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Back to Square One

Jack London Square's future lies in an ambitious-but-risky proposal whose failure could turn once-public waterfront into office space.

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In a windowless office on the Oakland estuary, Renato Sardo, a scion of Italy's Slow Food movement, leans against an enormous Plexiglas box. Inside is an architect's model of a future Jack London Square anchored by a foodie Utopia, a cluster of organic markets and restaurants dubbed Harvest Hall. It's essentially a larger version of San Francisco's Ferry Building Marketplace, with a similar roster of top-tier artisan food stalls and restaurants.

But despite Sardo's Slow Food credibility, the $100 million vision is off to a decidedly rocky start. Its marketing office is remarkable for its lack of activity — it remains locked most days, and the phone sits alone on the floor because there is no furniture. And after more than a year of searching for tenants, Harvest Hall's backers have not yet convinced a single merchant to ink a contract.

The Hall's prospects would appear to mirror the fortunes of the rest of Jack London Square, which has struggled mightily since local developers Jim Falaschi and Hal Ellis Jr. bought much of it from the Port of Oakland in the early part of the decade. There are at least eleven empty storefronts in its heart between Embarcadero Way and the estuary. Several once-bustling chain restaurants have shut down, including TGI Friday's, El Torito, and The Old Spaghetti Factory.

At the time of the sale, city and port officials billed Falaschi and Ellis as saviors. They were cast as deep-pocketed developers whose wealth and knowhow would finally breathe life into Jack London Square, which has long struggled to attract viable retailers.

When the two first acquired much of Jack London Square, the deal sparked fierce criticism. In November 2001, the port sold Falaschi and Ellis four buildings in the square for an extremely favorable price. When combined with several other financial sweeteners, the deal essentially allowed the developers to realize a complete return on their investment in just three years.

Then in July 2004, the Oakland City Council handed them another gift by essentially allowing them to build whatever they wanted on the site. The developers said they needed flexibility to respond to the Bay Area's changing economy, but opponents worried that their real plan was to turn the square into a giant office park. Now, if Falaschi and Ellis fail in their effort to pull off Harvest Hall, that outcome could yet come to pass.

Some current and former merchants believe Falaschi and Ellis have deliberately run off the businesses in an effort to transform the square from a middle-class, family-oriented destination to a haven for the well-to-do. Chandru Gurnani was co-owner of the square's Pizzeria Uno, which changed its name to Pizzeria SFO before closing last November after revenues tanked. The developers, he said, "have been successful ... at emptying Jack London Square."

The city and the port took a huge gamble when they sold Falaschi and Ellis key parts of the square at fire-sale prices. Yet since the square went private, it has come to resemble a ghost town. The developers say they plan to spend a total of $400 million in private funds, but if their project fails to create a destination vibrant enough to attract locals and tourists alike, Jack London Square may continue as a ghost town — one that many Oaklanders won't even be able to afford.

A Sweetheart Deal
In 1999, the port solicited bids for a master developer. The winning bidder eventually dropped out of the competition, paving the way for the runners-up, Falaschi and Ellis, who dubbed themselves Jack London Square Partners.

Falaschi has long been tight with state Senate President Don Perata, the state's most powerful Democrat. Both men are graduates of Saint Mary's College in Moraga, and in the late 1990s, Summit Medical Center in Oakland hired the senator as a "consultant" while Falaschi served as the hospital's board chairman. Falaschi also has assisted the senate boss on some of his political campaigns, and from 2000 through 2006, he and Ellis contributed at least $64,450 to Perata's various political committees and those associated with him.

Around the time that the developers became involved in the future of Jack London Square, the port came under intense pressure to jettison its waterfront property. In 2000, Perata asked the California state auditor to conduct a complete review of the port's books. The audit showed that the port's commercial real-estate division, which included the square, was losing money. Instead of hiring consultants to help turn the publicly owned square into a top tourist attraction, port officials used the audit as an excuse to privatize it.

In November 2001, the port revealed that it planned to sell Falaschi and Ellis four buildings in the heart of the square for $17.2 million. The developers agreed to pay the port $510,000 a year to lease several more properties. The port also said it would pay them $1.1 million a year to manage the square, and provide $10 million to help construct a parking garage, build a small public park, and extend the San Francisco Bay Trail. Finally, the developers would immediately start collecting rent from the square's tenants, which at that time totaled $5.5 million annually.

Some developers and activists immediately labeled the plan a sweetheart deal. As if to confirm their assertion, one month later, another development team offered the port $21 million for the same four buildings. And then a representative of original winning bidder LCOR-WDG Ventures revealed that it had planned to pay $44 million for the four buildings, plus one more, which penciled out to $127 per square foot, nearly 60 percent more than Falaschi and Ellis had offered.

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