City officials unhappy with downtown South Bend "grocery store" progress

SOUTH BEND, Ind. --- A soft opening of a grocery store at 300 E. Lasalle in downtown South Bend has both city officials and residents concerned about the lack of progress.

The housing project was started in 2015 by Matthews LLC. Since then, it's received $5 million in funding from the city and has failed to meet two deadlines for a completed grocery store.

Developer David Matthews was given a final extension to open the grocery store by December 31, 2022. Residents at the apartment complex tell ABC57 staff were stocking the store with a number of items on New Year's Eve.

The city can technically come after Matthews for a “clawback repayment”— which is 150% the amount he was given for the whole project. In this case, it would be $7.5 million.

Inside the grocery store is a few freezers stocked with frozen meals and tables set up with various pantry items. A resident at 300 E. Lasalle who wishes to remain anonymous says this is not what they were promised when they chose to move in to the building downtown.

"We took a chance on this building and what it could do for South Bend and enjoy our unit but the common areas and overall management of this complex as well as the pending store are very suspect," the resident says. "They advertise amenities that have not and will never be built and this store issue and possibility of the city clawing back its investment have us nervous about the stability of the building and Matthews LLC."

Matthews says he remains committed to making the East Bank Neighborhood better and promises a better version of the store will open soon. He did not comment on what vendor is running the grocery store when asked.

"A grocery store is a challenge, it was a challenge before Trader Joe’s opened a mile away, it was a challenge before Martin’s Supermarket sold to Spartan Nash," Matthews said. "Our preference is to open the store once and have it be an amazing delightful place to experience.  Our hands were tied, and though not ideal, the grocery store opened last year.  It will re-open later this month with an improved experience."

The city says the grocery store at 300 E. Lasalle does not have all the necessary licenses to operate as a grocery store or pharmacy and expressed their dissatisfaction with the project,

In a statement, Executive Director of Community Development Caleb Bauer says:

"This so-called "grocery store” is a slap in the face to taxpayers who supported this project. This agreement was struck six years ago and has already received two deadline extensions from the Regional Development Authority. In Elkhart, the Elkhart River District project funded at the same time as this project has had a grocery store open since 2020.

There is currently no certificate of occupancy for the grocery store space and no retail food permit for the premises. The pharmacy also does not have a certificate of occupancy.

The City has been exploring its options, including pursuing the clawback provision of the agreement, to remedy this default of the development agreement and will have more to share in the near future."