College Terrace Centre market operator named

The convoluted evolution of the College Terrace Centre and the market that will replace the beloved JJ&F Market took another turn on Wednesday night when the property’s manager named a member of the Chavez family as the potential grocer.

Miki Werness, owner of the now-defunct Miki’s Farm Fresh Market at Alma Village, previously had announced that he was planning to run the market when it is built. But on Thursday he confirmed he has pulled out of the project.

Uriel Chavez, a member of the Chavez family of grocers, is being brought on board, property manager James Smailey told members of the College Terrace Residents Association Wednesday night. Chavez has more than 25 years of experience operating his family’s markets, including Chavez Family Markets, La Hacienda, Mi Rancho, Artegas and Mi Pueblo markets throughout Northern California and the Peninsula.

The new store will be called College Terrace Market.

College Terrace Centre includes 40,000 square feet of office space, 13,000 square feet of retail and eight below-market-rate housing units. About 8,000 square feet of retail is reserved for a market. Construction is contingent upon securing a market comparable to JJ&F, which was part of the 2009 approval of the site’s planned community (PC) zone. The agreement guaranteed the store would be a “public benefit” in exchange for denser development.

Chavez said he will have a 20-year contract to operate the store, which will be owned by Smailey, who does not have experience running a market. Chavez’s family owns 40 stores with an estimated gross revenue of more than $200 million per year, he said. The sizes range from 8,000 to 30,000 square feet, he said. The College Terrace Market will have a delicatessen, grab-and-go meals, a kitchen for freshly made foods and an outdoor seating area.

“It would have more of a Draeger’s selection with a limited size,” he said.

College Terrace residents at the meeting urged him to consider a price structure that would not be as high-end as Draeger’s, noting that many college students and workers would be coming to the market, as well as local families.

“It’s definitely not a Draeger’s,” Chavez said of the price points. The store would offer household products such as paper towels and toilet paper along with comestibles, he said. Chavez said he has geared his community markets toward customers’ needs. A market in Menlo Park on Menalto Avenue includes more organic items and a taqueria and items for the Latino clientele who frequent the store, he said. He said his stores are clean and service-oriented.

Reached by phone on Thursday morning, Werness said he chose not to be part of the project about two weeks ago.

“I have my reasons,” he said, without much elaboration. “I think it will be a wonderful market. I love the location; I love Palo Alto. It just has to be made a total shop. There’s a lot of good foot traffic. … I just didn’t feel I would fit in with the group.”

The City Council must approve the new grocer before construction can begin.

On Wednesday, Smailey brought in well-known developer Jim Baer as a project consultant. Baer said he would be assisting with the approval process, but he did not have a financial stake in the project.

Residents were skeptical at the College Terrace meeting. The 13-page “vision and values” handout Baer and Smailey brought to the meeting was the equivalent of a public relations piece that did not detail the actual lease agreement or how the project would ensure the grocery store would be there “in perpetuity.” Residents and board members said they do not want to see the grocery store fold in six months after the center’s construction is completed and for the Smaileys and the developer, Brian Spiers, to walk away.

Resident Bill Ross criticized Baer and Smailey for failing to supply the association with a 15-page summary and an unredacted copy of the lease agreement that has now been submitted to the city. Not bringing the documents prevented any meaningful discussion at the meeting, he said. The project team also failed to bring a 100-page booklet of exhibits.

Smailey and Baer said they would email a copy of the project narrative to the association.

Neighborhood association board members’ and residents’ concern over the project have been amplified by a confusing chain of ownership and responsibility related to the development. Smailey’s father, Patrick Smailey, was the on-record developer under the company name Twenty-One Hundred Ventures, LLC (also called Adventera Inc.). But the younger Smailey revealed on Wednesday that he and his father are no longer the developers.

Funding for the project was in jeopardy in March 2013, with the project receiving a one-year extension for its planning entitlement permit. A $40 million construction loan was eventually secured, but the lender wanted a different developer, Smailey said. Spiers was chosen, and the Smaileys are to become the center’s managers after it is built, he said. The property is owned by Joseph Oeschger and Eldora Miller under The Chilcote Trust, which has held title since the 1920s. The owners are now in their 80s, he said.

Smailey said the landlords have guaranteed the payment of leases if the grocer should not be able to make payments, so the lease cannot be defaulted. The lease would be $22,500 a month with the first three months free and the next three at half the rental cost, he said. After the current landowners die, the family trust would take over the lease-payment guarantee.

But Ross wanted to know if the lease guarantee stipulates the use and occupancy of a grocery store. Without a letter of credit or a performance security, the agreement would be meaningless, he said. Smailey did not confirm if such a provision exists.

Ross pointed back to the failure of Miki’s Market after just six months. He questioned if a fund could be set up that would have cash available for maintaining a grocery store in the same way a city has funding to maintain a park.

Baer called the lack of such a guarantee a recurring flaw in the city’s drafting of planned-community zoning ordinances.