Documents Reveal a Troubled Dean & DeLuca Deal

For months, Annapolis city officials touted a deal that would bring Big Apple panache to the city's historic waterfront. Negotiations with gourmet grocery chain Dean & DeLuca to lease the Market House were down to the "last-minute details," City Administrator Robert D. Agee told the Post in June.

But as early as last November, less than two months after successfully bidding to operate the city-owned landmark, Dean & DeLuca told the city it was no longer interested, according to an attorney for the Manhattan-based company.

"On or about Nov. 9, 2004, Dane Neller, the CEO of Dean & DeLuca, advised representatives of the City of Annapolis that Dean & DeLuca would not be going forward with this transaction," Jeffery C. Dahlgren wrote to City Attorney Shaem C. Spencer on June 15.

Dahlgren admonished the city for its March 21 press release stating that Dean & DeLuca would operate the market through a "joint venture" with local merchant Annapolis Seafood Markets Inc.

"Dean & DeLuca will not be joint venturing with Annapolis Seafood in the operation of the Market House," Dahlgren said. "This is absolutely not the case. Dean & DeLuca will not be a tenant of the Annapolis Market House nor have any interest in any entity which may ultimately become a tenant in the Annapolis Market House."

Days earlier, Neller had e-mailed Agee, stating that Dean & DeLuca would supply products to Annapolis Seafood, "but in no way as a subtenant or licensee of any space at the Market House.

"It is very clear that you understand our position here," Neller wrote on June 2.

The documents were among hundreds released by the city last week in response to public records requests by The Washington Post and other newspapers. The documents, along with follow-up interviews with city officials and others involved in the negotiations, shed light on how a lease intended for Dean & DeLuca ended up in the hands of Annapolis Seafood, which had not even bid on the project. Annapolis Seafood withdrew amid growing political turmoil over a transaction that has led some City Council critics of Mayor Ellen O. Moyer (D) to say they felt duped.

Dean & DeLuca began to have reservations about the market within weeks of outbidding Prince George's County-based Site Realty Group, documents and interviews show.

Agee and Moyer said in a joint interview last week that they believed Dean & DeLuca's reluctance to sign the lease was merely tough negotiating. They said they also considered the possibility that a larger corporate strategy might be affecting the company's interest in Annapolis.

Agee and Moyer said they could find no record of the Nov. 9 communication referred to by Dahlgren. As for Neller's and Dahlgren's June missives, Agee said that he didn't know at that point who Neller was and that he had no reason to believe Neller held sway in the negotiations. "He was clearly getting excited about something, but he is not the policy maker; the company's board is," Agee said.

Negotiations continued for months and resulted in a lease that the City Council reviewed in February, Moyer said. She said that despite the assertions by Neller and Dahlgren, Dean & DeLuca was not trying to walk away from the deal.