News


Edgewood Plaza developer: City fines are not 'warranted'

Sand Hill Property fires back at city in request for independent hearing

The developer for Edgewood Plaza in Palo Alto, who has faced steep daily fines for the vacant grocery-store space at the shopping center, has fired back at the city in a new letter that calls the penalties "excessive," unlawful and unwarranted.

A Nov. 21 letter from Sandhill Property Company's attorney to the city requests an independent hearing to challenge the "validity" and "legality" of the fines, as well as to seek relief for all payments that have already been made to the city. The letter includes a $28,000 deposit "made under protest, in order to have the City accept and process our request for a hearing."

The request, written by David Lanferman of Rutan & Tucker, LLP, defends Sand Hill Property Company's compliance with the city's "planning community" (PC) zoning ordinance, which required the developer to provide a grocery store at the shopping center as a public benefit.

In exchange for providing the store, Sand Hill was allowed to build and sell 10 homes. Sand Hill was also required to rehabilitate one of two historil Joseph Eichler-developed commercial buildings -- a requirement that it violated in 2013 when it demolished the structure. The council responded by fining Sand Hill $94,200 for the demolition.

Last year's departure of the original grocery tenant, Fresh Market, prompted another fine, which started at $500 per day in September 2015 and then escalated to $1,000 in October 2015. But with the space still vacant, the City Council voted in November to increase it to $2,500 per day.

Sand Hill has unsuccessfully searched for a replacement for Fresh Market, reaching out to more than 65 potential operators as it continued to comply with the "lawful conditions" or the PC zoning ordinance, Lanferman wrote.

"There is no basis for asserting or determining that the owners may be out of compliance with the PC conditions because of the independent and uncontrollable actions of the current tenant in curtailing its daily grocery store operations," the letter states, referring to the fact that Fresh Market still holds the lease. "To the contrary, the owners continue to comply with not only the conditions" of the ordinance, but have "provided for the 'continued used of the 20,600 sq. ft. building as a grocery store' to the exclusion of any other land use or activity at that building."

Though Fresh Market has closed, it remains the tenant, Lanferman wrote, making it "impossible for the owners to unilaterally seize possessions of the building, or to install some new grocery business at the site — even if such a new grocery tenant could be found."

The city also cannot "lawfully" require Sand Hill to "guarantee the continuous operation of a grocery store in perpetuity," the letter states.

Sand Hill has acted in good faith with the city, Lanferman wrote. Absent any "intentional violations or bad faith refuse to comply with valid regulations," fines should not be imposed, he added.

The hearing has been tentatively scheduled for Jan. 10 at City Hall, according to City Attorney Molly Stump. The time has not yet been determined.

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Comments

39 people like this
Posted by Grocer Fan
a resident of Another Palo Alto neighborhood
on Dec 2, 2016 at 4:39 pm

It is very difficult to feel sympathetic towards Sand Hill Properties. Sand Hill Properties did not have to buy this property a few years back. Sand Hill Properties did not have to move forward with a development that required a grocery store. Sure, Sand Hill Properties probably thought that their investment in this property would yield a positive return. Sand Hill Properties took the optional risk in moving forward with the grocery store tenant as a requirement. They share none of the potential upside profit in doing so, but they also obligated to take 100% of the potential downside loss. Having said that, Sand Hill Properties probably has a clause in their lease with Fresh Choice that allows Sand Hill Properties to pass on any penalties during the lease period to their grocery store tenant - if so, the absence of a grocery store isn't even costing Sand Hill a dime (all penalties would be borne by Fresh Choice). If there were a vote, my vote would be for the City to continue to impose increasing financial sanctions against Sand Hill Properties (and Fresh Choice?) until a grocery tenant starts operating at Edgewood Plaza again.


13 people like this
Posted by DTN Paul
a resident of Downtown North
on Dec 2, 2016 at 4:41 pm

DTN Paul is a registered user.

I'm not an expert, but these negotiated public benefits seem like a pretty dumb idea. If the negotiated outcome is not enforceable, why do them?


6 people like this
Posted by Curmudgeon
a resident of Downtown North
on Dec 2, 2016 at 7:34 pm

They are indeed unlawful under city law. All Planned Community establishment ordinances, including this one Web Link are carefully written to provide no enforceable penalties for noncompliance. Merry Christmas, Sand Hill.

(Its subtle escape mechanism is in Section 7. Do you detect it?)


16 people like this
Posted by Random
a resident of Downtown North
on Dec 2, 2016 at 9:34 pm

Most of these issues crop up because most residents demand "public benefits" in exchange for, in effect, not stifling a project or opposing it. And to think everybody thinks there is no corruption in local politics. Talk to many citizens and when they oppose a project, the first thing they say, aside from how it might affect their "quality of life" is "what do we get out of it?" I'm sorry, I didn't realize the property was yours and that every project in the city needs to necessarily benefit you.

Also, the claim that Sand Hill passes on the daily fines to the grocery store might make sense in theory, but then why would they spend any money on a large, expensive law firm to contest the daily fines? If they are netting 0, what would they care?

Also, is it that bad for people to have to drive to Trader Joe's down Embarcadero or to Safeway on Middlefield? Good grief. Entitlement at its finest. Wonder if anyone read about how Palo Alto homeowners pay the least effective property tax rates in the state. Somehow that won't bother homeowners I bet. Go figure.


23 people like this
Posted by Here is why
a resident of Duveneck/St. Francis
on Dec 2, 2016 at 10:14 pm

@Random Public Benefits are required when a project asks for permission to violate the zoning.
Zoning is the law.
Please become more knowledgeable about how the world and a city works.


30 people like this
Posted by john_alderman
a resident of Crescent Park
on Dec 2, 2016 at 10:15 pm

john_alderman is a registered user.

Sandhill is acting in bad faith because they are happy collecting the rent from Fresh Market on an empty space. Sandhill needs to release Fresh Market from the lease, lower the rent (to zero if necessary), and get another grocer in. it is a joke to say they are searching for a replacement when Fresh Market holds the lease, not Sand Hill.


10 people like this
Posted by Random
a resident of Downtown North
on Dec 3, 2016 at 8:17 am

@Here is why, I should have clarified, I am talking about the many projects where the projects would comply with zoning and the citizens ask for how the project would benefit them (not this Edgewood Plaza project in particular). I think I get it - citizens reserve the right to complain and want something in exchange for you to get to do something as a developer. Funny, in the rest of the world they call that corruption. In Palo Alto, it's the norm.

Do a little research and you will know what I'm talking about in Palo Alto. Projects that meet zoning requirements somehow still do not get approved. I wonder why that is. You see, when there is zoning, and a project meets zoning, then there should be absolutely zero debate about whether the project is a go or not. All of these fictitious outs get created instead, such as, "it's not compatible with the neighbors" or "it will affect my quality of life". In other words, if it bothers a few people down the road and you apply enough pressure to council, they will cave.

You are right, zoning is the law. In the Sand Hill/Edgewood case, I get it. My quarrel is with those projects that meet all zoning requirements. Here's a novel idea, don't debate the project. The council should follow their own rules. Since you are so brilliant and understand the city so much, and I suppose the world, maybe you can explain why.


26 people like this
Posted by Hahaha
a resident of Another Palo Alto neighborhood
on Dec 3, 2016 at 2:24 pm

Now they are being hit with a fine that hurts, huh???

Sandhill should stop stalling, stop whining like spoiled brats and be proactive!

Get a grocery store in Edgewood NOW!


35 people like this
Posted by Duveneck Resident
a resident of Duveneck/St. Francis
on Dec 3, 2016 at 4:41 pm

We'll let them off the hook if they give back the $30 million they got from the property being upzoned to allow 10 townhouses, each of which sold for $3 million in exchange for providing a grocery store. They are not releasing Fresh Market from the contract and tried to lease it to Andronica's above the rent that Fresh Market was paying. Did we mention they "accidentally" knocked down a historic building they agreed to preserve while redeveloping. They also have a bad rap in Cupertino. Glad we finally have a penalty that motivates them.


8 people like this
Posted by Sue the city sand hill
a resident of Barron Park
on Dec 3, 2016 at 5:31 pm

Duveneck- shall we stick to facts? Fresh market holds the lease. They are involved in the negotiations. Sand hill cannot lease the place to anyone. Your claim about above market rent is bogus. No major chain is interested in a Palo Alto sized store (. I. E. Too small).


7 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Dec 3, 2016 at 5:42 pm

I wonder how much consideration Sand Hill gives to people who violate the letter of the agreements they sign with Sand HIll? I wonder if they have examples of lowering the rent to lessees who are having trouble paying their rent for example?


6 people like this
Posted by Mom
a resident of Duveneck/St. Francis
on Dec 3, 2016 at 7:44 pm

Random, we are not talking about project in Palo Alto, in general. Here is Why is exactly correct. Sandhill either 1) has a take back clause in its contract with Fresh Market or 2) should have included a take back clause in the contract. If 1), they can take the lease back and lease it to a grocer at a very low price. If 2) shame on them for making such a bad business deal and let them buy Fresh Market out. The developer needs to live with the consequences.


14 people like this
Posted by Ralph
a resident of Ohlone School
on Dec 4, 2016 at 5:19 am

I was explaining this deal to my 9 and 7-year-old grandchildren today:

Developer buys Edgewood property. Neighborhood wants grocery store. Developer assures City Edgewood grocery store in return for City permission to build 10 townhouses.

He builds structure at his cost (maybe $5 million) for grocery store, then leases building to Fresh Market for 10 years at $50,000 a month.

Then he builds 10 townhouses which he sells for $3 million each. How much did the developer gross on selling the townhouses, kids? "$30 million," right. Say he made $12 million profit on the townhouses.

Fresh Market stays in business about 18 months, then closes. But Fresh Market still pays the developer $50,000 a month rent, and must for another 5 years or so. Fresh Market tries to sub-lease to another grocer; no takers.

Neighborhood unhappy and urgse City Council to fine the developer until a grocery store is back operating at Edgewood. Eventually, a $1,000 a day fine (about $30,000 a month) is levied, and collected, by the City.

Still no grocery store. After a year, City raises fine to $5,000 a day; how much is that a month, kids? "About $150,000," right again.

Now, how is the developer doing on the rent versus fine? "He is losing about $100,000 a month." Right.

Now how long will it take to wipe out his profit on the townhouses? "Wait, I've got this Grandpa," the 9-year-old says. "$12 million divided by $100,000 a month is 120 months." How many years is that? 7-year-old immediately says, "10."

But the Fresh Market lease is up in about 5 years. What then? "Developer is very motivated to have another grocer lined up for bargain rent, because he immediately avoids $150,00 a month in fines."

"Couldn't the developer buy out the lease from Fresh Market to speed up the process," kids ask.

Very good, kids.


8 people like this
Posted by Reality
a resident of Crescent Park
on Dec 4, 2016 at 7:46 am

I hope sandhill wins. I really do. Fining them was a mistake. Increasing the fine was a huge mistake. It was pandering to the vocal locals. Who are always unsatisfied. No question this plays out bad for city council. They look like buffoons.

The grocery space isn't viable. You can want something really bad but that's not in and of itself going to make it viable. Too many people are unwilling to acknowledge this reality and they think that they shouldn't settle and keep pushing. Don't get me wrong perseverance is an admirable quality but so is facing the facts and accepting reality.


18 people like this
Posted by Edgewood Neighbor
a resident of Duveneck/St. Francis
on Dec 4, 2016 at 10:55 am

@Reality,

It really depends on your definition of the word "viable" means. Sandhill agreed to provide an operating grocery store in exchange for the zoning concessions. If this wasn't possible at market rents, then the lower than market rent calculation should have gone into Sandhill's profit calculations. If they even needed to subsidize the grocer, then that should have gone into their calculation too. At some price point, a grocer can be enticed to go into that location. Sandhill needs to do the work and figure out what that price point is. Hopefully, the $5000/day fine will be just the enticement they need.


3 people like this
Posted by Todd
a resident of Another Palo Alto neighborhood
on Dec 4, 2016 at 12:14 pm

I can imagine how quickly the neighbors would change their tune if a dollar store or something similar was proposed...


9 people like this
Posted by St. Francis Neighbor
a resident of Duveneck/St. Francis
on Dec 4, 2016 at 1:07 pm

I am no lawyer, but reading the contract that was mentioned, said that they should make sure they have provision for a grocery store. They do. For the life of the project. The still do. You can sue them once they rent it out to a non-grocer outlet. The problem is that the only way to offer an "operating" grocery store forever is to run one themselves. Not sure how that is even possible in court. So while some people are pushing for this, they as usual forget how the law is interpreted vs how they like for it to be interpreted.


Like this comment
Posted by Steve Dabrowski
a resident of Duveneck/St. Francis
on Dec 4, 2016 at 5:27 pm

Where are the super market shoppers going to park? The lots there are almost full every day and parking for the existing businesses is spilling onto the local streets. It is just wishful thinking that a market could be viable with the present parking situation. A market would get customers for a few weeks until it became clear that it was just too much of a problem to find a parking space. Or is a multi story parking garage in the plans now also?


27 people like this
Posted by Reader
a resident of another community
on Dec 4, 2016 at 7:04 pm

Increase the fine to $10000 per day.


9 people like this
Posted by anonymous
a resident of Duveneck/St. Francis
on Dec 4, 2016 at 8:12 pm

I hope everyone reading this avoids doing business with Sand Hill Properties in any future instance.
I hope the City of Palo Alto prevails; otherwise, we the neighborhood residents, have been deceived by Sand Hill Properties and they get to skate w/o consequences. Disgusting. Don't do business with or patronize such businesses as this one ever again.
I have a long memory, myself.


Like this comment
Posted by Sea Reddy
a resident of College Terrace
on Dec 4, 2016 at 8:33 pm

De Martini Orchard in Los Altos is a fine fruits and vegetables store that I have been impressed about.

Would that be a good fit?

A portion of this space could be rented for a Gym like Equinox?

Will this make sense to the community?

respectfully


10 people like this
Posted by john_alderman
a resident of Crescent Park
on Dec 4, 2016 at 8:50 pm

john_alderman is a registered user.

@Todd - Of course, neighbors would rightfully be upset with a dollar store, or a drug store, or a clothing store, because they all would be in violation of the agreement to provide a grocery store.

@St. Francis Neighbor - The municipal code states "Provision of a grocery store" not "Provision for a grocery store". There is no legal or english interpretation that would allow an empty building to qualify. If it said "for" you might be able to argue that an empty space qualifies, but that's not what it says. I wish though that the City was more rigorous in the way they define PC zoning benefits. Things liek teh escalating fines should be explicit and agreed to on both sides.


2 people like this
Posted by Hulkamania
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 8:50 am

What's the over/under on Sand His Property walking away with no fines paid?


2 people like this
Posted by Hulkamania
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 8:52 am

What's the over/under on Sand Hill Property walking away with no fines paid?


15 people like this
Posted by NeilsonBuchanan
a resident of Downtown North
on Dec 5, 2016 at 10:07 am

NeilsonBuchanan is a registered user.

This grocery case study is important. It is just one retail paradox. There is a real possibility that rent is willfully high...pure capitalism. As we know from University Avenue it is possible to keep retain properties vacant and then justify that there is no demand. Then property owners and city government officials openly play footsy with zoning regs and vague historical facts. Citizens who want retail goods and service close to neighborhoods then are not at the table and are disadvantaged.

The purpose of zoning is to control land use. Lease income for retail is unlikely to approach income for offices. Therefore, any Monopoly player understands the incentives to hold properties with the greater rent. Bottom line: Zoning determines the basic value of a property. Sand Hill fully understood the intent for grocery service and assumed all the financial risk therein....assuming that zoning and covenants are binding.

There are three other case studies for someone to debate. On California Avenue there are two seemingly viable grocery stores. Nearby another new grocery store is almost ready to open. What is unique by their lease costs? Long time, stable zoning and market forces are essential to sustain those retail uses. The market even with consistent zoning may not support three grocery stores in a small area.

What is the learning opportunity for City Council, City Attorney, Edgewood neighborhood and Sand Hill?


2 people like this
Posted by Jim
a resident of Community Center
on Dec 5, 2016 at 10:38 am

Sand hill should have written a lease that allows them to seize control if the grocer quits doing business there.


2 people like this
Posted by Jim
a resident of Community Center
on Dec 5, 2016 at 10:41 am

Mistake for Sand Hill to not have a seizure clause. Mistake for Palo Alto to allow sand hill to totally control lease contract given the requirement to maintain a grocery there.


9 people like this
Posted by Long Time Resident
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 11:06 am

To Random: You say: "Also, is it that bad for people to have to drive to Trader Joe's down Embarcadero or to Safeway on Middlefield? Good grief. Entitlement at its finest. Wonder if anyone read about how Palo Alto homeowners pay the least effective property tax rates in the state. Somehow that won't bother homeowners I bet. Go figure."

Gosh, we Palo Altans ARE SO, SO ENTITLED! Imagine not wanting to DRIVE to TJ's, through one of the worst intersection in our fair city! Or to Safeway in Midtown! Imagine wanting to WALK to the market in our own neighborhood! To the market like the one we used to have, when Edgewood Center was a wonderful little shopping place, with a drugstore, market, hardware store, and more! Even worse, we're selfish enough to care about the environment, and maybe even our own health.

By the way, what do property tax rates have to do with the matter at hand? Nice red herring trick!

On a more serious note, it's hard to believe that Fresh Market wouldn't be happy to step away from the lease it's paying on an empty building. Much more likely that Sandhill is happy to collect the money every month to offset the fine. It's only when the fine went up that they started to protest the unfairness of it all. John_Alderman and others are right: Sandhill could get this done with incentives, if it wanted to!

I hope those of us who remember the old days, and shopped at Fresh Market when it was making a go of this supposed too small market space, will show up at the hearing to bear witness and speak up against exploitative developers!


4 people like this
Posted by Here is why
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 11:21 am

"The grocery space isn't viable" Wrong, wrong, wrong.

Fresh Market WAS viable, their corporate decision was to close down west coast operations and concentrate on the east coast.

Stanford hired this company to redevelop 2600 El Camino. Maybe that's where they get their legal advice on how to deal with Palo Alto.

2600 El Camino Submitted: 6/29/2015 File# 15PLN-00275
Request by SHPDM, LLC c/o Allison Koo on behalf of the Board of Trustees of Stanford University for Preliminary Architectural Review for demolition of the existing six-story building and construction of a 62,616 sf four-story office building in the CS zoning district


2 people like this
Posted by Annette
a resident of College Terrace
on Dec 5, 2016 at 11:30 am

Annette is a registered user.

This debacle underscores the lunacy of tying approval of a PC to the continued existence of a grocery store. I am pretty sure I heard some smart person advise CC to not do that when the 2180 El Camino Real (aka JJ&F) PC was under consideration. When a PC is the wrong thing to do to a neighborhood, CC needs to have the guts to say NO. Palo Alto has long been a pleasant city with interesting neighborhoods and diversity of people, housing, and retail. This is changing - and not for the better.


6 people like this
Posted by Walter
a resident of another community
on Dec 5, 2016 at 11:50 am

Take note Cupertino residents. How do you think your "green roof" at Vallco will go down with Sand Hill at the helm? This episode further illustrates Sand Hill's attitude: that the rules don't apply to them, and that obligations can be shed through legal actions that are costly to the communities where they operate.


9 people like this
Posted by john_alderman
a resident of Crescent Park
on Dec 5, 2016 at 11:54 am

john_alderman is a registered user.

@Jim - Sandhill may have seizure clause in their lease with Fresh Market, but they have had no incentive to use it because they are collecting rent, and maintaining a claim that they are in compliance. If they took back the lease, they'd be on the hook to find a grocer, and not collecting rent.

@Annette - Why let Sandhill off the hook? They were a participant in the process and could have said no. No one was forcing them to build two story multi million dollar houses. They made the deal.


Like this comment
Posted by 38 year resident
a resident of Old Palo Alto
on Dec 5, 2016 at 11:57 am

38 year resident is a registered user.

I have to agree with the developer and his attorney on this one. The developer fulfilled his obligation to provide a grocery store/market on the site. Not his fault that Fresh Market closed their west coast operations and pulled out of the plaza.

Every attempt he has made to fill the space with another store has failed because the footprint is too small for a market to profit with margins being as low as they are for grocery stores.

I understand the neighbors frustration, but you can't force someone to take the space. Perhaps they should form a co-op and approach the developer with a plan that they can all live with. It's apparent that there are no takers in the retail grocery business that want the store space as it is.


18 people like this
Posted by john_alderman
a resident of Crescent Park
on Dec 5, 2016 at 12:12 pm

john_alderman is a registered user.

@38 year resident - "Every attempt he has made to fill the space with another store has failed because the footprint is too small for a market to profit with margins being as low as they are for grocery stores."

That's a totally unsupported claim. Sandhill doesn't even control the space at this point. Fresh Market does, and they are the ones negotiating with other markets to take over the lease. We have no idea what is happening in those discussions. We have no idea if Fresh Market is marking the lease up or down. If the footprint is too small to be profitable at the current rental price (you don't know if that is true), then the rent just needs to be lower.

The lie that Sandhill must not be allowed to tell is that they have exhausted their options.


26 people like this
Posted by Disreputable Behavior
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 1:49 pm

The fact is that Sand Hill is NOT the least bit willing to do exactly what it needs to do to get a good grocery store into Edgewood: LOWER the outrageous rent they are asking!!

Grocery stores tend to have rather low profit margins, unless they are very high end, luxury stores such as Draegers.

The rents Sand Hill expects are so high that no grocery store could possibly make a profit.

However, there is a Chinese restaurant in the development that has been there nearly three years and has YET to open its doors for business? How are THEY paying their exorbitant rent???

A lot of suspicious behavior surrounds Sand Hill Properties. Cupertino ran them out of town-- should Palo Alto do the same?


10 people like this
Posted by Neighbor
a resident of Crescent Park
on Dec 5, 2016 at 1:55 pm

Seems like the developer/owner should release Fresh Market from the lease, and then it could revert back to Sandhill Property, who could look for a new tenant directly. Perhaps someone loses money in this deal -- Fresh Market is likely trying to get paid what it is paying, or more. But it seems reasonable to assume this lease is way over market for the location and constraints, and that is holding up finding a sub-tenant. These penalties are therefore fair because there is more Sandhill could do to fill that space if let Fresh Market walk away from its current lease.


3 people like this
Posted by Carla Talbott
a resident of Duveneck/St. Francis
on Dec 5, 2016 at 7:16 pm

I lived in Palo Alto from 1970 to 2008. First few years was at Seale and Mark Twain, then 35 years on Sierra Court, almost in the middle of the 101/Oregon Expwy/Embarcadero Rd clover leaf! I well remember shopping and dining at Edgewood Plaza in its heyday. Then it started tumbling downhill. I went to the earliest meetings of the neighbors with Sand Hill people and I was negatively impressed by the company's leader from the start. My "sense" was that he was dishonest, a fast-talker with lots of promises but fewer details or answers. Then it dragged on and on with nothing much, if anything, having been done by the time we moved to Oregon in 2008. I also loved Midtown but not all of the changes there in the more recent years before I moved. I'm old but I do like change...for the better! In my opinion, the livability of Palo Alto went steadily downhill during the 38 years I lived there. Where once I'd shopped downtown and Midtown and California Ave., I was going elsewhere. It had gotten much worse in being pretentious, upscale, unaffordably expensive. Even though it had always been relatively that way, it went clear off the charts upward while joy of living there went down at about the same rate. I am amazed at how rapidly, and well, things get done where I now live, in McMinnville, OR. In some ways "Mac" reminds me of Palo Alto when I first moved there. Their downtown has won national prizes and there's an increasing tourist trade due to food/wine tourism. Mac is now undergoing some of the "growing pains" seen in Palo Alto and not all of the long-time residents are happy with the "gentrification" of McMinnville!


3 people like this
Posted by EPA
a resident of East Palo Alto
on Dec 5, 2016 at 10:04 pm

@random
Just to let you know that that store was a decent option to the severely under served EPA side. Try leaving EPA and going all the way to middlefield or Trader Joe's. have you experienced how the cities haven't dealt well with east bay shore road? Think that's entitlement?


12 people like this
Posted by Tell Sand Hill Where to Go
a resident of Triple El
on Dec 5, 2016 at 10:37 pm

Glad to hear the City is going to fine Sand Hill into compliance. Maybe Amazon Go could make a go of the space?

Web Link


3 people like this
Posted by Midtown neighbor
a resident of Midtown
on Dec 6, 2016 at 7:52 am

@Disreputable Behavior - "However, there is a Chinese restaurant in the development that has been there nearly three years and has YET to open its doors for business? How are THEY paying their exorbitant rent???"

That Chinese restaurant, Chef Zhao Kitchen, opened its doors for business since June. For the few times I was there, it was always packed and required putting my name on the waitlist.


5 people like this
Posted by Moldy Reeds
a resident of Old Palo Alto
on Dec 6, 2016 at 8:06 am

Ah, the "Doctrine of Impossibility."

It's not impossible. But Sand Hill has to pay Fresh Market to break the lease then pay someone to operate a grocery store. Sand Hill should have thought about this in advance. They need to drop the notion that they will make money on the grocery store, when the likelihood is that they'll have so subsidize it. The other option might be a one-time payment to Palo Alto of all the profit they made from the rest of the project, plus some penalty. $50 million would be about right.

Here's an idea from the article in the Mercury News:

"The developer could build another building on that site for a grocery store and leave the Fresh Market building empty. They should do underground parking because there's not enough room for another building there unless they do that. When the Fresh Market lease expires then Sand Hill can tear down the original building. That's just one idea. It's up to the developer to figure out how to fulfill the agreement."

Other cities should be extremely cautious when Sand Hill comes calling with grandiose plans, with "public benefits," in exchange for building highly profitable housing or office space. Those public benefits may never happen and the city will end up in court with Sand Hill explaining that the promised public benefits are simply impossible so they should be let out of the development agreement.

Thankfully, the voters of Cupertino were not dumb enough to fall for Sand Hill's promises for the Vallco Mall, despite Sand Hill spending something like $7 million on a campaign. With what's going on in Palo Alto, it will be hard for them to come back with some other plan because no one is going to believe their promises.


1 person likes this
Posted by Amazon to the rescue?
a resident of Embarcadero Oaks/Leland
on Dec 6, 2016 at 9:52 am

Web Link


Like this comment
Posted by Random
a resident of Downtown North
on Dec 6, 2016 at 10:38 am

@Long Time Resident,

It is cute that you do not consider what you want as entitlement. By definition entitlement is the fact of having a right to something.

You are living in another decade. If the residents in that area so love frequenting Edgewood Plaza, perhaps that plaza would still be up and running today. Unless you are walking everywhere, you could probably spare yourself the argument that you do this for the environment. I would love to know how many people actually walked to Fresh Market rather than drove there.

I just love seeing all the pedestrians walking to their local grocery stores these days, it's such a sight to see. You are reliving another decade or era in your own mind and not part of the reality of today. So yes, you sound even more entitled. You feel you have the right to not have to drive down a busy intersection to get to an alternative grocery store and a right to leave your house when you want so as not to potentially avoid traffic. People make adjustments to reality, like going off-peak hours. Sounds like you want what you want and how you want it.

My commentary is more on the people who are so vocal about inane things such as having to drive slightly more. With respect to the technical lease between Fresh Market and Sand Hill and City Council's major goof, I am not taking Sand Hill's side. All I am saying is explore reality a little further. Fresh Market of all parties has the most incentive to re-lease to a grocery tenant so they can be off the hook for their lease amount to Sand Hill. You don't think they are trying to look for one? If they are and Sand Hill just says they won't accept a sublessee, that's a different story.

The answers to these questions must be explored. Sometimes, no matter how much you complain in life or about your lot in life (woe is me, grocery store is not walkable), the lessons learned are more valuable, and maybe City Council will learn its lesson on how to structure these deals in the future. Funny how nobody is taking shots at the City Attorney's office. Aren't they the legal experts? Why aren't people inquiring with them how they could allow this to happen on their watch?


7 people like this
Posted by be Positive
a resident of Leland Manor/Garland Drive
on Dec 6, 2016 at 11:50 am

be Positive is a registered user.

@random - I don't know how many people drove to Fresh Market, but the rest of the Plaza has a lot of foot traffic. And lots of people stopped on their way to or from work to pick things up at Fresh Market (reducing traffic a bit since it was on many people's commute route) and there were LOTS of people at lunch time coming from the offices on the other side of 101, many of them on foot too.


5 people like this
Posted by Crescent Park Dad
a resident of Crescent Park
on Dec 6, 2016 at 12:01 pm

re Parking. I can't verify my opinion - but I'm guessing that there are quite a few commuters who are dropping their cars off for all day parking and either ride sharing, biking or taking the shuttle to downtown. Avoiding parking fees. If and when a grocery store returns, I have no doubt that a security monitor will be needed to stop the free "park and ride" lot.


2 people like this
Posted by john_alderman
a resident of Crescent Park
on Dec 6, 2016 at 12:23 pm

john_alderman is a registered user.

@Random - " Fresh Market of all parties has the most incentive to re-lease"

They have a financial incentive, but it is a complicated situation. First they are in Greensboro NC, focused on East Coast expansion. They aren't here. living with the problem, embedded in the market looking at options every day. They also have an incentive to do nothing and let the fines ratchet up on Sand Hill so they are in a stronger bargaining position. Lastly, they may be trying, but are limited to dealing the remainder of the current lease. A new market may want price and duration guarantees past the term which only Sand Hill can offer.

So while it is true Fresh Market has an incentive to lease the space, they aren't in the best position to make it happen.


2 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Dec 6, 2016 at 1:16 pm

As perhaps a typical Palo Alto resident, my grocery shopping is more than likely done on a list of errands or on the way home from somewhere else. I have occasionally left the house to buy an item or two of groceries, but that is not the norm. I strongly suggest that people rarely leave home by foot to go to the grocery store and then return home. I would equally suggest that not many leave home by car to go to one small grocery store by car and then drive straight back.

Buying groceries either in large quantities or for tonight's dinner is usually done by most of us as part of a list of errands at different destinations or on the way home from work or some other occupation. For this reason, the vast majority of us are using a car to take the groceries home. For this reason alone parking is very necessary at supermarkets. Mostly the parking is short term, less than one hour. Unless the supermarket has restaurants, nail/hair salons, or gyms sharing the same parking lot, most of the parking will be short term. I would suggest that all employees should have parking hangers from their mirrors issued by the establishments using the parking lot and parking lots at all supermarkets have 2 hour maximum parking for everyone except employees. That would ease parking at all supermarkets around town I should think.


9 people like this
Posted by Sandy Chang
a resident of Downtown North
on Dec 6, 2016 at 1:58 pm

Just because Sand Hill says that Fresh Market will not let go of the lease, and that they've contacted 65 grocery store chains (are there that many?), does not necessarily make either of those statements true.

Based on their history in Palo Alto, Sunnyvale, Cupertino, and Newark, you can't be sure what is true.

I suspect that they can't find anyone to pay a lease rate close to what Fresh Market is still obligated to pay so they are not wanting Fresh Market to get out of the lease.

The reality is that they probably will have to offer free rent or even pay someone to operate a store there, and of course they'd rather just collect the rent from Fresh Market instead.

Other cities should pay close attention to what is happening in Palo Alto should this developer propose a project in their city.


4 people like this
Posted by anonymous
a resident of Duveneck/St. Francis
on Dec 6, 2016 at 2:40 pm

I walked over to Edgewood for The Fresh Market grocery, also to get bagels at the bagel place, and more recently walked to dinner with my neighbor at the Chinese restaurant, where we had a very nice meal with plenty of other happy diners. I can't imagine why several of pushing the notion it is odd to walk to a grocery store. Are you telling me Palo Altans don't want to Piazza's over on Charleston and Middlefield?! Yes, they do. 6NAfj


10 people like this
Posted by Darwin
a resident of another community
on Dec 6, 2016 at 5:39 pm

@SandyChang

"Other cities should pay close attention to what is happening in Palo Alto should this developer propose a project in their city."

Cupertino just did. They denied Sand Hill Properites to do what they wanted to do with the old Valco mall. Sand Hill is becoming synonymous with failure.


4 people like this
Posted by Sandy Chang
a resident of Downtown North
on Dec 7, 2016 at 11:12 am

@Darwin:

"Sand Hill is becoming synonymous with failure."

Since fixing the grocery store issue at Edgewood would cost them comparatively little money, it's odd that they allow it to continue to harm their reputation. They must know that other cities are watching what's going on in Palo Alto, as well as what went on in Sunnyvale and Cupertino.

They really should consider hiring a good public affairs manager that is skilled in managing the company's outreach to cities, and that can advise the CEO on how to improve the company's reputation.


8 people like this
Posted by Don't Give In
a resident of Crescent Park
on Dec 7, 2016 at 2:04 pm

If Sand Hill cared one smidge about its reputation, why did it:

** Refuse to comply with the Edgewood CC&Rs until homeowners sued it and won?

** Claim that the tearing down of a historic building it had pledged to restore was accidental? Did Sand Hill really expect people to believe that any contractor hired to preserve a historic building would accidentally bulldoze it? Sand Hill claimed its contractor hadn't been inside to see the building's condition until work was ready to start - yet who would accept a bid from such a contractor?

** Claim now that it never promised an operating grocery store at Edgewood, despite all its past statements?

** Claim now that the City of Palo Alto can't even legally require an operating grocery store as a benefit of Planned Communities (PCs) such as Edgewood Plaza? Ironically, Sand Hill's own adviser, Jim Baer, helped put that very requirement into both the Edgewood and College Terrace Centre PCs, so if it wasn't legal, why did he do it?

Sand Hill relies on local city councils being so fanatically pro-developer that it can get away with these outrages and more. To keep Sand Hill and similar developers from continuing such shenanigans, we must insist our cities not give in.


6 people like this
Posted by Rajesh Agarwal
a resident of Evergreen Park
on Dec 7, 2016 at 5:38 pm

@38 year resident

What makes you think that "Every attempt he has made to fill the space with another store has failed?" Because the developer says so? LOL!

The fact is that the developer voluntarily entered an agreement to provide a grocery store in exchange for the highly-profitable housing they were allowed to build. Even if they have to operate a grocery store themselves, or pay someone to operate one, that's just what they'll have to do. Tough luck.

This whole fiasco should be a wake-up call to cities that enter into these sorts of agreements. Palo Alto should have looked at Sunnyvale Town Center as evidence of what was likely to happen with this developer. Cupertino was smart enough to not fall for the propaganda sent out by this developer, but that was a decision by voters, not by a city council.


10 people like this
Posted by Mike
a resident of University South
on Dec 7, 2016 at 8:21 pm

I say demolish the townhomes to add more parking then let SH rent the space to anyone.


4 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Dec 8, 2016 at 12:39 am

Why is it that Fresh Market does not want out of the lease? Is there a penalty for
them ... or in other words how does this look from the various points of view.

Perhaps Sand Hill's proposal to let Fresh Market out of the lease is that they must
pay part of it, or an early termination penalty. If Sand Hill then rents the property
they would get income from two sources, one of them for providing nothing. Is it
not doing the fair thing and looking for a free payday?

Or what if Fresh Market is not sure they do not want to come back. Maybe they
made a mistake pulling out of CA.

It would be nice to know what is going on so we do not unfairly accuse anyone.

We've now make this too small market mistake twice now in Palo Alto, with Miki's
and with Fresh Market. I think the mistake at Fresh Market was the City's for trying
re-use the old Safeway and not allowing expansion. There is no enough parking
and what parking there is in this current configuration is a pain in the neck to get
in and out of. They should have built a larger market perhaps with parking on top
as in the Mtn. View Safeway - or raised the height and put the living spaces above
the businesses.

It doesn't feel like this should have been a surprise ... we went through it with Miki's,
so what happened that the City made the same mistake?

Also, why was this shopping center so dead for so long? It seems like we need an
enterprise zone on places like this, but if we are stuck with contractors that have
no imagination or vision - just a nose for maximizing profit and then leaving ... that
is a problem too.

The issue of knowing there is a market there, and getting in your car, or walking over
and then not being able to find a parking place. And that is doubly bad with the
very small parking places that Palo Alto seems to love because you cannot park
in many places throughout the city if you then want to get out of your car and get
back in.

People park over there and take two places, or park so close to the next space's
line that no one can use the next space.

Get this place cracking again, it used to be nice, it is a waste to have no market
there, and it's a pain to live in a location that should have a market but instead has
a city that cannot get it together to plan its space.


6 people like this
Posted by Larry Robert
a resident of College Terrace
on Dec 9, 2016 at 10:35 am

Larry Robert is a registered user.

I live next to the new College Terrace Market.
I certainly hope the City Administration wrote a better contract for this project that it appears they did for Edgewood.
It was my understanding that a grocery store must be in operation.
The landlord must adjust the terms of any lease to sustain that store or get a new tenant who will meet the terms.
the 5,000.00 per day fine should be automatic after a tenant stops operating an acceptable store.
Sand Hill should have written a better contract with the grocery store at least with a clause that the tenant pay the 5,000.00 per day fine until they vacate.
For all of my fellow residents of Palo Alto, who is responsible for this failure to hold developers to their promises?
If necessary, Sand Hill must pay a grocery store to operate. It should have been a condition of occupancy and continued operation.


6 people like this
Posted by Uncaring
a resident of Duveneck/St. Francis
on Dec 9, 2016 at 2:42 pm

The fact is, from all reports and experiences of three cities, that Sand Hill Properties simply don't care!

Their plan all along was to get in, make money, get out and make more money from lease payments.

The fact that they are complaining NOW about the fine is because now it hits them in their holy profit margin!


1 person likes this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Dec 9, 2016 at 5:25 pm

So where is this fine going in our City coffers?

With a budget deficit being forecast, this fine must alleviate something, mustn't it?


Sorry, but further commenting on this topic has been closed.

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