Trouble on the East End: Two of Tahoe City’s Biggest Commercial Properties in Limbo
The east end of downtown Tahoe City has a problem. Two of the town’s biggest properties — the Lighthouse Center and Boatworks Mall — are in trouble. The former’s anchor tenant and property owner, Safeway, moved to the other end of Tahoe City last fall. The Lighthouse space has been empty ever since, partly due to Safeway’s refusal to sell to another supermarket. MJD Capital Partners, which owns Boatworks, defaulted on its loan in January. The property is now in foreclosure and goes to auction next month.
“I think the majority of commercial square footage in our town is tied up in those two properties, so I think it’s concerning to the entire community and to the whole region, really, when you lose key commercial properties to service our needs, especially in such great lakefront locations,” said Placer County Supervisor Cindy Gustafson, who represents North Tahoe.
Safeway
Safeway vacated the Lighthouse Center last October. The grocery store was the center’s only street-front business; all other businesses, like A Santé Lakeside Fitness and Tahoe National Brewing Co., are in the back of the building. (CVS and the Tahoe City Post Office are in a separately owned building.)
When Safeway left, hopes were high that another grocery store would purchase the building. Tahoe City had been left with only one grocery store since October 2023, when Save Mart lost its lease to make way for Safeway’s relocation. The remodel ultimately took two years.
Word of residents’ growing frustration with the gaping vacant space at Lighthouse and lack of the current Safeway’s ability to keep up with demand during peak visitor months reached Sup. Gustafson. On June 9, she wrote a letter to Safeway’s corporate headquarters in Pleasanton, California:
“The continued vacancy of this highly visible property has become a significant community concern. Residents frequently describe the site as an eyesore and a missed opportunity at one of Tahoe City’s most important commercial locations. In addition, I continue to hear frustration from community members regarding reports that Safeway has limited or discouraged opportunities for other grocery operators or potential buyers to utilize the property.”
A local real estate agent confirmed that the former Safeway building is for sale with a non-compete clause.
“Apparently it keeps falling out of contract,” the realtor wrote to Moonshine Ink. “They have turned down offers of $10 million and started to list it at $12 million, but they wanted a deed restriction and clause in the purchase contract that it could not be leased to or used as a grocery store.”
Gustafson has heard the same thing directly from supermarkets that have tried to purchase the building.
“I’ve been told that by people who have tried to acquire the property,” she said. “Other grocery stores that are in the region have tried to acquire this site.”
Numerous phone calls and emails by Moonshine Ink to multiple Safeway corporate officers and media relations were not returned.
On June 22, Gustafson’s office received this response from Todd Paradis, Safeway real estate manager based in Hawaii:
“Thank you for your recent letter sharing concerns raised by some residents of Tahoe City regarding Safeway’s new store and our intentions for the site of our previous store. We are in the process of reviewing the concerns raised and will discuss them internally. We will be in touch.”
Six weeks later, her office still has not received a follow-up response.
On July 22, Gustafson sent a letter of support for California Assembly Bill 1857, also known as the Grocery Store Access Act, to the state senate. The act, which was introduced in February, would ban corporate grocery chains from using restrictive property covenants to block new supermarkets from opening in spaces they have vacated.
“For the residents of Tahoe City, this legislation represents more than good public policy,” Gustafson wrote in the letter. “It represents an opportunity to remove unnecessary barriers that have prevented our community from attracting new grocery investment and restoring a vital commercial property to productive use. Communities should not be forced to choose between an underperforming grocery store and no grocery store at all.”
Gustafson said she now understands how Safeway won the lease for its current location.
“I think it’s very clear Safeway could outbid because they knew they were going to capture the market by not selling to another grocery store,” she said.
Boatworks
With MJD’s default on its $14-million loan in January, its failure to pay property tax, and the Boatworks now set to go to auction in Roseville on Aug. 12, there are concerns that the mall could face the same fate as the neighboring Safeway building — becoming a large, vacuous, empty space.
“I think that if we are looking down the barrel of having [another] ‘Henrikson Building East,’ that is a detriment to our community,” said Jeff Hill, Jake’s on the Lake general partner, referencing a dilapidated, empty building that used to sit on the opposite end of town. “We all have this vision of what we want our community in town to be. And I think that this is just another tipping scale of adversity that is, all eloquence aside, just sad.”
Jake’s has had a contentious relationship with MJD since it bought Boatworks, where the restaurant is housed. That is one reason this summer is Jake’s final season in Tahoe. After 48 years, it’s closing its doors in October unless the new owners present a deal too good to refuse.
“Due to the dynamic with the landlord and other outside factors, a path hasn’t really been presented to be able to move forward,” Hill said. “Should a path illuminate, we would walk it, but I just don’t see what that would be.”
MJD has not been communicative with tenants about its financial situation and foreclosure. The owner of Mountain Lotus Yoga found out about the auction when Moonshine Ink reached out to him, and Tahoe Fit owner Katie Peterson said every time she asked the company about the auction, they denied it.
“I did approach them about the auction a couple of times. And they’re still, to this day, denying that that’s even happening. So that part is slightly puzzling,” she said. “They say it’s a real estate financial issue they are working with.”
Tenants also complained about MJD’s neglect of the building. The electricity was turned off twice due to unpaid bills, and so was the water. The company cut back on garbage collection and maintenance staff. The mall’s main bathrooms got so bad at times that some tenants refused to use them.
“I feel that they definitely tried to run it on a shoestring budget,” said Allison Yonto, owner of the Tahoe Wine Collective. “And you saw that happen about, I want to say two or three years ago, when we lost our full-time maintenance guy.”
Hill agrees.
“I would say that whatever financial duress has fallen upon MJD has been reflected on the Boatworks itself,” he said. “The time and care and consideration have not been cultivated to the degree that we wish within our community.”
Fears of Boatworks becoming vacant are not unfounded. The building is currently only half occupied. Many businesses — Geared for Games, Tahoe Core Pilates, Tahoe T-Shirtery — had already left in anticipation of the structure being torn down to make way for MJD’s massive redevelopment proposal; Acorn Home Furnishings & Design is leaving at the end of August. The tenants are also all on a month-to-month lease (except for Jake’s), which only adds to the uncertainty. The mall’s other restaurant and anchor tenant, Hacienda del Lago, closed in 2021.
According to Yonto, only eight businesses in the Boatworks are open on a daily basis. She thinks MJD did not do enough to attract customers to the mall.
“There was definitely a disconnect of thinking that just because it’s a building on the North Shore on the water, that it would just always be busy. Foot traffic is a big problem getting people to come through here,” she said. “I don’t think they [MJD] did us any favors by not doing marketing regularly, by allowing spaces to go vacant, especially a lakefront restaurant space. They were just unfamiliar with how it works up here.”
Though MJD founder and CEO Marie Murphy did not admit to the impending auction, she issued a statement to Moonshine:
“We deeply love Tahoe, and are integral, long-standing members of the business community here. Our site has always reflected this love and stewardship for Lake Tahoe and Tahoe City. We are working through addressing current financial headwinds.
Despite the challenges we have faced, our focus remains on finding solutions that allow us to move forward and create a destination serving residents, businesses, and visitors — one that will bring much needed vitality, employment, and tax revenue to Tahoe City, while preserving the character of this amazing place.”
Yonto has a word of warning for the Boatworks’ next owner.
“Whomever takes this building over, I feel like they need to realize that if they don’t help the tenants that are here, the tenants aren’t going to get any better [financially],” she said. “We’re not going to magically start making more money until this building has some reason for people to come here, and the vacant spaces are definitely not that [reason].”
