S.F. sues developer for unpaid Fillmore Heritage loan
San Francisco City Attorney Dennis Herrera filed a lawsuit against real estate developer Michael Johnson on Thursday in an effort to recover $5.5 million Johnson borrowed from the city to build out commercial space at the Fillmore Heritage Center.
Johnson borrowed the money from the city in 2005 to spruce up portions of the building that would eventually house a 6,300-square-foot restaurant, 1300 on Fillmore, and the ill-fated San Francisco outpost of the Oakland jazz club Yoshi’s. The San Francisco Yoshi’s closed in 2014, and Johnson’s attempt to resurrect the jazz club under a new name, the Addition, failed a year later.
The lawsuit is emblematic of the long-running struggle to activate the heritage center. Once heralded as a modern nexus for African American culture and commerce and a celebration of the rich jazz history in the Fillmore District, the mixed-use center has been beset by problems. The building, which houses 50,000 square feet of commercial space, now sits empty.
According to Herrera’s suit, Johnson struggled to make payments on the money he borrowed from the city, despite efforts to renegotiate the terms of the loan to make it easier for Johnson to pay the money back. With interest, fees and other penalties, Johnson is now responsible for more than $6.5 million, the suit says.
“The city made this loan in good faith and has given Mr. Johnson every chance to pay back San Francisco taxpayers,” Herrera said in a statement announcing the suit. “San Francisco has worked with Mr. Johnson at every turn. Mr. Johnson has never held up his end of the bargain. The years of excuses are over. Time’s up. San Francisco taxpayers need to be made whole.”
In an email, Johnson said he had not yet received the lawsuit and could not comment on it. But, he added, “We did everything we could from a period of 2004-2014 to make that project a success.” In 2015, he told The Chronicle that the “business model didn’t really work.”
Johnson has been a part of several development projects over the years in San Francisco, but he is a better-known
“The years of excuses are over. Time’s up. San Francisco taxpayers need to be made whole.” Dennis Herrera, San Francisco city attorney
figure in Oakland, where his business, UrbanCore Development, is headquartered. UrbanCore is also named as a defendant in the lawsuit, along with other companies Johnson controls.
Over the years, some of Johnson’s development deals in Oakland — and the public money he took for them — have come under scrutiny. Back in 1999, cost overruns at the 78-home Palm Villas redevelopment project in East Oakland forced Johnson to request additional funds from Oakland over several years — on top of an initial $3.3 million loan. The city ended up forgiving that loan and lending Johnson and his partners an additional $3 million.
The Fillmore Heritage Center, which opened in 2007, was built as a public-private partnership. About 35 percent of its $80.5 million cost came from public funds. The Mayor’s Office of Community Development borrowed the $5.5 million it loaned to Johnson from the federal Department of Housing and Urban Development.
In February 2017, two years after Yoshi’s closed, San Francisco officials began searching for a new operator to breathe new life into the center. Nine months later, the city announced that no suitable bidders had come forward that met the standards set by the city and the Fillmore community.