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New SF Trader Joe’s stalls as billionaire developer mired in corruption scandal

The 555 Fulton St. building in San Francisco. | Liz Hafalia/The San Francisco Chronicle via Getty Images | Source: Liz Hafalia/The San Francisco Chronicle via Getty Images

San Francisco's most anticipated Trader Joe's store continues to lack an opening date as the new location's developer is embroiled in an international corruption scandal.

Hayes Valley residents have been waiting more than 10 years for a new grocery store to open at 555 Fulton St., a new 139-unit apartment complex.

But developer Z&L Properties has been accused of dragging its feet by the local neighborhood association, who say $1 million worth of works need to be completed before Trader Joe's can move in.

Z&L is owned by Hong Kong-listed R&F Properties, which is partially owned by Li Zhang, a Chinese real estate tycoon who was arrested last year in London for alleged corruption involving San Francisco city officials. Zhang is accused of bribing officials to obtain construction project permits.

Zhang was released on bail worth $18.4 million and is currently on house arrest in a 43rd floor London apartment, Bloomberg reported.

Zhang Li, chair of Guangzhou R&F Properties | Xinhua/Sovannara via Getty Images | Source: Xinhua/Sovannara via Getty Images

"The whole situation is a mess," said Jen Laska, president of the Hayes Valley Neighborhood Association.

City documents show the 555 Fulton St. plans date back to 2006, but previous efforts to open a grocery store at the site have stalled.

A New Seasons Market was set to take over the space before plans fell through in 2018. The Portland-based grocer blamed construction delays among other factors—construction was delayed for three years after Z&L Properties introduced changes to the building without first getting city approval.

Z&L Properties have been accused of dragging its feet on other San Francisco projects before.

Homebuyers put deposits down on the firm's 55 Oak St. development, and were supposed to move in by late 2021. Instead, 17 buyers who put deposits down had still not been allowed to move in by mid-2022.

In 2021, the city fully approved a Trader Joe's to open inside the condo building, the store is yet to materialize.

'This Developer Is Holding It Up'

Laska alleges Z&L Properties has dragged its feet on the construction work needed for Trader Joe's to move in.

"The community has been trying to get a grocery store here for a decade, and this developer is holding it up," Laska said.

There is a $1 million construction permit that was filed with the city in January 2022, outlining work including a suspended ceiling, stone fixtures and new restrooms for a store that sells "pre-packaged food items," but does not name Trader Joe's outright.

Community leaders have supported Trader Joe's in getting around the neighborhood's ban on new retail chains opening.

"They have been willing to jump through a lot of hoops," said Lloyd Silverstein, president of the Hayes Valley Merchant Association. "This has been a long haul for them."

"We've been at work for more than a decade to deliver an affordable grocery store to this location, and it's unfortunate that after all this effort, Z&L Properties isn't acting to make that happen," SF Planning Director Rich Hillis said.

People wait in line outside of a Trader Joe's. | Noam Galai/Getty Images

"I only have information to share about stores that are opening soon," a Trader Joe's spokesperson said after The Standard asked for an update on the situation.

Laska said the Trader Joe's is sorely needed because the area has a lot of dense housing but limited grocery stores nearby.

"There are corner markets, but they're expensive," Laska said. "You need a car if you want to get a meaningful amount of groceries."

Z&L Properties were contacted via R&F Properties for comment.