Developer Dave Matthews to open East Race Market on Thursday after years of delays

SOUTH BEND — Despite East Bank developer Dave Matthews' intent to open a grocery store beneath his LaSalle Avenue apartment complex this week, South Bend officials say they're still working to reclaim money from him in a lawsuit.

Instead of leasing the ground floor of his high-rise apartments to a grocer, Matthews will operate the store himself, he told The Tribune during a walk-through Monday. The small-format shop at 350 E. LaSalle Ave. will open Thursday as East Race Market with hours of 9 a.m. to 9 p.m.

Matthews says the 8,000-square-foot store will be akin to Aldi or Trader Joe's on account of its competitive prices and its variety of private label goods. To tamp down prices, Matthews said, he arranged a deal with a Wisconsin-based grocery wholesaler called Certco, which has expanded to Indiana to serve East Race Market.

"We are price-competitive with Meijer and Martin's, which is like solving the impossible problem that every other small grocer that's tried and failed in the area has not been able to figure out," Matthews said.

The shelves are stocked with canned goods, cereal, bread and snack foods. Rows of refrigerators hold dairy products and meat and frozen pizzas. There's also fresh fruit and vegetables.

With the items on offer this week, Matthews appears to fulfill the requirements for a full-service grocer that were outlined in a 2017 agreement with the city of South Bend.

The same deal called for an in-store pharmacy. Instead, a pharmacist called Healthy U Rx is open in the nearby Commerce Center, which Matthews also owns.

But city attorneys maintain that Matthews is a year late.

What led to South Bend's lawsuit against developer Dave Matthews?

Last January, the South Bend Redevelopment Commission sued Matthews' company Commerce Center Development LLC. The city aims to recover $5 million granted to Matthews and a $2.5 million penalty, alleging that he failed to open a grocery store and a pharmacy by Dec. 31, 2022.

When the Redevelopment Commission made its $5 million pledge to Matthews in 2017, both parties expected that Martin's Super Markets would open a grocery store and a pharmacy in Matthews' building.

But the outlook dimmed when Grand Rapids-based grocery chain SpartanNash bought the local supermarket franchise in late 2018. By summer 2019, city officials warily moved forward with their support of Matthews' project.

The issue heated up in September 2022, when the Redevelopment Commission threatened Matthews with a lawsuit to reclaim its money.

The city's position is that Matthews failed to open a legitimate grocery store on time, according to a lawsuit filed in January 2023. His last-ditch effort to meet the contract's bare minimum on the final day of the year served only to annoy city officials.

A city spokeswoman declined to make leaders available for an interview about the lawsuit because of its ongoing litigation. She confirmed, however, that the city maintains there was a "failure to meet multiple commitments of the development agreement."

"The City remains hopeful that the taxpayer's investment into this project will result in a downtown, full-service grocery and pharmacy to help our city continue to grow," the spokeswoman wrote in a statement.

Attorneys for Matthews in November filed an answer to the city's complaint in which they reject that the city is entitled to reimbursement. Matthews on Monday also declined to comment on the ongoing lawsuit.

Matthews also received about $5 million from the South Bend-Elkhart Regional Development Authority for the proposed development. Stephen Studer, an attorney for the RDA, said the entity has so far chosen not to sue Matthews.

"The goal of the RDA has always been ... to move forward in a way that would result in a downtown grocery store and pharmacy that meet agreed upon standards," Studer wrote in a statement Monday. "The RDA is in weekly communication with Mr. Matthews regarding his progress towards opening the grocery store."

How Matthews hopes to keep the store afloat

Matthews said he's overcome a big hurdle to operating a grocer downtown by carrying items at reasonable prices. He estimates the cost to get about 4,000 inventory items and build out the space was about $550,000 to $600,000.

But the challenge to lure shoppers into the store remains.

Walk-in customers won't cut it, Matthews said. Not enough people live nearby. But he envisions drivers who live in surrounding neighborhoods stopping in to shop on their commutes to and from downtown. Matthews said the store, tucked between LaSalle and Colfax avenues, is well-situated in that regard.

And a benefit of local ownership, Matthews said, is that he can quickly adjust his inventory based on requests from customers. He said he'll arrange an easy way for shoppers to let him know if they want more of a certain item.

Matthews at least has a vote of confidence from a friend in the grocery business. John Cocquyt, who served as senior vice president of Martin's Super Markets for three years, walked through the store Monday and seemed impressed.

"You can actually make a meal walking through here at a very, very strong dollar value," Cocquyt said. "Walking the store and looking at his pricing — his pricing's great."

Email South Bend Tribune city reporter Jordan Smith at JTsmith@gannett.com. Follow him on X: @jordantsmith09

This article originally appeared on South Bend Tribune: Dave Matthews to open grocery store in downtown South Bend