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.
"They weren't willing to let it go," she said. "They were willing to whittle down their financial obligation, but they weren't willing to let it go."
Neller, who resigned from Dean & DeLuca last month for reasons the company said were unrelated to the Market House deal, could not be reached for comment. The company's new president, Patrick A. Roney, who was a board member at the time, said that the negotiations did not reach the board level and that it was Neller's prerogative as chief executive to evaluate new locations.
Roney, in the first public comment from a company official since the deal collapsed, said he doesn't know why Neller became disenchanted with the site. Asked if the company would consider re-bidding, he said: "I think it's certainly something we should take a look at."
On Nov. 10, one day after Dahlgren said Neller made it clear that Dean & DeLuca wasn't interested, three members of the city's negotiating team made train reservations to visit him in Manhattan.
During their Nov. 17 meeting, Neller expressed concern over the amount of revenue Dean & DeLuca stood to generate, considering the slowdown in tourism in the winter months, recalled Michael F. Miron, the city's economic development director, and Emory Harrison, the city's central services director. Neller also broached the idea of a licensing agreement with local vendors, Miron said. " 'We're not sure we want the whole Market House,' " Miron recalled Neller saying.
Miron and Harrison said the meeting left them disconcerted. " 'I think we ought to cut them loose,' " Miron said he told Harrison on the train ride back.
The mayor was "very upset" when the two directors advised her to end negotiations, Miron recalled. "She felt like she had been blindsided."
Moyer sent Neller a letter on Nov. 26 stating the city was willing to help the company find local tenants. "It is understood that they would be treated as sub-lessors, licensees or concessionaires," she wrote. "The Dean and DeLuca reputation and name would continue to be the major draw for this important project."
By early December, Harrison and Miron became increasingly convinced that Dean & DeLuca was out, documents show. Harrison proposed crafting a press release "placing the blame squarely on the shoulders of D&D," he wrote in a Dec. 8 e-mail to several city officials, including Agee. "The City lived up to it's end of the deal, D&D did not."
Moments later, Agee responded: "Am very optimistic things will be working out well," he wrote. "Do not know why we need to have notes flying about dealing emphasizing blame etc."
Meanwhile, Moyer, Agee and other city officials continued to tell the media that negotiations were on track, even while Dean & DeLuca declined comment. "What was that fairy tale about spinning straw into gold?" wrote city spokeswoman Jan Hardesty in an internal e-mail. "Rumblestiltskin? I'm beginning to feel that's my new role in life."
It was around that time that Moyer named Agee to take over negotiations.
Annapolis Seafood became involved around that period as well, documents show. Nick Bassford, owner of Annapolis Seafood, said he contacted Dean & DeLuca with a proposal to warehouse products for them. At some point, Dean & DeLuca asked if he were interested in taking on a bigger role in the market, Bassford said. "It started with, 'Would you be interested in a part of it,' then half, then I probably said I could use it all," Bassford said.
But the city couldn't just turn over operations to Annapolis Seafood. "We had to have some link between Dean & DeLuca and Annapolis Seafood, because Dean & DeLuca was the successful party in the [bidding process]," said Bassford's attorney, Alan Hyatt.
They decided to form a separate Maryland company called Annapolis Market House LLC, which Dean & DeLuca would turn over to Annapolis Seafood once the lease was signed, Hyatt said.
On March 7, Hyatt sent an e-mail to the city with a draft press release making clear the arrangement between Bassford and Dean & DeLuca. "Annapolis Seafood announced today that it will operate the soon-to-be renovated Market House. . . . Through a co-merchandising venture with Dean & DeLuca, the Annapolis Market House will feature Dean & DeLuca specialty foods, fresh local seafood and other general grocery products."
Agee said the city's lawyers objected to the language. "The law office said that Dean & DeLuca had to be the operator to meet the conditions of the lease," Agee said.
When the city issued a release two weeks later, it stated that the companies intended "to enter into a cooperative venture for the operation of the renovated Market House."
On May 23, the City Council approved an amended lease with Dean & DeLuca. But several days later, on June 2, Neller phoned Agee and then followed up with an e-mail: "The Dean & DeLuca name cannot appear on any lease or legal document without my express written approval."
In August, the city publicly acknowledged that the company had withdrawn.