Oakland set to OK deal on land where project was killed

Oakland officials are poised to sign a deal with the same developer they picked last year for a controversial high-rise project on East 12th Street — which turned out to violate a state law governing the sale of surplus land and was eventually killed.

On Thursday, the City Council said Michael Johnson is again the city’s No. 1 choice to develop the same piece of public land, an acre lot abutting Lake Merritt. This time, Johnson’s company, UrbanCore, is partnering with the nonprofit East Bay Asian Local Development Corp. and pushing plans for a 360-unit building, in which a third of the units would be affordable.

“This is the most important project in our company’s history, and in my 38-year career,” Johnson said at a Monday hearing of the council’s Community and Economic Development Committee, at which three bidders vied for the Lake Merritt parcel.

The meeting drew hundreds of people to Oakland City Hall, many of them pledging support for one of Johnson’s competitors — a People’s Proposal for 133 units of affordable housing, conceived by a group of Oakland residents who’d come together because they were angered by the council’s previous deal with Johnson.

“For us, the fight is not over,” said Amy Vanderwarker, a spokeswoman for the People’s Proposal. “This whole fight started last year when UrbanCore also had an exclusive negotiating agreement with the city, but we stopped that — the land still has not been sold.”

Johnson’s previous project — a 24-story market-rate apartment tower — was all but finalized last year when the city abruptly pulled the plug in July, after a memo from the city attorney’s office leaked to the press. The memo said city officials had ignored a state law when they began negotiating with Johnson.

Because the parcel is surplus land, the council had a legal obligation to offer it to school districts and government agencies before entering talks with a private developer.

Johnson told The Chronicle on Thursday that he doesn’t believe the city did anything wrong. “I think at every step everybody was well intentioned and working in good faith.”

By the time Oakland officials killed that project, the council had worked out a deal that required Johnson and his former Colorado-based partner, United Dominion Realty, to pay an $8 million fee for rights to purchase the parcel — for an additional $5.1 million.

The $8 million fee was supposed to fund construction of affordable housing in Oakland. Opponents still slammed the deal, and Councilman Abel Guillen called it a “silver lining” for a process that had raised questions from the beginning.

In July, the city put the East 12th Street parcel out to bid.

Johnson, who lives in Oakland’s Adams Point neighborhood, has worked on publicly funded projects in Oakland and the surrounding area for decades. He’s forged a strong political connection with Councilman Larry Reid, who is a chief backer of a transit village that UrbanCore is planning to build near BART’s Coliseum/Oakland Airport Station. In 2003, he did a major rehabilitation project in Richmond in partnership with Richmond Neighborhood Housing Services, a nonprofit that at the time was run by Lynette Gibson McElhaney, who is now the Oakland City Council president.

At the committee meeting Monday, McElhaney stressed the importance of providing opportunities for local African American developers like Johnson.

Johnson is also the developer behind San Francisco’s Fillmore Heritage Center, which was supposed to bring 80 housing units, a nonprofit jazz museum, and a new iteration of Yoshi’s jazz club to a historic retail corridor. It began with good intentions and ended with Johnson defaulting on his loan payments to the city. Yoshi’s was saddled with millions of dollars in construction debt before it opened, and its owners filed for bankruptcy in 2012. A replacement club, the Addition, shuttered last year.

San Francisco has since taken over ownership of the Fillmore Heritage Center property.

Joshua Simon, who heads East Bay Asian Local Development Corp., which is partnering with Johnson on the new East 12th development, said he’s confident their project will move forward.

“We were pleased when the city turned it into an open request for proposals,” Simon told The Chronicle on Thursday. “We thought it was an important site, and we thought the best minds in the city should be applied to that site.”

Rachel Swan is a San Francisco Chronicle staff writer. Email: rswan@sfchronicle.com Twitter: @rachelswan