Suresh Wattamwar set up shop 19 years ago in a burned-out patch of Bedford-Stuyvesant now known as Saratoga Square. A young pharmacist who had recently arrived from India, he visited the neighborhood and saw that it needed a drug store. He knew it was one of the city’s poorest communities–but to him that also meant little in the way of serious competition.

His willingness to patiently answer his customers’ questions earned him a loyal following, particularly among a poor population used to getting the bum’s rush from emergency room attendants and clinic doctors. His business flourished. But Wattamwar admits his store, Sure Drugs, has been a rare success story along this ragged retail strip which, like dozens of smaller junctions throughout the city, was left to rot after being gutted by riots in the 1970s.

Now after a decade of promises to restore this Fulton Street shopping corridor, construction is slated to begin this summer on Fulton Street Partnership Plaza, the first of eight neighborhood shopping centers planned under Giuliani administration’s “ANCHOR” inner city retail initiative. This two-story retail mall, a project of the New York City Partnership, will likely feature a new health clinic and insurance office, as well as discounted space set aside for small businesses and local franchises.

There’s only one problem, for Wattamwar at least. The biggest tenant will almost certainly be a 10,000 square-foot Rite Aid drug store.

At first Wattamwar tried to deal his way out of the crisis. After all, this was supposed to be a local economic development project and he had one of the few healthy businesses around. They’d work with him, he thought. So he arranged to make a counter offer for the space; Thiftway Associates, a regional drugstore chain with 28 stores, readily agreed to go into a joint venture with Wattamwar meeting Rite Aid’s terms.

But the Partnership concluded Thriftway simply lacked the financial heft needed to guarantee future rental payments for the project’s backers. Ironically, Wattamwar is being undone by the same business forces that guided his decision to settle here two decades ago. Rite Aid figures the neighborhood needs prescription pills and there isn’t much competition. Wattamwar now says it’s likely he will have to move on.

“I will miss this place,” he sighs. “It’s the customers. They treat me extremely well here.”

The ANCHOR plan–for better or worse–will be the model for New York’s inner-city business development in the foreseeable future. After decades of complaining about how the nation’s big stores have abandoned poor neighborhoods, city officials and nonprofits are finally doing something–most dramatically, by plopping “big box” megastores down on major traffic arteries. But on the secondary strips, the neglected commercial capillaries that would provide the most direct economic bloodflow into poor communities, the city is trying a scaled-down megastore strategy, centered around the introduction of smaller chain stores, theaters and restaurants.

It’s hard to deny the attractiveness of the chains: they offer a way to privately finance projects, replacing direct government subsidies. In ANCHOR, the Giuliani administration has opted for a practically funding-free approach to inner city retail, offering low-cost financing and federal loan guarantees, yet relying mostly on chain stores’ own eagerness to tap the inner-city market.

But there is a small but growing chorus of critics who say the program is flawed, especially in neighborhoods that lack the political leadership to ensure that ANCHOR responds to community needs.

In Saratoga Square, some neighborhood leaders charge they are being bulldozed. Under the current arrangement, the Partnership and city housing bureaucrats have had total control over the project: no formal public review of construction plans was required; no community input over who would develop the site was solicited. And some neighborhood leaders say that not enough has been done to find out what new businesses are really needed on Fulton Street.

Activists argue that this strip had real potential. Rex Curry, associate director at the Pratt Institute Center for Community and Environmental Development (PICCED) worked with locals to design a plan four years ago for a new shopping promenade and farmer’s market. “This could have been a major town center,” he says. Instead Fulton Street is getting a Rite Aid and a strip mall–“homogenized into something you could see every place.”

“Who’s making the ultimate decisions here?” charges Majorie Matthews, chairwoman of local Community Board 3. “Everybody besides me.”

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With a serious squint, it’s possible to see a future life for this broken leg of eastern Fulton Street. There’s no reason that the main drag, fed by people coming and going from the Ralph Avenue subway stop under Mt. Sinai’s reassuring cathedral spire, couldn’t be a vital part of the Central Brooklyn commercial corridor.

As the Partnership touts, the surrounding area has become more attractive to working class people over the last decade, boosting the average income for a neighborhood that was almost exclusively poor. Some 730 new two- and three-family homes, marketed to families earning between $30,000 and $55,000 a year have been built over the last eight years. In 1980, the neighborhood had only 1,100 households with incomes between $35,000 and $150,000. By 1990, that figure had risen to 10,900, according to Partnership marketing documents.

Yet there is little evidence of this progress along Fulton between Saratoga and Ralph avenues. More than half of the active storefronts are home to churches and social service agencies. Most of the remaining stores are open only sporadically. Fayaz Rasheed, owner of Rio Drugs, says that with the notable exception of one bright new open air meat and vegetable market, the strip hasn’t changed a bit in the time he’s been there.

Why, Rasheed adds, would anyone want to invest in a mall here? The bodega next door, All My Children Variety and Grocery, has gone in and out of business three times over the last year, he says. A small Associated Supermarket attached to Wattamwar’s shop closed two months ago after someone reportedly poured gasoline down the air conditioning ducts and lit the store on fire. And many of the storefronts along Fulton and Ralph–Brooklyn Nails, Spencer Upholstery, 24 Hour Discount Midnight Store to name a few–appear to be permanently shuttered. “Just look at it,” sighs Frank German, a local resident standing outside Rasheed’s shop. “It’s dismal.”

Neighborhood people who have money get in their cars and drive to Kings Highway or the new Atlantic Terminal to shop, concedes Joseph Holley Sr., executive director of the Northeast Brooklyn Housing Development Corp. and coordinator of the Ralph Avenue Merchants Association, an organization which he describes as “kind of dormant.” Holley says he’s tried over the years to persuade both store owners and landlords to make the area more inviting, but the merchants are so poor and the rents are so low–sometimes less than $5 per square foot–the landlords aren’t interested in helping out.

This shouldn’t be surprising. In affluent neighborhoods, a broad range of retail is taken for granted. But experienced developers say that building a shopping strip from scratch in a place like Saratoga Square takes careful planning–and a willingness to accept the fact that things may go bad even if everything is done right. Robert Brandwein, president of the Boston-based Policy and Management Associates and a veteran of New York’s nonprofit retail development world, says a workable deal requires three financial elements: low cost loans, a competent developer and solid store owners willing to commit to long leases and substantial rents. The political stars must be aligned too; the opposition of even one vindictive councilman has been known to doom a project. And most importantly, the community must buy in; after all, these are the people who are going to do their shopping here.

If the goal is to build retail, the Giuliani administration’s ANCHOR initiative could work as long the mayor delivers on promised low-cost financing, Brandwein says. But if the goal is to also support solid neighborhood businesses, hire local people and invest profits back into business support services, the city will need to develop strong collaborations with effective local leaders. “Development in New York City is aggravating as hell,” he says, insisting that he would never attempt one of these projects without the leadership of a neighborhood-based nonprofit. They are the only ones with the connections and the moral authority to make a project work, he says. “Because they’re local, they can do it.”

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ANCHOR, short for Alliance for Neighborhood Commerce Home Ownership and Revitalization, claims to be a shot at real community building. While the program has never been a headline grabber like Giuliani’s big-box zoning plan, it nonetheless stands a chance of becoming important since its architect is Richard Roberts, a former aide in mayor’s office who, after quitting for a time, was brought back to lead the foundering Department of Housing Preservation and Development (HPD). When asked by City Limits about his intentions when he was appointed two months ago, Roberts replied that expanding the ANCHOR program would be one of his top priorities.

It has also been billed as such by the Partnership’s Kathryn Wylde who says it is her organization’s first attempt at “comprehensive community development,” a much-hyped goal in foundation board rooms, but ultimately a back-breaking mission. The Partnership–which was instrumental in designing and funding the ANCHOR program–will be largely responsible for the new building. For its part, HPD is charged with monitoring the development, finding other builders for abandoned commercial space and vacant city-owned land and pressuring other city agencies, like parks, sanitation and police, to improve the look and feel of these ANCHOR strips.

As community board officials in Saratoga Square have figured out, the Partnership exerts enormous influence over every facet of the process. Urban renewal planning for the area was completed more than five years ago under the Dinkins administration; because the construction plans were accepted then, the Partnership’s blueprints require no public review now. The Partnership was also responsible for choosing the developer, one of many that it has worked with doing housing in Brooklyn. And the developer, in turn, is responsible for leasing the space and making the project’s numbers work.

As a condition of its contract, the developer is also required to invest some money–25 to 30 percent of profits after business costs–back into business-related services for the neighborhood. Still Steven Brown, president of the Community Partnership Development Corp., the Partnership’s development arm, couldn’t estimate how much this would be.

While the only immediate goal of the organization is to build and lease its eight Partnership Plazas, officials there make no secret of their ambition to make ANCHOR a prototype that will be duplicated in other neighborhoods. The task is to figure out what mix of tenants and financing might make inner city retail development routine in the future.

If such a formula exists already, it is in the proliferation of well-publicized Pathmark superstore deals going on around the city and, indeed, all over the region. But ANCHOR is designed for neighborhoods typically too small to support a Pathmark-sized leviathan. Therefore the Partnership and its developers have been looking at all kinds of alternatives, ranging from small supermarkets to Blockbuster video stores.

In run-down Saratoga Square, the Partnership’s choices have been decidedly limited; Rite Aid has stepped up as the sole anchor tenant. If it signs on the dotted line, as it has committed to do, the drugstore will be the dealmaker. The chain is talking seriously about taking a 20-year lease, paying $23 to $25 a square foot for the privilege of doing business there.

Big chains makes these developments possible, Brown explains. Because they can afford to pay far more per square foot than local businesses, they subsidize the project allowing the developer to charge lower rents to locals.

More importantly, banks want to see a long-term lease agreement from a national company so they know someone will be paying rent even if the development’s smaller, less stable retailers bail out. Such lease agreements are particularly critical as this stage, he adds, because the Partnership Plazas have no track record. The banks have no way of judging whether they will turn a profit.

That, he says, is why the Partnership had to turn down Wattamwar’s Thiftway offer in favor of the larger chain’s.

“Ride Aid’s on the hook,” Brown says. He admits that chain stores are not perfect; it’s possible, for example, that Rite Aid could eventually go bankrupt as plenty of other large retail chains have. But hopefully by then, he says, the mall will be successful enough to attract a new anchor tenant and carry on. “The fact is, today Rite Aid has a pretty good balance sheet,” he says, adding with a short laugh, “and today is when I need them.”

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The Partnership’s Rite Aid deal is maybe financially safe, but does it give the people of Saratoga Square something they really need?

A couple years ago, the Ralph Avenue Merchants Association took an informal survey of residents outside of the local subway station asking them what kind of businesses they would like to see in the neighborhood. A new drug store was nowhere near the top of the list. Holley says the big winners were a large sit-down restaurant, a hardware store and a clothing store. There were also numerous requests for a sports store and a bank with an automated teller machine.

Others in Bed-Stuy also make no secret of their desire that some of the new retail space to go to local African-American entrepreneurs. Businesses should not be allowed take all the wealth out of this community, asserts CB 3 District Manager Lewis Watkins. The people along East Fulton Street do not have stock in Rite Aid, he points out, nor do they have any say over the actions of the New York City Partnership. Without some community control over these investments, he says, the Partnership is only “offering tidbits.”

“Decisions are being made centrally, not locally,” he adds. “And we have to live with those decisions.”

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But if the neighborhood wants its needs met, the reality is that it must be endowed with leaders capable of articulating those needs–shouting if need be–and boldly manipulating the city’s vast, multi-layered bureaucracy.

One of the great success stories is Congressman Floyd Flake. Having built a housing and social service empire from his church, Allen A.M.E. in southeast Queens, he has also been successful at retail development. Along a ten-block stretch of Merrick Boulevard, Allen A.M.E. Housing Corp. owns and manages more than two dozen storefronts.

The church has used its own financial strength–thanks to $3.5 in annual earnings from offerings, tithes and other gifts–to buy properties whenever they come available at affordable prices, says Deborah McCaffity, executive director of the Allen A.M.E. Neighborhood Preservation and Development Corp. Attempting to support the business community, counselors provide free advice on subjects such as corporate and tax laws, bookkeeping and bank financing. And the next step will be to bring franchises to the strip, providing sit-down restaurants, clothing shops and, ultimately, a major supermarket. “We have a full vision,” she says, smiling.

Other community-based organizations have racked up similar successes. Brandwein cites, by way of example, his work with Coney Island’s Astella Development Corp., a housing development organization that began work last year on a plan to restore Mermaid Avenue under–no big surprise–the ANCHOR program. A small Pioneer supermarket, a Rite Aid and a Blockbuster video store have already opened up and the Partnership is in talks with a major movie theater to spur development on the corridor’s desolate eastern end.

Astella’s executive director Judy Orlando is Brandwein’s paradigm of a powerful, well-connected local leader. Orlando, who can usually be found working the phones in her office on Mermaid Avenue, has been a driving force behind this development. At the moment, she is schmoozing in the hopes of achieving her ultimate goal: building space for at least 40 new stores–complete with residential space above–on the area’s vacant lots. Brandwein, who has invested $100,000 of his own money in an Astella mall project, says Orlando’s personal ties don’t hurt either.

“Judy’s husband was formerly head of the community planning board and worked as an assistant to [Dinkins Deputy Mayor] Barbara Fife when she was in the Dinkins administration. She was also with Flatbush Development Corp. and socially she sees a lot of those people. Her cousin is Henry Stern, the parks commissioner. There are a lot of those things,” Brandwein says. “I don’t want to single her out, but she’s very good.”

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Saratoga Square has had no such leader–and not much luck. Both Holley and “Sir Chief” Charles Joshua, a self-promoting sachem who leads the 135-agency Central Brooklyn Coordinating Council, have tried their hand at business development. But their sputtering efforts have gone nowhere.

There was one attempt, however, at building a plan for the neighborhood with some interesting vision. Back in 1991, Rev. James Daniel Jr. was looking to do a groundbreaking community development project through his church. For help, he approached PICCED’s Curry and asked him if he and his students at Pratt would help design the plan.

Then an elder at Mt. Sinai Cathedral, the neighborhood’s largest church, Daniel had a bully pulpit and a natural base of church-going consumers. Knowing that, Curry agreed to take on the project, spending periods over the next two years working with his students on things like marketing studies and streetscapes. By the time they finished in 1993, the group had designed an elaborate new plan for the area that included new retail space, walking promenades, a farmer’s market and space for new mixed-used housing developments.

It all sounded good, but Daniel as a leader was making critical mistakes. Though he was naturally articulate and charismatic, he didn’t attempt to aggressively sell the plan to his parishioners, Curry recalls. Daniel himself admits that he alienated neighborhood politicos by aligning himself with community organizing groups like the ACORN, who at the time were demonstrating against the Partnership’s middle-income projects in the hopes of spurring low-income construction.

Perhaps most significantly, Daniel reportedly copped an attitude with Mayor Dinkins’ economic development team–then working on the area’s urban renewal plan–by demanding that his newly formed East Fulton Street Group Local Development Corp. get exclusive rights to neighborhood development funding. The organization had no track record, yet Daniel demanded total control. “We couldn’t do that,” recalls Angela Brown, a former Dinkins administration official.

By 1993, the East Fulton Community Development Plan was just about sunk. Daniel admits his interest in Saratoga Square began to wane as he began doing outreach and educational conferences on economic development through his newly formed 21st Century Partnership. The result, Curry says, was that there was no church or agency committed to doing the legwork of selling the plan to city officials and the community.

By this time, the Dinkins administration, having grown confident with the ongoing work of the New York City Housing Partnership, had all but ceded development of the neighborhood to its president Kathryn Wylde. And while she was interested in developing retail, she had come to recognize that her middle-income developments weren’t going to spontaneously generate local business–her interests were decidedly less grassroots than those of Rev. Daniel or Pratt.

At a long meeting in the basement of a local public school, Curry and others in Daniel’s group tried to sell the Partnership on their plan. An unimpressed Wylde crucified it–and them. “I’m still trying to pull the nails out of my hands,” Curry jokes.

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Curry admits that the book-length plan had its flaws. For one thing, there was no attempt at determining how much such a project would cost or how a developer might pay for it. But Curry believes that it was, de facto, the community’s last chance to exert some control over the look and feel of the ANCHOR development. Today, he adds, the Partnership is more interested in rushing Rite Aid’s mall into production than in working to make the strip, and the surrounding neighborhood, a bona fide development success. “They never spent the time in the community centers and church basements like we did,” Curry says. “There was a lot of hope there.”

Rev. Daniel, now a pastor at Ecclesiastes Church of God near downtown Brooklyn, says the community’s handling of the plan should be a lesson in future ANCHOR battles. “East Fulton Street and eastern Bed-Stuy have not gotten the best they could get–that’s the bottom line,” he says today. “Who’s at fault? A lot of us.”

Yet truth be told, those concerns are not much reflected on the political landscape, nor among the people who walk along East Fulton’s depressing streetscape. Leaders like Assemblyman William Boyland simply want the abandoned lots and graffiti-laced storefronts replaced with something, anything. “This is the third attempt to develop that corner,” he testily replied to a constituent who wrote out of concern for Suresh Wattamwar. “Each time some idea and financing have been presented we have had to stop because of some isolutionists [sic] or obstructionists.

“Sure Drugs should join the program,” he concluded, “and help get the project going forward rather than leaving this corner abandoned for another fifteen years.”

About the only dissident voice being raised is Wattamwar’s. In the hopes of avoiding a public relations quagmire, officials at both the Partnership and HPD are scrambling to accommodate the diminutive druggist, who has said he will be happy if the city can find him 2,000 square feet of new space in the neighborhood at, of course, reasonable rents.

“We’ve shown him a whole range of available commercial space,” says James Lima, HPD’s point man on ANCHOR. But, he adds with some exasperation, “he’s been a little bit specific in his requirements.”

Bruce Kelly, a Manhattan-based freelance writer, contributed to this story.