A portion of a shopping center that has long been the centerpiece of Palo Alto's Midtown neighborhood has been sold to a private investor.
The 18,555-square-foot center at 2615-2699 Middlefield Road was built by the Haley family, which has owned it since 1956. But family members are aging and decided it was time to sell, Michael Haley said this week. The family took great pride over the years in maintaining the center, which has served the neighborhood through small, mostly mom-and-pop stores, he said. Current tenants include Palo Alto Cafe, Baskin-Robbins, School of Rock, The UPS Store, Core Studio, Classy Salon, Monica Foster Salon, Jen Bradford Hair, among others.
The property includes two buildings and sits in between the Walgreens and CVS, which are also regarded as part of the Midtown Shopping Center.
The family received many offers from developers who wanted to raze and redevelop the land, Haley confirmed. The family sold it for $15.26 million -- or $822 per square foot -- "well above the listing price," said Marcus & Millichap associate David Cutler, who also represented the family in the sale.
Though the property transfer was completed in October, Cutler said, the company made the announcement this week.
Haley said he hoped the new owner would retain the stores. That owner is identified by the deed filed with the Santa Clara County Clerk Recorder's office as Telly Chang, a broker-investor, E & R Investment Properties, LLC and CWKT, LLC. Chang is listed as the manager of CWKT, according to the California Secretary of State corporation registry.
Chang can do what he wants with the property; there are no deed restrictions, Haley said.
Though residents and shop owners have expressed fears the center will be razed, Keyvan Alikermanshahi, owner of Palo Alto Cafe, said the new owner confirmed he does not have plans to redevelop the site.
"We were worried four months ago when the building was up for sale," Alikermanshahi said.
Those concerns were also stoked by Marcus & Millichap's announcement this week, which said the center has potential for redevelopment. Its "neighborhood commercial" zoning designation allows for a mixed-use redevelopment that could include 26 multi-family residential units and a commercial space of at least 18,500 square feet, the company said.
"Located within a prime infill area, the center is currently underutilized but will provide a stable income stream while new ownership pursues redevelopment approvals," said Kirk Trammell, senior vice president investments for Marcus & Millichap's Palo Alto office.
Chang declined to speak on the record regarding the purchase, but Cutler said that the new owner plans to hold the property long term.
Only one 950-square-foot space in the two buildings is vacant. It is advertised for lease on the website LoopNet at $4 per square foot. The center also has a vacant parcel that is currently used as a community garden.
Cutler said if the new owner chooses to develop the site, he would likely not have to wait many years.
Tenants "all have pretty short-term leases. If they had a few years left, some had termination options," he said.
The Midtown shopping district encompasses retailers on both sides of Middlefield between Moreno Avenue to the north and south of Colorado Avenue. Walgreens, CVS and Safeway are the anchors of the district.
According to public records, the various parcels have five different owners (not including Chang).
Buy-in or approval from surrounding property owners is not required for redevelopment of the parcel, City of Palo Alto Planning Department officials said.
Some small business owners and shop patrons said they would be opposed to the construction of homes on the retail site. Midtown Residents Association Chairwoman Sheri Furman said she doesn't think housing would be a good fit, since the land isn't close to employment centers and some residents are concerned about additional traffic and parking spilling over onto their streets.
"The idea of neighborhood centers in the city's Comprehensive Plan is that it has neighborhood-serving retail," she said.
She's also concerned the small shops could be replaced by high-end chain stores. Even having to move out of the center during construction could spell the end of the small businesses, she added.
"We would lose (them) and never get them back," she added.
A longtime employee at a local cleaners predicted that lease costs will increase, especially because the property owner will have to pay more property taxes than the Haleys were paying, she said.
The previous net assessed property value was $236,134 as of June 30, 2016, according to the Santa Clara County Tax Assessor.
Alikermanshahi, who has owned Palo Alto Cafe for 22 years, said he and others have worked very hard to make the center thrive.
"There was nobody here when I came here," he said. But now, "We never close the shop -- not one day in 22 years."
Patron Lisa Medoff, a Stanford University employee, likes the cafe so much that she comes from East Palo Alto to enjoy its offerings and ambiance.
"I think this place is important to the community. There's a reason people come here. I wrote my dissertation here 10 years ago. It's like a family," she said.
Joyce Schmid also said the Midtown center should continue to serve the neighborhood. Adding housing or offices "would bring too much traffic. They would be building larger buildings."
When she and her husband, City Councilman Greg Schmid, moved to the neighborhood in 1973 they enjoyed shopping at Bergmann's department store, which she said they still miss. Since then, the center's mix of stores has improved, and many have served generations of patrons, she said.
Her family has come to Baskin-Robbins for decades.
"When our son was in Little League, every time he hit a home run, we would take him to Baskin-Robbins to celebrate," she said.