City Attorney sues developer of Fillmore Heritage Center over unpaid loan

San Francisco City Attorney Dennis Herrera filed a lawsuit Thursday against the developer of the long-vacant Fillmore Heritage Center for failing to pay back a $5.5 million loan from The City.

Constructed via an $80.5 million public-private partnership, the mixed-use development at 1330 Fillmore St. was envisioned as an anchor for black business and culture on the Fillmore corridor, but community advocates say it has morphed into a multi-million dollar blight.

Named in the lawsuit is developer Michael Johnson, as well as three companies headed by him — UrbanCore Development LLC, Fillmore Development Commercial, LLC and EM Johnson Interest Inc. The suit seeks to recover a $5.5 million loan plus interest that Johnson received from the Mayor’s Office of Community Development in 2005 to construct the center, but has failed to pay back.

It also seeks to hold Johnson responsible for “compensatory damages to be determined by the court and reasonable attorney’s fees and costs,” according to a statement released by Herrera’s office Thursday.

Johnson did not respond to requests for comment by press time.

The Fillmore Heritage Center opened in 2007 on a promise to revitalize the stretch of Fillmore Street famously known as Harlem of the West, and was one of the last projects of the Western Addition redevelopment program. The development is comprised of 80 condominiums, some 50,000 square feet of commercial space, including a 28,000 square foot entertainment venue and restaurant space that served as the former home of Yoshi’s nightclub and a 112-space parking garage at 1330 Fillmore St.

While the condos were privately financed and have since been purchased and managed by the homeowners, the City financed the construction of the 50,000 square foot commercial space using a $5.5 million federal loan from the U.S. Department of Housing and Urban Development.

That space was a centerpiece of the project, designed to give space to Oakland Yoshi’s Jazz Club, a separate restaurant known as 1300 on Fillmore, and the nonprofit Jazz Heritage Center.

However all of those enterprises have since closed and, more than a decade later, the center remains vacant.

Unable to keep up with rental payments, Yoshi’s declared bankruptcy in 2012. Johnson, who took stewardship of the space himself, rebranded the venue as The Addition, but that venue’s operations ceased less than a year later. He cited financial hardships for the closure.

The City has not been repaid any of what it’s owed from Johnson, which as of July 15 was more than $6.5 million, according to Herrera’s office.

In the statement, Herrera said that “The City made this loan in good faith and has given Mr. Johnson every chance to pay back San Francisco taxpayers.”

The City took over the center and commercial spaces in 2015, and launched a search for a potential buyer, as Western Addition community groups and advocates have called for oversight and participation in the process.

In 2015, community stakeholders proposed a 10-point community benefits package that stipulated that any developer taking over the space would maintain its use as a music and art hub and ensure access and employment to local residents, among other requests.

Last year, a Western Addition non-profit organization known as the New Community Leadership Foundation (NCLF) announced plans to create an oversight board to monitor the sale of the center and ensure that the community benefit plans is honored.

“It doesn’t surprise me that The City has sued to recoup those funds. That shows that the mayor is looking at all angles to ensure the housing funds are put back in place,” said NCLF spokesperson Majeid Crawford. “At this point, [Mayor London Breed’s] commitment is to the community, and as long as a buyer comes forward with a strong community benefits plan, she will allow the building to be sold for the amount it costs to recoup the HUD loan.”

As previously reported by the San Francisco Examiner, a Request for Proposals  issued by The City for the property last year was rejected because it lacked a strong community benefits commitment.

Crawford said that NCLF is seeking to be among the center’s buyers. “Mayor Breed and [District 5] Supervisor Vallie Brown have been talking to a lot of [potential buyers], including us.”

lwaxmann@sfexaminer.com

Laura Waxmann
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Laura Waxmann

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