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Plan to replace JJ&F meets with opposition, skepticism

Original post made on Aug 12, 2014

A proposal by the project developer's son to run the new grocery store at College Terrace Centre proved to be a tough sell Monday night, with Palo Alto officials bemoaning a lack of transparency and demanding more information about lease terms for the new market.

Read the full story here Web Link posted Tuesday, August 12, 2014, 2:25 AM

Comments (26)

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Posted by curmudgeon
a resident of Downtown North
on Aug 12, 2014 at 10:40 am

It seems that no experienced grocer thinks this arrangement is viable. The solution is simple: forget the store, let Smailey build per normal zoning.


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Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 12, 2014 at 10:43 am

This is what happens when zoning is given away left and right for "public benefits" that are TBD. The devil is in the details as they say.


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Posted by Barron Park dad
a resident of Barron Park
on Aug 12, 2014 at 10:58 am

It should be a red flag to everyone involved that absolutely NO experienced grocers are willing to step up and invest in a grocery store at this location. So what does that tell you about the future viability of a grocery store run and operated by someone with ZERO grocery experience?

Look, it's very simple: the City Council agreed in 2009 to zoning changes for this particular block -- to build a massive building -- IF AND ONLY IF a public benefit was offered in exchange.... that is, a grocery store equivalent to JJ&F. Let's hold firm as citizens of Palo Alto and demand that. Otherwise the deal should be reconsidered.


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Posted by Crescent Park Dad
a resident of Crescent Park
on Aug 12, 2014 at 11:54 am

I am a bit skeptical of "no experienced grocery store company has expressed interest". It may be true. But right now, on the outside looking in, it appears that you have a developer with no grocery experience, a son with no grocery experience, a lawyer with no grocery experience. No offense... But these profiles don't come across as a winning team when it comes running a grocery or recruiting a grocer.


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Posted by KP
a resident of South of Midtown
on Aug 12, 2014 at 11:59 am

KP is a registered user.

I don't know about anyone else, but I don't like the attitude the young Smailey is giving...""I'm sorry, but your whole city is based on startups," Smailey said, noting that this is what makes Palo Alto and Silicon Valley what they are."
Really!?!?? "your whole city". Sounds like he's not much of a team player to me!
I don't trust the whole family! I sure won't be shopping there if it gets done.


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Posted by 5 Coats
a resident of Barron Park
on Aug 12, 2014 at 12:29 pm

Let the Smalley grocery remain, let it succeed or fail on its own merits or lack of experience. There is no viable grocery on El Camino between Trader Joe's at Town & Country and San Antonio Center in Mountain View. It appears the tiny little store is succeeding that is located in the 3900 block of El Camino. A great location not only for the residences of College Terrace, but also the neighborhoods between Churchill and Oregon Expressway, the Stanford Community, Ventura and Barron Park who traverse El Camino Real on a daily basis.


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Posted by Midtown
a resident of Midtown
on Aug 12, 2014 at 12:59 pm

If the Smalley's paid a high enough start up bonus and continuing operating subsidy they could find a grocer willing to run the place. That's what they signed up for, make them toe line and none of this "private" stuff, it is a public benefit after all.


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Posted by Robert Smith
a resident of Duveneck/St. Francis
on Aug 12, 2014 at 1:41 pm

The very polite Weekly article understates the tone of the meeting. The applicant's lawyers were peremtory, arrogant, and stone-walled on all information relevant to the proposed plan. Flat refused to provide information after making semantic arguments about what the information was, refused to give straight answers until the council started adversarial interrogations. Never seen anything like it in Palo Alto.

The developer's son is trying to become the grocer. He has no experience in the business. Seems like a nice guy actually, a better spokesperson than the attorneys! Why does he can think he can succeed in a location that none of the professionals want?

The real issue--if we can ever get to it--is that the store is very likely to fail I think. But I doubt that the developer will give up on the highly-favorable terms that he got from the city via the PC ordinance.

The city needs to demand all relevant information, insist on the terms being upheld, and remind the builder that the city will continue to insist on the terms being upheld permanently. I suspect the builder is planning to try to sneak around the terms in a few years after trying and failing in the grocery business.

The owner and his attorneys are signaling by their tone that they are playing hard ball. If they continue to stone-wall, and the city insists on getting the needed information, look for a lawsuit.


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Posted by Saul Alinksy
a resident of another community
on Aug 12, 2014 at 2:03 pm

Smailey does not have a vested right to develop the property as allowed by the Planned Community zone district, because he does not have a building permit and has not completed substantial construction. The City's approval of a grocery tenant is a prerequisite of building permit issuance. If the owners want to play hard ball, then the City Council should rezone the property Neighborhood Commercial, which is the zoning the property had before the Council adopted the current Planned Community zone ordianance for the property.


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Posted by Larry Kavinoky
a resident of College Terrace
on Aug 12, 2014 at 2:11 pm

If at any time a grocery store does not succeed, the landlord should be required to put , say 10% of the other rents into a "Public Benefit" fund until such time as the landlord provides reasonable lease terms that a grocery store of JJ&F quality can succeed. This is not about cash flow for the developer. This is about having a rent which will allow the "Public Benefit" to survive. Whatever that takes is the cash flow the landlord must live with.


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Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 12, 2014 at 2:49 pm

The developer has no incentive for the grocery to survive. Saul Wlinsky us right, the developer has no vested interest in developing the property. (Miki's didnt make it with a free lease and an experienced grocer - it says something that no one is interested.)

How did this PC turkey ever get through council anyway? We don't need more office space, we do need the neighborhood commercial. How many more housing units would we have to build elsewhere for that office space? This should be a no brainer, glad to see our Council stepping up for once ... Or, it remains to be seen.


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Posted by curmudgeon
a resident of Downtown North
on Aug 12, 2014 at 2:56 pm

"glad to see our Council stepping up for once ... Or, it remains to be seen."

You got that last part right. The city played "hardball" with McNellis at Alma Plaza, until one fine evening it simply gave him exactly what he wanted. Same with Hohbach's monster under construction on Park Blvd.


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Posted by Ahem
a resident of Another Palo Alto neighborhood
on Aug 12, 2014 at 3:35 pm

Curmudgeon,

Yup, that is how it works. The PACC makes a good show of playing tough while everyone is watching, but then when everybody get tired, or is looking the other way, they cave and give the developers whatever they want.

The developer has been "playing" the PACC all along with this project, and these latest developments just seem like more of the same.


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Posted by jh
a resident of Evergreen Park
on Aug 12, 2014 at 3:48 pm

jh is a registered user.

5 Coats.

This property is zoned for 25,000 square feet of building, 13,000 of which has to replace the existing retail, leaving 12,000 square feet for offices, and also a maximum two story building. This is because the property backs up to a residential neighborhood and is zoned Neighborhood Commercial, which is intended to protect all Palo Alto neighborhoods from the effects of large office buildings by providing a zone of transitional low density development.

However, the developer, Mr. Smailey, was determined he was going to build 60,000 square feet, with 40,000 square feet of office space. So Mr. Smailey applied for a zoning waiver to be given the infamous "PC" designation to allow him to do so. However, prior to submitting his original plans to the city he had jacked up JJ&F's rent so that it was untenable in an attempt to get them to go out of business. The Garcias tried to negotiate, but the property owners quietly filed a lawsuit with the intention of evicting JJ&F if they couldn't come up with the money. After all, why would they want to include a grocery store, an industry where margins are minimal and who couldn't match the higher retail rents that could be to charged.The Garcia's, not having the kind of money necessary to fight this settled out of court and signed a non-disclosure clause. Once they had done so they could never speak about this again, and so became pawns to be manipulated.

In public Mr. Smailey promised to include a lovely new store for JJ&F as justification for the development, and which he would only do if he got the full 60,000 square feet he was asking for. He even said JJ&F could remain in the existing store while he built the complex, and then they could move into their new space, after which he would tear down the old store. But at that time there was no deal to keep the rent affordable for a grocery store, and the developer and owners would have also known that the Planning Department had never enforced the existence of public benefits in any previous PC once the occupancy permit was granted.

Over a period of repeatedly trying to get the city to allow him to build his 60,000 square feet, Mr. Smailey ultimately had to include, as a condition, that he would provide a grocery store space for JJ&F, with an affordable rent to keep them in business.

In order to get the public behind this and pressure the council, Mr. Smailey hired a public relations consultant to orchestrate a campaign to convince the public how much he loved JJ&F, and how personally committed he was to including them in his development. With his slogan, "ONLY I CAN SAVE JJ&F," public sentiment was whipped up, and they organized supporters from near and far to cram the council chambers to put pressure on the council to approve the 60,000 square foot development. Although, as one of the Garcia's wryly remarked afterwards, "If they all shopped with me I would never have gone out of business."

But most everyone swallowed the Kool-aid and permission to build an almost 60,000 square foot development was granted. It's notable that having used JJ&F as a pawn, and they couldn't say anything he didn't approve, shortly afterwards JJ&F disappeared for good.

At least the council, unlike the public at large, had enough wisdom to realize that it was a very big "if" that JJ&F would be able to return after closing and liquidating their fixtures and stock, stay away for two years, and then afford at least a $1,000,000 loan to be able to set up a new store. So the council also included a clause in the PC agreement that if JJ&F were unable to return, then there must be a signed lease with a grocer of similar experience and standards providing the same products and services, before building could commence.

Mr. Smailey now says he has a signed lease agreement with his son to run the grocery store, so he should now be given permission to start building. The council didn't ask one pertinent question. What was Mr. Smailey's interest in this property AFTER, not just during, construction. Mr. Smailey's lawyer neatly explained that Mr. Smailey was wearing his "fee as developer hat" only as long as this project was being built. The implication being that once that role was over that was the end of Mr. Smailey's role. But neatly left out that Mr. Smailey would then revert to his "property manager hat" with an ongoing interest in this development. And he he would be the one to enforce the lease against his son, definitely a conflict of interest, even if technically the lease is between his son and the owners.

So, tell me 5 Coats, why would we want to trade a 25,000 square foot, 2 story development, for a 60,000 square foot building, that will presumably remain for it's lifetime, on the off chance we might have a grocery store that might evolve into a glorified sandwich shop, or just quietly go out of business after a few years, possibly becoming a more profitable restaurant. If the developer can't meet the terms, the ones he proposed, then the property should revert to the original zoning.


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Posted by jh
a resident of Evergreen Park
on Aug 12, 2014 at 3:59 pm

jh is a registered user.

When testifying before the Planning and Transport Commission, who ultimately turned him down, Mr. Smailey repeatedly testified that setting aside even 8,000 square feet at an affordable rent for a grocery store was a big sacrifice for him and his business plan. This was also emphasized at the following council hearing as well.

Doesn't exactly give one confidence that he has a vested interest in the store's ultimate success.

The emphasis on his business plan and he would have an ongoing interest in the project after it was completed and occupied.


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Posted by Rupert of henzau
a resident of Midtown
on Aug 12, 2014 at 3:59 pm

The grocery store at alma plaza failed despite being run by a " professional" grocer, so why do we assume that an undersized grocery store will succeed at that location? Maybe they should ditch the whole grocery store idea-- there are two grocery store nearby- and go back to the original zoning as descbed by JH above. Or maybe the CC is planning to,appease CT by ruling that all grocery store in PA will have to downsize so,they are smaller than the proposed CT store and none will be able to.sell products at prices below the new store-- that want there will be no competition.


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Posted by Craig Laughton
a resident of College Terrace
on Aug 12, 2014 at 4:20 pm

>why would we want to trade a 25,000 square foot, 2 story development, for a 60,000 square foot building

Answer: The subsidized housing special interests got eight units of subsidized housing. Take away this housing, and this thing would not have passed.

Lesson: Ban any more subsidized housing in PA. Then live within our existing zoning, unless there is a legitimate reason to make exemptions.


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Posted by Oldster
a resident of Old Palo Alto
on Aug 12, 2014 at 4:57 pm

Saw in person the entire 2 hour agenda item on this last night. Some random comments not mentioned so far:

An applicant rep said there were 3 unnamed grocery professionals who might be hired but were still working elsewhere (and needed to keep their current jobs) who have 100 years of grocery experience. Later the 3 grocers magically had just 60 years cumulative experience according to the applicant reps.

The fact the developer and owner can't find a single experienced grocer to sign a lease after after least a year of hard trying shows this "public benefit" is doomed to failure.

Much talk of how the family trust which owns the land is really a single person who had to set up a Limited Liability Company (LLC) to qualify for a bank loan to build.... what has to be a 60,000sf structure .... which needs the PUC waivers and goodies. Sounds cash poor, land rich. Unlikely to have deep pockets to take the City through the courts.

The applicant's two attorneys kept talking about "entitlements" the City has given their client. Bull! Zoning can be changed all the time. The City has spot zoning all over the place. Council, have some more courage!! Revoke the PUC now. Once JJ&F disappeared behind a nondisclosure agreement the rationale for the PUC vanished into thin air.

Groceries. Start-ups.....hmmmm. The most "public benefit" I would "extort" from the owner is dedicated curb space and electrical plugs for food trucks and some small studio apartments or condos which would be "below market" due to their size and road noise. Maybe allow a 7-11 for "groceries" - with food trucks - it could be a destination. Better yet, reopen formal neighborhood input to determine a public benefit for any zoning change now that a real grocery is clearly just an illusion.


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Posted by Sea-Seelam Reddy
a resident of College Terrace
on Aug 13, 2014 at 3:31 am

Monday night meeting was exhausting.

Please, Smailey family; meet with College Terrace community and find out what is the best grocery store option available.
Andronico's?

Respectfully


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Posted by Revoke PC zoning
a resident of Palo Verde
on Aug 13, 2014 at 10:07 am

Completely agree with @jh. Property should now revert back to its original zoning. The Developer has no real public benefit for this amount of up-zoning. Ok, maybe some residents feel that 8BMR units are enough of a benefit! What about all the College Terrace residents who will most likely suffer from an eyesore that will be here forever, as well as the rest of Palo Altans. We do not need anymore eyesores and blocking out our views of the Foothills. Why should a group of lawyers/Developers have the inside track......It would take some guts to revoke this PC, but the original agreement is a farce. CC should stand up and revoke this PC nonsense.


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Posted by Craig Laughton
a resident of College Terrace
on Aug 13, 2014 at 4:57 pm

[Post removed.]


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Posted by Ahem
a resident of Another Palo Alto neighborhood
on Aug 13, 2014 at 5:36 pm

Revoke,

Agreed, if the developer cannot provide the agreed upon public benefit (which most of us thought was saving JJ&F), then the PACC must show the zoning regulations actually mean something, by revoking the PC.

In the future developers should be required to post a bond to apply for any development project. If the project fails to complete in some set amount of time, the bond money would be used to landscape and maintain the property until a project is approved.


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Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 13, 2014 at 7:48 pm

Anyone who thinks zoning should revert : you must get together with your neighbors, pool some money, and hire a land use attorney. Find out what your rights are and how you can most effectively force the Council to revoke the PC zoning now. If it comes to a referendum, the rest of us will have your backs. I somehow doubt it will come to that, if you know your rights, and pursue them at this point. There is an election coming up. Let's see if the developer shills on the Council show their true stripes. Win or lose, you will be doing the whole town a favor.


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Posted by H. Petard
a resident of College Terrace
on Aug 13, 2014 at 8:18 pm

Does "Hung by one's own petards" ring a bell?


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Posted by Saul Alinsky
a resident of another community
on Aug 14, 2014 at 1:00 pm

The City Council has a Closed Session scheduled at the end of next Monday's meeting to discuss potential litigation regarding this project. It is difficult enough to get the City Council to do the right thing when they are being watched. What control does the public have when the City Council discusses important issues like this one behing closed doors?


 +   1 person likes this
Posted by Zapatos
a resident of College Terrace
on Sep 18, 2014 at 5:23 pm

It's amazing, when I read all these posting, I start to feel all the people living in Palo Alto are a bunch of communists. Why is this supposedly progressive city any different than others in the country? Aren't owners and developers allowed to build to grow and expand a community without incredibly hawkish control freaks? It's a sad state to watch these childish despots self-aggrandize their thoughts.


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