VFOIA’s Broken Fee Structure Prices Out Many Virginians

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The Virginia Freedom of Information Act (“VFOIA”), located at § 2.2-3700 et seq. of the Code of Virginia, states in part that “[b]y enacting this chapter, the General Assembly ensures the people of the Commonwealth ready access to public records in the custody of a public body or its officers and employees, and free entry to meetings of public bodies wherein the business of the people is being conducted.”

VFOIA’s current fee structure is broken and untenable. VFOIA fees are unreasonably burdensome, effectively depriving many Virginians of the rights conferred by VFOIA. Furthermore, the fee structure is opaque, rudimentary, and underdefined. Virginia, the birthplace of Thomas Jefferson, George Washington, James Madison, and Patrick Henry, is now trailing other jurisdictions in the United States when it comes to transparency and freedom of information.

Efforts toward reform are faltering. Senate Bill 324 (Roem, 2024) (hereinafter, “SB 324”) brought hope for some modicum of reform. SB 324 proposed1  to amend Va. Code § 2.2-3704(F)(1) to state in part “that (i) for the first hour of the first request made by a requester to a public body during a calendar year, a public body shall not charge a requester for any costs incurred during the first hour spent accessing, duplicating, supplying, or searching for the requested records and (ii) for any additional time spent accessing, duplicating, supplying, or searching for such records, or for any additional record requests, the public body shall not charge an hourly rate for accessing, duplicating, supplying, or searching for the records exceeding the lesser of the hourly rate of pay of the lowest-paid individual capable of fulfilling the request or $40 per hour.”

The third enactment of SB 324 states in part “[t]hat the Virginia Freedom of Information Advisory Council (the FOIA Council) shall study whether the provisions of the Virginia Freedom of Information Act (§ 2.2-3700 et seq. of the Code of Virginia) allowing public bodies to charge requesters for the production of public records should be permanently amended to make access to public records easier for requesters. In conducting its study, the FOIA Council shall convene a work group consisting of citizens of the Commonwealth, representatives of state and local government entities, broadcast, print, and electronic media sources, open government organizations, and other interested parties, to examine the current FOIA provisions on charges and make recommendations on ways to amend such provisions to make the assessment of charges by public bodies for the production of public records more uniform, more transparent, easier to understand, and less costly.”

The work group established by the third enactment of SB 324 (hereinafter, the “SB 324 Work Group”) met seven times. Out of these meetings, was derived Legislative Draft (“LD”) 25101081D.2 This draft fails to substantively move the needle forward in the direction of the stated objective of SB 324 (“to make the assessment of charges by public bodies for the production of public records more uniform, more transparent, easier to understand, and less costly”). As such, the General Assembly should reject it. It is acknowledged that the legislative process inherently involves public policy compromises and that in many cases, incremental progress is better than no progress at all. However, the General Assembly should refrain from passing legislation that purports to substantively reform VFOIA’s fee structure but fails in the endeavor.

This article proposes two options for reforming VFOIA’s broken fee structure: Comprehensive Reform and Bare Minimum Reform. Either option would make the assessment of charges by public bodies for the production of public records more uniform, more transparent, easier to understand, and less costly. The specifics of these two options are not carved in stone and may be adjusted in the context of measured compromise.

Comprehensive Reform

A comprehensive reform of VFOIA’s fee structure would entail the following:

  • Conceptually and practically unlinking VFOIA fees from the actual costs of implementing VFOIA.
  • Differentiating (for fee purposes) between requests made for: a.) commercial (for-profit) use; b.) purposes related to educational/scholarly research, noncommercial scientific research, and journalism; and c.) any other purpose (e.g., requests by the general public).
  • Distinguishing between the fees charged for: a.) search; b.) review and redaction; and c.) duplication.
  • Reducing the burden and deterrent effects posed by VFOIA fees by waiving a reasonable amount of fees per requester per year.
  • Setting the VFOIA fee rate (for the tasks of search, review, and redaction) at the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent3 per year.
  • Establishing a process by which a requester may petition for requested records to be furnished without any charge or at a reduced charge if disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government and is not primarily in the commercial interest of the requester.
  • Establishing a framework to address and remedy the current information desert in the area of VFOIA requests, production, and fees. This framework would include: a.) a procedure by which public bodies would report VFOIA-related information to the VFOIA Council on an annual basis; and b.) a procedure by which the VFOIA Council would prepare an annual summary report based on the information collected from public bodies.

Following comprehensive reform, the revised VFOIA fee structure could be as follows:

I. When records are requested for commercial (for-profit) use:

a.) Fee charged for search time: Free for the first one (1) hour (applicable only to the first two VFOIA requests made to a public body by the requester in a calendar year). Thereafter, the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

b.) Fee charged for review and redaction time: Free for the first one (1) hour (applicable only to the first two VFOIA requests made to a public body by the requester in a calendar year). Thereafter, the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

c.) Duplication charges: Actual, reasonable charges as per the public body’s published fee schedule.

II. When the records are requested for purposes related to educational/scholarly research, noncommercial scientific research, and journalism:

a.) Fee charged for search time: Free for the first three (3) hours (applicable only to the first two VFOIA requests made to a public body by the requester in a calendar year). Thereafter, the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

b.) Fee charged for review and redaction time: No charge for the first two VFOIA requests made to a public body by the requester in a calendar year. Thereafter,4 the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

c.) Duplication charges: No charge for the first one hundred pages per request. After the first one hundred pages: Actual, reasonable charges as per the public body’s published fee schedule.

III. When the records are requested for any other purpose, including requests by the general public:

a.) Fee charged for search time: Free for the first two (2) hours (applicable only to the first two VFOIA requests made to a public body by the requester in a calendar year). Thereafter, the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

b.) Fee charged for review and redaction time: No charge for the first two VFOIA requests made to a public body by the requester in a calendar year. Thereafter, the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year. The hourly rate calculated shall not include the cost of fringe benefits or any overhead costs. When calculating the median rate of pay, the rate of pay of full-time and part-time employees shall be included, but the rate of pay of temporary employees shall not be included.

c.) Duplication charges: No charge for the first one hundred pages per request. After the first one hundred pages: Actual, reasonable charges as per the public body’s published fee schedule.

IV. VFOIA fee waiver provision:

Records shall be furnished without any charge or at a charge reduced below the established fees if disclosure of the information is in the public interest because it is likely to contribute significantly to public understanding of the operations or activities of the government and is not primarily in the commercial interest of the requester. Any of the three categories of requesters noted above (I., II., or III.) may seek this fee waiver.

Bare Minimum Reform

A bare minimum reform of VFOIA’s current fee structure would entail the following:

  • Conceptually and practically unlinking VFOIA fees from the actual costs of implementing VFOIA.
  • Setting the VFOIA fee rate (for the tasks of search, review, and redaction) at the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and b.) $40 per hour, which rate shall increase by two percent per year.
  • Setting the duplication charges at: No charge for the first one hundred pages per request. After the first one hundred pages: Actual, reasonable charges as per the public body’s published fee schedule.

Following bare minimum reform, the revised VFOIA fee structure could be as follows:

A public body may make reasonable charges not to exceed the lesser of: a.) the median hourly rate of pay of state employees (calculated on a statewide basis); and $40 per hour, which rate shall increase by two percent per year. There shall be no charge for the first one hundred pages of duplication per request. After the first one hundred pages, the public body may charge actual, reasonable charges as per the public body’s published fee schedule.

The Perils and Folly of LD 25101081D

The General Assembly should decline to pass LD 25101081D in part for the following reasons:

  1. It would likely result in irrational inconsistencies in VFOIA fees across public bodies and their constituent departments/divisions;
  2. It would likely cause confusion, foster disputes, and increase the risk of litigation;
  3. It would likely be logistically costly to implement; and
  4. It is unlikely to achieve the objectives (as stated in SB 324) of making the assessment of charges by public bodies for the production of public records more uniform, more transparent, easier to understand, and less costly.

Public Body Objections to Substantive VFOIA Reform

At least some public bodies in the Commonwealth have raised issue with substantive reform to VFOIA’s fee structure. Three of the issues/objections (as understood by this writer) are noted below, along with retorts:

First, the public body side contends that Virginians are abusing VFOIA for vindictive or vexatious purposes and suggest, by implication, that the current fee structure helps to deter citizens from harassing public bodies.

Even if some citizens are making VFOIA requests for vindictive or vexatious purposes, this likely constitutes a small percentage of total VFOIA requests. To subject all Virginians to unreasonable, burdensome, and prohibitive VFOIA fees for the actions of a few is to allow the exception to dictate the rule. VFOIA can be amended to discourage abusive practices while also ensuring that citizens have ready, affordable access to public records.

Second, the public body side asserts that public bodies lack sufficient financial and human resources to adequately and timely handle VFOIA-related obligations and responsibilities.

Public bodies should have sufficient resources to operate effectively and in accordance with the law. Unfunded mandates can be as unreasonable as the current VFOIA fee structure. As noted above, a reporting mechanism should exist whereby public bodies report VFOIA-related data to the VFOIA Council, in part to enable the Council to accurately gauge the cost of VFOIA and to have meaningful discussion regarding how best to fund it.5

Third, the public body side at least implies that as a matter of principle, citizens should cover the actual costs associated with their VFOIA requests.

Though possibly an admirable concept when considered in a vacuum, this is simply not feasible in the real world. In practice, the implementation of an actual cost regime undermines the stated objective of VFOIA, rendering the cost of access to public records burdensome for most Virginians and insurmountable for indigent citizens. We should not expect each citizen to pay the actual costs associated with VFOIA requests for the same reasons that we do not expect each citizen to pay the actual costs of driving on state roads, or receiving public education, or calling 911, or using public libraries, or obtaining police services. Perhaps the infeasibility of an actual cost regime is best illustrated by citing data from the federal FOIA. According to the Summary of Annual FOIA Reports for Fiscal Year 2023, published by the Office of Information Policy, U.S. Department of Justice, the FOIA fees collected in FY 2023 are less than 0.4 percent of the total estimated cost of the government’s FOIA-related activities.6

Conclusion

Senator Danica Roem should be commended for her leadership on the important issue of VFOIA fee reform. As previously stated, the legislative process inherently involves public policy compromises and, in many cases, incremental progress is better than no progress at all. However, compromising too much can lead to ineffectual revisions to VFOIA and to greater delay in achieving substantive VFOIA fee reform. Liberty-loving Virginians and organizations that promote transparency and open government in the Commonwealth should stand on principle and remain cognizant of the distinction between measured compromise and capitulating to the expensive and opaque status quo.

Perhaps the importance of having affordable access to public records is best illustrated by the words of Thomas Jefferson who, in a letter to Richard Price dated January 8, 1789, stated in part: “that wherever the people are well informed[,] they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.”

  1. The second enactment of SB 324 states “[t]hat the provisions of the first enactment of this act shall not become effective unless reenacted by the 2025 Session of the General Assembly.” ↩︎
  2. According to the suggested agenda for the December 4, 2024 meeting of the Virginia Freedom of Information Advisory Council (hereinafter, the “VFOIA Council”), “while some participants expressed support for the draft legislation, the work group did not establish consensus on it as several participants indicated that organizations they represent either were divided or had not yet taken a position on the draft.” This author, who is a citizen member of the SB 324 Work Group, opposes LD 25101081D. ↩︎
  3. In lieu of a fixed-rate escalation approach, this rate could be pegged to the year-over-year percentage change in the Chained Consumer Price Index for all Urban Consumers (C-CPI-U), as published by the Bureau of Labor Statistics, U.S. Department of Labor. ↩︎
  4. There is little to no logical basis for why any group of requesters (other than perhaps commercial (for profit) requesters) should pay for the government’s review and redaction process. However, as a matter of practicality, to reduce the burden on public bodies, and as part of a mechanism to discourage VFOIA requests that are for vindictive or vexatious purposes, review and redaction fees could apply to subsequent requests made in a calendar year. ↩︎
  5. In the medium to long term, the rapid development of artificial intelligence (“AI”) is likely to reduce VFOIA review and redaction costs and thus diminish the force of, or render moot, many of the fee-related arguments posited by public bodies. ↩︎
  6. According to the summary, “[d]uring FY 2023, 4,944.39 ‘full-time FOIA staff’ were devoted to the administration of the FOIA throughout the government [footnote omitted]. The total estimated cost of all FOIA-related activities across the government was $659,869,904.30. Of this total, 93% ($610,779,248.10) of total costs were attributed to the administrative processing of requests and appeals by agencies. Seven percent ($49,090,656.24) was reported to have been spent on litigation-related activities. By the end of the fiscal year, agencies reported collecting a total of $2,337,097.74 in FOIA fees. The FOIA fees collected in FY 2023 are less than 0.4% of the total estimated cost of the government’s FOIA-related activities.” ↩︎
The Wall of Truth and Memory at the Museum of Memory and Human Rights in Santiago, Chile
Photo: Ramin Seddiq

Thanks to Alan Gernhardt, Esq., Executive Director of the Virginia Freedom of Information Advisory Council, for expeditiously responding to the citizen inquiry of August 12, 2024.

Georgetown University Repurposes DC’s Darth Vader Building Into a Multi-Use Education Facility

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Georgetown University is in the process of repurposing the property located at 111 Massachusetts Avenue NW (nicknamed the “Darth Vader” building). According to the University, the building “is expected to be used as a multi-use education facility for new learning hubs and expanded programming, including programs in the School of Continuing Studies, McDonough School of Business, the Earth Commons Institute, the School of Health, the School of Nursing, and executive education programs.” Construction at the property—which covers a land area of 35,336sf and sits across Massachusetts Avenue from the Georgetown University Law Center and Capitol Crossing—is expected to be complete in the fall of 2025.

According to public records, Georgetown University acquired the property from Jemal’s Darth Vader LLC on December 16, 2021 for $85 million. The DC Government’s CorpOnline database lists Norman Jemal and Douglas Jemal (of Douglas Development Corporation) as the “beneficial owners” of Jemal’s Darth Vader LLC.

The Washington Business Journal reports—citing data from the Department of Education—that in fiscal 2022, Georgetown had Greater Washington’s largest university endowment at $3.21 billion. According to a Georgetown University Consolidated Financial Statements, “[t]he University’s endowment totaled $3,298,969,000 and $3,210,032,000 at June 30, 2023 and 2022, respectively.”

The “Darth Vader” building, located at 111 Massachusetts Avenue NW in Washington, DC.
Photo: Ramin Seddiq

Rappi’s Rapid Rise

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“Rappi1 is a Latin American super-app offering a variety of digital consumer services that began with food delivery and has since expanded to provide e-commerce, travel, and banking services[,]” according to an analysis published by Contrary Research which states further that “Rappi’s core offering is its delivery service, which allows customers to order a wide variety of goods across more than eight categories of products as of May 2024, including restaurant orders, groceries, pharmaceuticals, clothing, drinks, travel bookings, and electronics.”

In 2023, Rappi’s growth rate was 37 percent year-over-year, according to Sacra, and as reported in Statista, with a market value of $5.25 billion, the Bogotá-based on-demand delivery service is Latin America’s second most valuable unicorn.2 Reuters reports that Rappi operates in nine countries across Latin America; that it is backed by Japan’s SoftBank; and that according to cofounder Simón Borrero, it could be ready to launch an initial public offering on the New York Stock Exchange within 12 months, but that the company is in no rush to launch an IPO, taking into account its better earnings figures reported last year.

As stated on the company website, Rappi “was created in August 2015 by Simón Borrero, Felipe Villamarín and Sebastian Mejía […] as the solution to connect small businesses or ‘neighborhood stores’ with users in a few city blocks.” Rappi’s growth and success has had economic reverberations in Latin America. According to a CSIS report, in Colombia,3 more than 110 companies have been formed by Rappi alumni across a wide range of industries. “These companies have collectively raised more than $2.1 billion in [venture capital] funding and employ more than 14,000 people[,]” according to the report, which also cites a GSMA study stating that “every 10 percent increase in digitalization has the potential to generate a 1.9 percent increase in GDP growth for LAC [(Latin America and the Caribbean)] countries.”

Rappi’s rapid rise brings some risk, according to the analysis published by Contrary Research, which states that “[t]he company’s expansion strategy and diversified service offerings aim to increase user engagement and market penetration but also complicate resource allocation and management.” Rappi also faces issues related to labor rights and working conditions.

Rappi uses micro-fulfillment centers/“dark stores”4 to store inventory and enable rapid delivery. Micro-fulfillment centers and “dark stores” are small-to-medium-sized storage facilities that are used by the e-commerce industry to store inventory closer to the end user so as to reduce cost and transit/delivery times.

  1. According to Startup Savant, Rappi takes its name from (and is a play on) the Spanish word “rápido,” meaning fast. ↩︎
  2. Unicorn is the term used in the venture capital industry to describe a privately-owned startup company valued at over $1 billion. ↩︎
  3. According to the company, Rappi has 150,000 registered delivery drivers in Colombia, of which 52 percent connect regularly. ↩︎
  4. Although the terms micro-fulfillment center and “dark store” are sometimes used interchangeably, “dark stores” are usually retail spaces that are closed to the public and used exclusively for e-commerce order fulfillment whereas micro-fulfillment centers are typically small warehouses (~10,000sf) that serve a function similar to “dark stores.” ↩︎
Bogotá, Colombia
Photo: Ramin Seddiq

The Ballston Macy’s Redevelopment Project

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Insight Property Group intends to redevelop the now-shuttered1 Macy’s at 685 & 701 North Glebe Road in Arlington, VA into a 16-story building with 553 apartment units, a 38,400sf organic grocery store and 2,000sf of in-line retail space. Construction at the two-acre (87,365sf) site will include two levels of underground parking and one level of above grade parking, according to an Arlington County profile of the project. An employee of a nearby store stated today that he believes Whole Foods Market will be the grocery tenant.

According to Andrew A. Painter, “[i]n exchange for transferring density from the Haven [apartments] site to the Ballston Macy’s site through the County’s Transfer of Development Rights process, Insight [Property Group] agreed to commit the Haven’s units as Committed Affordable Units, record a historic easement to preserve the Haven’s architectural integrity, and make a series of sustainability and maintenance investments at the Haven site.”

  1. The Macy’s Ballston Quarter closed in early 2024, following a liquidation sale. ↩︎
Site of the former Macy’s Ballston Quarter at 685 & 701 North Glebe Road in Arlington, VA
Photo: Ramin Seddiq

Strip Centers Experience a Revival

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According to the International Council of Shopping Centers (ICSC), a strip center is an “[a]ttached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores. Open canopies may connect the store fronts, but a strip center does not have enclosed walkways linking the stores. A strip center may be configured in a straight line, or have an “L” or “U” shape.” Strip centers are also known as strip malls. The U.S. has more than 68,000 strip centers from coast to coast, according to CNBC (citing data from ICSC). Strip centers range in size from 5,000sf to over 100,000sf, according to Wikipedia. ProjectionHub states that the average strip center is between 7,000sf and 20,000sf.

Traffic to strip centers was up 18 percent in 2022 compared to pre-pandemic numbers, according to a RetailStat analysis of 2,500 properties (reported by Audacy). RetailWire—citing data from Placer.ai—reports that foot traffic was found to be down one percent at strip centers in 2023 compared to pre-pandemic 2019 levels. That compares to a decline of 2.3 percent across U.S. shopping centers, with visits declining 5.8 percent at indoor malls and 8.5 percent at outlet malls, according to the report. Data from Marcus & Millichap (reported in GlobeSt) indicates that during the past three years, demand in the unanchored strip center subsector more than quadrupled new space delivery, compressing vacancy to 4.7 percent — the lowest recording since 2003. An average of 10,000 new leases were executed annually for 1,000sf to 5,000sf spaces at strip centers during this same period, according to the report.

In its Q–2 2024 retail market report, JLL notes an increasing focus “toward strip centers, particularly from an investment perspective.” The report states further that “[w]ith many centers located close to daily needs destinations, they often benefit from increased traffic and steady income from service-based tenants like medical offices and F&B tenants.” According to a March 2024 report, CBRE Econometric Advisors (“CBRE EA”) estimates the retail sector cap rate (the average for all markets covered by CBRE EA) to be 6.4 percent.

Further Point Enterprises and Mike LaVitola Plan To Resuscitate Some of Upscale Grocer Foxtrot’s Locations

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On April 23, 2024, the Chicago-based operator of Foxtrot and Dom’s Kitchen & Market announced the closure of all store locations amid plans to file for bankruptcy, according to Forbes. Chicago Reader writes that one thousand people were out of work with hours’ notice. The decision affected 33 Foxtrot locations across Chicago, Austin, Dallas, and Washington, DC, along with the two Dom’s stores in Chicago, according to Axios, which reports that the upscale hybrid market-cafés were popular local spots for artisanal snacks and gourmet food, as well as good places to work remotely.

Foxtrot Market and Dom’s Kitchen & Market agreed to merge last year under a new entity called Outfox Hospitality (“Outfox”), according to Specialty Food News. Progressive Grocer reports that during the week of May 13, 2024, Outfox filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, claiming that it cannot pay its creditors and listed its value and liabilities between $10 million and $50 million, with a range of 5,001 to 10,000 creditors. The report also states that on May 10, 2024 (prior to filing for bankruptcy) DLA Piper—the law firm that works with Foxtrot creditor JPMorgan Chase & Co.—conducted an online auction of Foxtrot’s assets and that a private holding company called Further Point Enterprises made the solo and winning bid ($2.2 million) for Foxtrot’s assets.1

According to The Real Deal, Mike LaVitola,2 who founded Foxtrot in 2013, is believed to be working with New York-based Further Point Enterprises to reopen multiple locations in Chicago and Texas. However, the new Foxtrot ownership isn’t planning to reopen any Washington, DC stores, according to the report (citing “sources”). C-Store Dive reports, citing a May 31 court filing with the U.S. Bankruptcy Court, that Further Point Enterprises has entered into lease agreements for six of Foxtrot’s former stores in Chicago. The six locations that Further Point has leased were part of the group of 15 Foxtrot stores whose assets it acquired in the May 10 online auction, according to the report (citing information from the bankruptcy court filing). Eater Chicago reports that on Wednesday, June 5, LaVitola announced plans to reopen 15 stores in Chicago, Dallas, and Austin this summer, with more than half of these 15 stores located in Chicago, and with the stores in Chicago’s Old Town and Gold Coast neighborhoods slated to reopen in six to eight weeks. The reopened stores will maintain Foxtrot’s layout and merchandising as well as its focus on small, local vendors, according to C-Store Dive (citing a company spokesperson).

A class action complaint filed on April 24, 2024, in the U.S. District Court for the Northern District of Illinois, alleges in part that Foxtrot Retail, Inc., Outfox Hospitality LLC, and Dom’s Market LLC (collectively, the “Defendants”), were “employers” as defined by the WARN Act, 29 U.S.C. § 2101(a)(1),3 20 C.F.R. § 639(a), and IWARN, 820 ILCS 65/5(c)4; that neither Jamil Moore (the “Named Plaintiff”) nor any members of the putative WARN and/or IWARN classes received at least 60 days’ notice of the Defendants plant closing and/or mass layoff; and that neither the Named Plaintiff nor the members of the putative WARN and/or IWARN classes received compensation for the 60-day notice period that should have been paid under WARN and/or IWARN.

  1. The auction ended when no offers were accepted for the estimated $200,000 in assets from Dom’s Kitchen & Market, according to Progressive Grocer. ↩︎
  2. According to a 2018 University of Chicago news release, Michael LaVitola, MBA’14, founded Foxtrot while in his first year at the University of Chicago Booth School of Business. Foxtrot is the fourth recipient of a venture investment from the UChicago Startup Investment Program, according to the news release, which also reported that the company “has received $450,000 from the university as part of their $6 million Series A round, which is led by Fifth Wall.” ↩︎
  3. The federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. (“WARN”). ↩︎
  4. The Illinois Worker Adjustment and Retraining Notification Act, 820 ILCS 65/1 et seq. (“IWARN”). ↩︎
A shuttered Foxtrot in the Rosslyn neighborhood of Arlington, Virginia.
Photo: Ramin Seddiq

Luckin Outpaces Starbucks and Leads in China’s Burgeoning Coffee Market

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China’s overall coffee sales will rise at an 8.7 percent compound annual growth rate (CAGR) during the 2022–27 time period, with hot coffee outpacing sales of ready-to-drink coffee drinks, according to GlobalData. Xiamen-based Luckin Coffee Inc. (“Luckin”) has tapped into the rising popularity of coffee in China, and it has overtaken Starbucks to become the largest coffee chain in nation of 1.4 billion, according to Global Times.

Luckin’s Q1–2024 financial report states that “[t]otal net revenues in the first quarter were RMB6,278.1 million ($869.5 million), representing an increase of 41.5 percent from RMB4,436.7 million in the same quarter of 2023.” Total net revenues in fiscal year 2023 were RMB24,903.2 million (~$3.5 billion), representing an increase of 87.3 percent from RMB13,293.0 million in fiscal 2022, according to Luckin’s 2023 financial report. By comparison, Starbucks reported total revenue of $3.05 billion in China for fiscal 2023 that ended October 1, according to a CNN calculation based on the company’s quarterly results.

In its Q1–2024 financial report, Luckin states that “[n]et new store openings during the first quarter was 2,342, including two new store openings in Singapore, resulting in a quarter-over-quarter store unit growth of 14.4 percent from the number of stores at the end of the fourth quarter of 2023, ending the first quarter with 18,590 stores which include 12,199 self-operated stores and 6,391 partnership stores.”1 Starbucks’ outlets in China are entirely company-owned, according to CNN, which reports (citing data from Starbucks) that as of the end of January 2024, Starbucks had 6,975 stores in China—a 14.5 percent increase from a year earlier. China is Starbucks’ second largest market after the U.S., according to Visual Capitalist.2

CNBC reports that Luckin and Starbucks have different pricing strategies and because Luckin “offers heavy discounts and offers,” a cup of coffee from Luckin costs 10 to 20 yuan, or about $1.40 to $2.75, whereas a cup of coffee from Starbucks is priced at 30 yuan or more (i.e., at least $4.10). Luckin has introduced menu items that appeal to the Chinese customer and elevate the popularity of coffee in the country. For example, Luckin collaborated with Kweichow Moutai3 to create the Jiangxiang-flavored4 latte which, according to a Q3–2023 Luckin earnings call, broke Luckin’s single-item sales record with 5.42 million cups sold on launch day. According to an April 8, 2024 Luckin press release, “[t]he ‘Jiangxiang Flavored Latte’, a successful product jointly launched by Luckin Coffee and Kweichow Moutai, has captured the hearts of China’s younger demographic, amassing a transacting customer base of over 25 million.” The same press release also announced that on March 29, the Luckin Coffee x Kweichow Moutai theme store opened in Shenzhen, Guangdong province.

In terms of site criteria, Luckin stated in a fiscal year 2023 SEC Form 20-F that “[w]e primarily operate two types of stores, namely pick-up stores and relax stores, for different purposes, and we strategically focus on pick-up stores, which accounted for 98.5 percent of our total self-operated stores as of December 31, 2023. Our pick-up stores have limited seating and are typically located in areas with high demand for coffee, such as office buildings, malls, shopping districts and university campuses.” … “The majority of these [pick-up] stores generally range from 20 to 60 square meters [(215-646sf)] in size …” The filing states further: “We open relax stores for branding purposes. Our relax stores accounted for 1.5 percent of our stores as of December 31, 2023. Relax stores are generally spacious and larger than 120 square meters [(1,292sf)] in size.”5

On April 24, 2024, Luckin announced the opening of a new roasting plant in Kunshan, Suzhou City of Jiangsu Province. The press release stated that “[w]ith a total planned investment of $120 million and an annual roasting capacity of 30,000 tons, it is the largest coffee roasting plant in China to date.”

Luckin was founded in 2017 by Jenny Qian. It trades on the OTC market. Centurium Capital, a private equity firm headquartered in Beijing, is currently the controlling shareholder of Luckin, according to Bloomberg.

  1. As of December 31, 2023, Luckin had 10,628 self-operated stores in operation, including 10,470 pick-up stores and 158 relax stores, according to an SEC filing. ↩︎
  2. As of October 2023, Starbucks had 16,346 stores in the U.S., of which 9,645 were company-owned and 6,701 were licensed, according to Visual Capitalist. ↩︎
  3. Kweichow Moutai, is a Chinese company specializing in the production, sale, and distribution of Maotai, a style of baijiu made in the town of Maotai, Guizhou Province, China. ↩︎
  4. Kweichow Moutai Jiangxiang baijiu (酱香) is described as “floral, dried dates with a hint of nuts and toasted rice,” and with 53 percent ABV. ↩︎
  5. The typical Starbucks store ranges in size from 1,500sf to 2,000sf. ↩︎
Zhongshan Lu Pedestrian Street at Siming South Road, Xiamen, China
Photo: Ramin Seddiq

New Building in DC’s Union Market District Sold at Auction

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The 12-story, 110-unit mixed-use (multifamily and retail) building in DC’s Union Market neighborhood sold at a foreclosure auction today for $38,300,000.00. Silver Spring-based HH Fund is the purchaser. PropertyQuest (DC Office of Planning) indicates the 2024 assessment for the property (land and improvements) to be $41,068,460.

According to The Real Deal, New York-based Ranger Properties purchased the pre-development property in 2017; the development entitlement process took two years; EagleBank issued a $33.7 million construction loan in 2019; the new development delivered in early 2023; and Srinivas Chavali purchased the nonperforming loan backing the property in January 2024.

The building includes 3,463sf of retail space, a portion (1,136sf) of which is leased to The UPS Store. The remaining 2,327sf is vacant. The multifamily portion of the building is known as The Lanes at Union Market. The property is located about a thousand feet from Edens-owned Union Market, which is a food hall that anchors the Union Market District.

Alex Cooper Auctioneers conducted the auction.

400 Florida NE (The Lanes at Union Market), Washington, DC
Photo: Union Market District

Chinese EV Maker BYD Seeking Sites for a Production Facility in Mexico

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Reuters reports that Chinese electric auto maker BYD is evaluating locations in Mexico for a production facility. The report cites Americas head Stella Li as stating that the plant will be built in central Mexico and will take two to three years to complete. It will have a capacity of 150,000 vehicles per year, according to Li, as reported in the Detroit Free Press. In an interview with WardsAuto, Jorge Vallejo, BYD’s general director in Mexico, stated in part: “These days our focus is basically on the Mexican market. We expect to commercialize 50,000 vehicles this year and we want to more than double those sales next year.” On May 14, BYD launched its first pickup truck—the mid-to-large size BYD Shark—in Mexico, according to CleanTechnica.1

According to Asia Financial, BYD overtook Musk-led Tesla in sales for the first time ever in Q4–2023, delivering 526,409 vehicles in the October-to-December period and exceeding Tesla’s deliveries of 484,507 EVs. Reuters reports that during a January 2024 post-earning call with analysts, Elon Musk said that Chinese car companies were the “most competitive”; that they “will have significant success outside of China, depending on what kind of tariffs or trade barriers are established”; that “[i]f there are no trade barriers established, they will pretty much demolish most other car companies in the world,”; and that “[t]hey’re extremely good.”

On May 14, The White House announced that the tariff rate on electric vehicles under Section 301 of the Trade Act of 1974 will increase from 25 percent to 100 percent in 2024, stating that “[w]ith extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of EVs grew by 70 percent from 2022 to 2023—jeopardizing productive investments elsewhere. A 100 percent tariff rate on EVs will protect American manufacturers from China’s unfair trade practices.” CBS News reports that the administration “is trying to keep the U.S. from emulating Europe, where Chinese EVs quickly came to account for about 20 percent of the market share, but is not considering banning Chinese-made EVs.”

Mexico’s industrial real estate market is thriving, according to an analysis published in Thornburg, which states that if just three percent of China’s industrial gross leasable area (GLA) were to shift to Mexico, the Mexican industrial market footprint would double. According to TC Latin America Partners, industrial inventory in Mexico has doubled since 2008 with vacancies hovering at just seven percent over the last decade. Commercial Property Executive reports (citing data from Fitch Ratings) that Mexico’s industrial market attracted more than $18.6 billion in foreign investment in the first quarter of 2023 alone, a 48 percent increase year-over-year.

Mexico is the world’s seventh largest passenger vehicle manufacturer, producing 3.5 million vehicles annually, according to the International Trade Administration, which further states that 88 percent of vehicles produced in Mexico are exported, with 76 percent destined for the United States. The Mexican Automotive Industry Association (AMIA) estimates that Mexico will become the fifth largest global vehicle producer by 2025, according to Prodensa.

  1. Mexico Business News reports that in addition to a production facility in Mexico, BYD intends to invest in a new industrial complex in northeastern Brazil, which is set to be built on land previously occupied by a Ford plant that ceased operations in 2021. That plant is estimated to cost 3 billion reais (US$620 million). ↩︎
BYD Auto logo, used since 2022.
Image: BYD

Takashimaya To Expand Its Presence in Vietnam With a New Store in Hanoi

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Japanese department store operator Takashimaya intends to expand its presence in Vietnam by opening a store in Hanoi, according to Inside Retail, which reports (citing Nikkei) that the company’s subsidiary, Toshin Development, has already started work on a mixed-use complex in the Vietnamese capital. Vietcetera reports that the company plans to invest around ¥2 billion ($12.9 million) in the project, which will be the first Japanese department store chain to establish a physical presence in Hanoi as well as Takashimaya’s first overseas venture in eight years. Slated to open in 2026, the Hanoi store will have 10,000 square meters of sales space and will be part of a mixed-use development that includes apartments, offices and retail space, according to Invest Vietnam.

In HCMC’s District 1, Takashimaya is an anchor tenant at Saigon Centre, a mixed-used development that was jointly developed by Keppel Land, a Singapore–based developer and Toshin Development. The Saigon Centre store opened in 2016, consists of five stories, and “involved individual sub-tenant fit-outs for over 100 brands,” according to Pure Projects. That store posted a two percent increase in revenue to three billion JP¥, during the fiscal year that ended February 2024, according to VietnamPlus.

Takashimaya currently has 22 locations—18 in Japan and four overseas.

Ba Son Bridge connecting District 1 to Thu Duc City; HCMC (Saigon), Vietnam
Photo: Ramin Seddiq