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Hayes Valley Trader Joe’s finally closer to reality as scandal-mired developer sells building

The corner of 555 Fulton St. building at Laguna Street in San Francisco is seen on Jan. 29, 2020. | 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 has taken a step closer to reality after its current owner agreed to sell the stalled project.

Hayes Valley residents have been waiting more than 10 years for a new grocery store to open on the ground floor of a new 139-unit apartment complex at 555 Fulton St. The city fully approved a Trader Joe’s to open inside the condo building in 2021, but the store has yet to materialize.

The Hayes Valley Neighborhood Association has blamed delays on development owner Z&L Properties, which is currently mired in an international corruption scandal. 

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

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.

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

The neighborhood association says $1 million worth of work needs to be completed before Trader Joe’s can move in, which Z&L had not done. 

A $1 million construction permit was filed with the city in January 2022, outlining work that included a suspended ceiling, stone fixtures and new restrooms for a store that sells “pre-packaged food items.”

The new owner said that it plans to do the needed work for Trader Joe’s to open, according to Supervisor Dean Preston, who had previously called for a hearing about why plans were still on hold.

“We are encouraged by this progress toward delivering on the promise of a neighborhood-serving grocery store in Hayes Valley,” said Preston in a press release. “Having a new owner enthusiastic about bringing in Trader Joe’s is a major step forward.”

“Trader Joe’s remains eager to open a neighborhood grocery store serving the Hayes Valley community,” a spokesperson from the grocery store said in Preston’s press release.

The new owner and the sale price are not being disclosed at this time, according to Preston’s office and Z&L. The sale is expected to close in roughly a month.

‘I’m Not Holding My Breath’ 

Pedestrians walking on a street in Hayes Valley in San Francisco.
Pedestrians walk the streets of Hayes Valley, a central San Francisco district. | Camille Cohen/The Standard | Source: Camille Cohen/The Standard

Regarding the sale, Jen Laska, the head of the Hayes Valley Neighborhood Association, said she’ll believe it when she sees it.

“I’m not holding my breath,” Laska said. “We’ve seen this developer stall with other things, so hopefully this goes through.”

“Z&L Properties is now in contract to sell the 555 Fulton Street property to a buyer who, once the deal is finalized, will assume the obligations of the lease and has assured us that they are eager to take the necessary steps to bring in Trader Joe’s as soon as possible,” Z&L said in a statement.

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

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.

Homebuyers put deposits down on homes at 55 Oak St. 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.