8:51 am Thu, March 31, 2011 POSTED: 08:51 AM Thursday, March 31, 2011 BY: Ben Myers, Reporter New Orleans City Business TAGS: Associated Wholesale Grocers, Charles Ciaccio, David Smith, Fresh Food Retail Initiative, Karen Parsons, Lake Terrace Center, Meme’s Market, Oak Park Civic Association, Re/Max Commercial Brokers, Robert Hand, Social Compact
Grocer Charles Ciaccio says he has signed a lease to open a store at the defunct Lake Terrace Center, a key commercial intersection in Gentilly. Residents who live near the site at Robert E. Lee Boulevard and Paris Avenue have been frustrated with its dilapidated state, but the deal is notable even if Ciaccio’s store never opens.
It shows that, in at least one circumstance, a landlord and grocer can agree to terms in an underserved area of New Orleans. That’s notable in a city where 53 percent of the neighborhoods contain “food deserts,” according to a 2010 study by Social Compact, a national nonprofit business coalition. The study is the most recent to analyze food barriers for New Orleans residents.
Diagnosing New Orleans’ food barriers is impossible in certain terms, but speaking with grocers and developers suggests a fundamental disagreement over property values.
David Smith, director of merchandising and marketing for Associated Wholesale Grocers, said members are complaining that prices are detached from reality, whether negotiations pertain to lease or purchase deals. That’s especially true in eastern New Orleans, where landowners are consistently demanding pre-Hurricane Katrina prices and more, Smith said.
“I don’t know if they in their right mind have just convinced themselves their property is worth more,” Smith said. “If nothing has actually sold or nothing has actually leased in many, many years and everybody else is asking a high price, you might likewise set your asking price very high.”
Wade Verges, a developer in eastern New Orleans, said he’s aware of the complaints, but that proprietors are undervaluing the area’s potential. People are looking for steals, he said.
“When they realize the East is a viable market and they can’t steal, then they say everybody wants too much money,” Verges said.
A Lake Terrace store would serve multiple food deserts the Social Compact study identified, but Gentilly doesn’t suffer the same dearth of grocery stores as eastern New Orleans, where one major store serves 64,310 people. Demand for a grocery store in eastern New Orleans outpaces supply by 64.2 percent when measured in retail potential versus sales, according to a retail feasibility study conducted by Robert Hand with New Orleans based Louisiana Commercial Realty.
Market values in eastern New Orleans are hard to determine, Hand said, because of the array of available land, which comes with and without structures in all kinds of conditions. Hand knows sellers who are asking pre-Katrina prices, but he also points to data showing that land sales in the area are occurring at about 84 percent of their list price, which he said is reasonable.
“Are prices in New Orleans East too high? That depends,” Hand said. “It’s not answerable, because compared to what?”
Much more needs to happen before a store opens at Lake Terrace Center. Ciaccio said lease payments won’t begin until property owner Kenneth Charity completes interior and exterior improvements, after which time Ciaccio would build 14,000 square feet of grocery space.
Charity received scrutiny in January 2010 when local news organization The Lens reported he had not made any progress at Lake Terrace after receiving $162,500 in economic development grants from former Mayor Ray Nagin’s administration.
Charity did not return calls for comment.
Ciaccio is not the only grocer who says he has worked with Charity on opening a grocery store. Carlo Coniglio, who operated Meme’s Market at Canal Boulevard and Robert E. Lee for 20 years before Katrina, said Charity reached out to him about three years ago, shortly after Charity paid $1.35 million for Lake Terrace. Coniglio said Charity asked for $25 a square foot, which he regarded as outlandish.
Ciaccio declined to discuss dollar amounts in his lease with Charity.
Ciaccio said he is seeking assistance from the city’s new Fresh Food Retail Initiative, a public-private partnership that offers low-interest and forgivable loans to grocers who open in underserved areas. Ciaccio said he has been watching the program for about a year but could have fashioned a deal at Lake Terrace without it.
Karen Parsons, president of the Oak Park Civic Association, credits the new incentive program for making it economically feasible to redevelop Lake Terrace, which is within her association’s boundaries. Charity “overpaid for the property in the post-Katrina market,” an error that, combined with the costs of rebuilding, has prevented an anchor tenant such as Ciaccio from signing on, she said.
“It’s very difficult to make all of that work from a business profit model,” Parsons said.