Edgewood developer sues over fines | News | Palo Alto Online |


Edgewood developer sues over fines

John Tze asks for reversal of fines and an injunction against the City of Palo Alto over an 'operational' grocery store

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Attorneys for an Edgewood Plaza Shopping Center developer filed an appeal in Santa Clara County Superior Court on Monday regarding the more than $700,000 in fines the city has levied for failing to provide an operating grocery store at the center. The lawsuit also asks for an injunction against the city for future fines.

Edgewood developer John Tze, who is in partnership with Sand Hill and Edgewood LLC, pleaded his case against the city's daily fines before an administrative hearing officer, Lance Bayer, in February, arguing that the property owner/developer had no obligation under its Planned Community (PC) zoning ordinance approved by the city to provide an "operating" grocery store, only to provide the space for a grocer, which the developer has done.

The 20,600-square-foot building had an operating grocery store, The Fresh Market, which occupied the space to much fanfare in 2013. It pulled out two years later in March 2015. Since then, the store has remained empty. Palo Alto has been assessing fines against the developer for allegedly violating its PC zoning ordinance since October 2015, six months after Fresh Market's demise, claiming the zoning ordinance compels the developer to provide an operating grocer for the lifetime of the development.

But Edgewood LLC also claimed its 10-year lease with Fresh Market doesn't give the developer any ability to make decisions on a sublease. Bayer did not buy the arguments and upheld the fines, finding them to be appropriate and lawful on April 2.

The fines, which began at $500 a day, have been increased by the city over time to a current level of $5,000 for each day the store remains empty. Edgewood LLC claims the penalties have equaled $700,500, and the fines continue to accrue.

The petition asks the court to overturn Bayer's findings and determine that the developer is not required to ensure the continuous operation of a grocery store on the site, but only to prevent a non-grocery use in the building; to determine that a code-enforcement officer is not authorized to issue administrative citations for purported violations of the zoning code; to find that the code does not create a violation or establish grounds for issuing administrative penalties or fines; to find that the maximum penalty the city can assess is $1,000 under government code; to set the first day of notice by the city of violations as Nov. 29, 2016, and to grant an injunction against the city's continued fines.

The complaint also alleges that the "grossly disproportionate" fines violate the developer's rights under the U.S. Constitution's 8th Amendment. The lawsuit asks for unspecified compensatory damages and legal costs and attorney fees.

City officials maintain the zoning ordinance agreed to by Tze gave the developer special concessions to add 10 single-family residences to the property in exchange for community benefits, of which the linchpin was a community grocery store.

Edgewood said in its complaint that the city's ongoing issuance of citations and fines was hindering its efforts to restore a grocery store. The developer claims to have approached nearly 70 grocers across the country to replace Fresh Market, but to no avail.

The suit names the City of Palo Alto, Palo Alto City Council, Planning and Community Environment Department and Lance Bayer. It alleges that the city amended the PC ordinance for the property around Nov. 18, 2013, adding a new sentence of the grocery store public benefit to read "Provision of a grocery store in the 20,600 sq. ft. building. The commercial property owner shall ensure the continued use of the 20,600 sq. ft. building as a grocery store for the life of the Project."

The lawsuit does not mention, however, that the ordinance was changed after Edgewood LLC destroyed one of the historic Eichler structures it was supposed to restore under the original PC ordinance, effectively making that agreement null and void. The amended PC was the result of the developer's own actions.

City resolutions adopted in May 2014 and October 2015 provided for a maximum penalty of $500 for violations of city zoning laws, with a second violation in 36 months fined at 150 percent and a third and subsequent violation in 36 months at 200 percent. But the developer said the city adopted a new category of penalties for violations on Nov. 7 increasing the penalty-increase schedule at $2,500 beginning the 181st day following notice of a violation. The plaintiff claims the newly added penalty provision was arbitrarily enacted and specifically targeted Edgewood for increased fines.

Attorneys for Edgewood also argue that the city's contention that its PC ordinance is intended to require a guarantee of the continuing daily operation of a grocery in the building for the lifetime of the project is vague and unenforceable, beyond the city's land-use regulatory authority and unconstitutional. The complaint points to the city's spelled-out requirements for continued use of the JJ&F Market at College Terrace Centre as evidence that the city understood how to write a compelling ordinance for a developer to maintain an operating grocery store, which it did not do in the Edgewood ordinance.

Attorneys for the developer also contend that the city unlawfully levied the fines and demanded payment as a precondition to seeking an appeal.

Matt Larson, spokesman for Sand Hill Property Company and Edgewood LLC, said the company did not have any comment for publication at this time. City Attorney Molly Stump has not yet responded to a request for comment.


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44 people like this
Posted by Poor Sand Hill
a resident of Crescent Park
on Apr 28, 2017 at 8:37 pm

Sand Hill is not obliged at all to comply with the PC zoning at Edgewood Plaza and the associated requirements. Instead, Sand Hill can take down the homes it built and revert to the underlying zoning. Of course, it wants to have its cake and eat it too -- to ignore the PC zoning rules but rake in the tens of millions of dollars in extra building rights given to it by the PC zoning.

And suing the judge? Next week, Sand Hill will sue everyone on Earth for not turning over all our assets to it. And the week after that, Sand Hill will go after the rest of the universe.

43 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Apr 28, 2017 at 9:20 pm

I sincerely hope Sand Hill Properties loses this suit,
but if they happen to prevail, this would be a great
reason for Palo Alto to never do business with them

The spirit of the agreement was clear. What Palo
Altans want is clear. What Sand Hill signed was
probably clear to them at the time, but the dollar
signs in their corporate eyes probably prevented
them from thinking about anything but building
and selling houses while probably paying minimum
wages to their workers.

Every time I see Sand Hill Properties' name showing
up in the news it is always something negative or
some problem that they have dumped on the City
of Palo Alto, either tricking the City Council or
with their complicity.

I for one would be happy to not see Sand Hill and
its associated squirrelly business tactics having anything
to do with Palo Alto in the future. Our city should end
this bad relationship, loudly and with a warning to other
communities, many of who already are aware of these

34 people like this
Posted by they did it again
a resident of Another Palo Alto neighborhood
on Apr 28, 2017 at 11:42 pm

SandHill seems to leave a nasty trace wherever and whenever it trys to bully the locals.

This has gone on for so long, I wonder how many grocery stores owners might reconsider to do business with SandHll at this point. Neighbors would welcome and support a grocery store and it would be great if there was a way to communicate this to store owners.

The city could have done a better job in monitoring this project over the years and how wise it would be for them never to do business with SandHill again.

8 people like this
Posted by Long Time Resident
a resident of Old Palo Alto
on Apr 29, 2017 at 12:10 am

Dear Community Members:
Below are email contacts for Grocery Outlet.
Web Link

Additionally, here is the email contact for Raley's (A California based company with headquarters in Sacramento). You can email them or write a letter.

Web Link

Years ago I put Mr Tze in contact with them, but Raley's told me that they were not interested in opening up a small store since it wouldn't be profitable.
However, considering the key location of this particular parcel, I think they would profit more than they realize.
They may simply be unfamiliar with our area.
Over the years, their real estate decision making may have changed, so give them a try and request a store without all the bells and whistles of florist, in store bakery, etc - which would require a larger size store.

If we complain too much, we may get something that local residents will not be too happy with. Something along the line of a Ranch.

Whatever grocery store eventually moves in, it is going to be a battle to keep the rodents, odors, and traffic down to an acceptable level.

Just trying to be helpful.

34 people like this
Posted by Cry Me A River
a resident of Duveneck/St. Francis
on Apr 29, 2017 at 12:11 am

Ban them from all future development in Palo Alt since their word means nothing. I'm tired of hearing about "public benefits" that never materialize or that get privatized so the residents never see any benefit.

With traffic getting worse, I want a grocery store there sooner rather than later.

15 people like this
Posted by Spade
a resident of Professorville
on Apr 29, 2017 at 12:18 am

what I think, believe & know is that Palo Alto residents are hippocrates ! We all insisted that the site have a grocery but then failed to shop there. The store is gone for one reason lack of profit. People in Shallow Alto sip silicon from paper cups pay millions for teardowns and then shop at costco...

13 people like this
Posted by Hugo
a resident of Old Palo Alto
on Apr 29, 2017 at 1:08 am

The problem with putting a store there is the parking lot. Even now, without a grocery store, the lot is often full. You cannot sell groceries if people cannot park there. (This is the developer's fault, not the city's.)

11 people like this
Posted by Nothing to see here
a resident of Charleston Meadows
on Apr 29, 2017 at 6:19 am

For those of you suggesting that Palo Alto not do business or ban sand hill, you realize that sand hill is doing business with private owners of the properties, not the city of Palo Alto.

11 people like this
Posted by resident
a resident of Charleston Meadows
on Apr 29, 2017 at 7:01 am

Safeway now has a smaller market business model called a community market. That would be a good market for that location since they can provide the basics. Not everyone wants to get in a car and drive and some older people no longer can get a license to drive.

6 people like this
Posted by Nothing to see here
a resident of Charleston Meadows
on Apr 29, 2017 at 7:15 am

Resident- I am not sure Safeway would want to open a store so close to their midtown location. Anyway, its the size that is the problem-- as has been stated most grocers do not want a Palo Alto, undersized location.

34 people like this
Posted by Cry Me a River
a resident of Duveneck/St. Francis
on Apr 29, 2017 at 9:10 am

To the person who said SH is doing business with landlords, not the city -- it IS the city that awards building permits and the city council that awards and denies them to its friends.

Remember how they refused Zuckerberg permission to build on 2 adjacent lots but let one of their buddies build IN Foothill Park. Remember the brouhaha about Greg Tanaka taking money from the developer on University Ave? He didn't recuse himself on voting to approve THAT project.

1 person likes this
Posted by resident
a resident of Charleston Meadows
on Apr 29, 2017 at 9:33 am

Can someone please explain the Foothill Park comments? I have not been up there during the rainy season and want to know what to look for. If you know who the business people are who coordinated that effort please include. Who benefited from this effort?

7 people like this
Posted by resident
a resident of Charleston Meadows
on Apr 29, 2017 at 9:36 am

Note that East Palo Alto is also on the west side of 101. There is a swap of land that rides along Woodland and Bay roads. There are a lot of people who would benefit from a decent store at that location.

9 people like this
Posted by Cry Me A River
a resident of Duveneck/St. Francis
on Apr 29, 2017 at 10:12 am

Here's the article from the Merc re the approval. (Sorry, strictly speaking it's not IN Foothill Park; only adjacent to and visible from FP.)

Web Link

A two-story, single-family residence and a detached guest house will be built at 670 Los Trancos Road, at the highest point of the ridge. Immediately to the south of the subdivision is Foothills Park.

The home will be 9,363 square feet and the guest house 1,508 square feet, on a 5.42-acre site.

6 people like this
Posted by Another longtimer
a resident of Crescent Park
on Apr 29, 2017 at 10:21 am

I too am furious with Sand Hill about the Fresh Market situation.

However, Sand Hill is not 100% horrible:
Web Link

26 people like this
Posted by Anonymous
a resident of Duveneck/St. Francis
on Apr 29, 2017 at 12:03 pm

Once again, a highly negative situation with Sand Hill Properties. Let's not let the city repeat this.
A major violation by Sand Hill of their agreement with the city, a quick massive profit for Sand Hill, and city residents be damned. Now our tax money goes to city attorneys as the city answers to Sand Hill, though Sand Hill's stance has no merit.
Once again, to the uninfformed poster above, the situation was NOT that local residents refused to shop at The Fresh Market. Stating that may confuse people.

10 people like this
Posted by john_alderman
a resident of Crescent Park
on Apr 29, 2017 at 1:55 pm

john_alderman is a registered user.

@Another longtimer - that's called PR, and you've shown that it can be effective.

20 people like this
Posted by Curmudgeon
a resident of Downtown North
on Apr 29, 2017 at 4:56 pm

If this clown Tze had any competence in his job, none of this would be happening.

25 people like this
Posted by Simply Incompetent.
a resident of Charleston Gardens
on Apr 30, 2017 at 10:57 am

How many years has this place been empty now? Sand Hill Property simply does not keep its word, so why keep do ing business with them?

21 people like this
Posted by Resident
a resident of Duveneck/St. Francis
on Apr 30, 2017 at 2:03 pm

The City should deny all future permits for new projects in Palo Alto from Sand Hill and prevent them from being involved in any new projects.

Spade said "We all insisted that the site have a grocery but then failed to shop there. The store is gone for one reason lack of profit. "

Many of us did shop there and it was profitable. Fresh Market closed all stores on the West Coast for reasons unrelated to this location and actually said the store was performing ahead of projections. Sand Hill Properties insisted the grocery store was viable in exchange for building and selling $30 million dollars of townhouses until right after they sold the last townhouse, at which point when Fresh Market closed they declared the site was not suitable for a grocery store.

The parking is primarily being used by Stanford and downtown folks who don't want to pay for parking permits so park all day and take the shuttle.

17 people like this
Posted by resident
a resident of Charleston Meadows
on Apr 30, 2017 at 2:26 pm

Sand Hill are the same people who want to take down the building on El Camino at Oregon. Please stop them - the building is fine as is.

2 people like this
Posted by Nothing to see here
a resident of Charleston Meadows
on Apr 30, 2017 at 3:11 pm

Resident-- the city cannot prevent sand hill or any other company from being involved in new projects. Remember that these projects are being done at the behest of,private properties owners. And given that the city is fining sand hill, I doubt a blanket ban would be allowed once sand hill sues the city.

7 people like this
Posted by chris
a resident of University South
on Apr 30, 2017 at 9:07 pm

The city and Sand Hill need to come to an agreement that allows for more flexible use of the property for a fixed fine, instead of the running clock now.

The way this situation is heading it will not end well for anybody.

It's better for the property to be used by a firm that can make a go of it instead of holding it empty for years and years. That is lose-lose.

25 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Apr 30, 2017 at 11:54 pm

Isn't SH still collecting rent from Fresh Market because they're still under their lease even though they pulled out of the CA market? This is no hardship on SH; it is on the rest of us who still need a grocery store.

If the parking lot is being used by commuters to avoid the cost of parking, what's the doing about that? How are they monitoring it? When the city rolls out the paid garages and parking meters this will only get worse?

And isn't the city talking about running a new shuttle out to Edgewood as a way to get back at the VTA for cutting routes because we already have some city shuttles and trying to make the VTA pay for it?

So we're out parkiing, a grocer and the new sales tax to fund the VTA for which we're getting nothing. Ridiculous.

23 people like this
Posted by Eudemus
a resident of another community
on May 1, 2017 at 6:51 am

@Spade "Palo Alto residents are hippocrates"
Hippocrates is considered the founder of Medicine, an absolutely outstanding intellect who made a huge contribution to improving the world.
Not all Palo Alto residents qualify, but some are genuinely aspirants.

14 people like this
Posted by Anonymous
a resident of Duveneck/St. Francis
on May 1, 2017 at 8:48 am

@Online Name
Thanks for cautioning the potential or possible current use of Edgewood as a park and ride - I am fearful of this.
This is a shopping center.
I clipped out a notice on page 27 in rather small print from the Palo Alto Weekly issue of April 28:

Public Hearing Notice
Citizens watchdog committee on 2000 measure A program expenditures
Anyway, theres a meeting May 10 6PM at the VTA Auditorium in San Jose and "the public is encouraged to attend but for those unable, written comments will be accepted until 5:00 p.m. On May 10 by email to: board.secretary@vta.org
I suggest those of us in the northern part of Santa Clara County should try and have a voice and request attention to projects, bus routes, etc. in this region - too - since the notice lists achievements about extending BART to Milpitas, San Jose.....light rail service extension MV to Alum Rock, "increase Caltrain service and electrify the system from Palo Alto to Gilroy" ("VTA has partnered with Caltrain on implementation..."
Personally, I see zero in real time with respect to positive effects to northern Santa Clara County like heavily-trafficked spots such as Palo Alto. If they count the light rail, that is a joke. Our county sales tax increase started in 2006 and we all hear about (crazy costly) BART which does not involve Palo Alto in the least.

9 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on May 1, 2017 at 9:23 am

@Anonymous, thanks for posting that. Also I wish the issue could be directed to Palo Alto city officials and the various local transportation commissions. Some substantive responses from them would be helpful, as would a well-publicized local meeting on the issues.

11 people like this
Posted by rainbow38
a resident of Mountain View
on May 1, 2017 at 10:47 am

Felipe's, an international market, would be great in that location. It's very popular in Los Altos, Sunnyvale and Campbell. The parking problem could be solved by limiting it to two hours only.

2 people like this
Posted by Garden Gnome
a resident of Crescent Park
on May 1, 2017 at 11:15 am

Dear @Spade, you wrote,

"...We all insisted that the site have a grocery but then failed to shop there. The store is gone for one reason lack of profit..."

It's unclear whether or not "we" didn't shop there enough, or whether that was the case for California overall. Here's a link to the Palo Alto Weekly article: Web Link

27 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on May 1, 2017 at 12:04 pm

People shopped at Fresh Market. The problem was that the East Coast-based chain decided to pull out of the entire California market. They are still paying rent to SH and we are still without a grocery store.

The new problem being raised is that the commuters are using the parking lot to avoid paying for parking permits, a problem which will likely worsen as the city widens its permit parking area and charges for the downtown garages. People all over town are seeing the parking-spillover problem.

It's time for the city to do something for the residents and start policing the parking lot for all-day parkers.

26 people like this
Posted by Good Grief!
a resident of Triple El
on May 1, 2017 at 1:34 pm

I fully expect that Sand Hill Properties lawsuit will be thrown out of court. It has no basis of merit!

The city plainly told them YEARS ago that they had to install a grocery store in order to do the other things they wanted to do, and they agreed, even signing documents.

Obviously, they didn't read the document thoroughly to learn about the fine. They happily paid it for ages before it was increased, because now it cuts into their profits, poor crooks!

[Portion removed.]

They promised the city a grocery store, they reneged, the city tried and tried to induce them to try harder, they refused! Now THEY want to sue the CPA!

[Portion removed.]

Like this comment
Posted by Extra small grocery
a resident of Charleston Gardens
on May 1, 2017 at 1:40 pm

[Post removed.]

8 people like this
Posted by Good Grief
a resident of Triple El
on May 1, 2017 at 1:48 pm

[Post removed.]

2 people like this
Posted by Agree with extra
a resident of Another Palo Alto neighborhood
on May 1, 2017 at 2:03 pm

[Post removed due to deletion of referenced comment.]

17 people like this
Posted by Kya
a resident of Midtown
on May 1, 2017 at 2:10 pm

Doesn't surprise me at all that sand Hill properties thinks that they can get away from paying a fine . I think they are the first developer to actually pay a fine,l...... all the numerous PC developments that promise public benefits that never took place. The whole PC process was a complete scam from the beginning. I also think it's interesting that now the city attorney and her staff are going to spend hundreds of hours on this lawsuit on an agreement that shouldn't have been signed in the first place . Who is really there to uphold our quality-of-life? It seems pretty obvious that it's not the city Council at this rate. Also, city manager city attorney and city staff have other priorities, not the residents/homeowners!

12 people like this
Posted by Larry Kavinoky
a resident of College Terrace
on May 1, 2017 at 3:02 pm

Sounds like the wolf guarding the sheep.
It was the attorneys who should have recognized the developer's obligation and written it into the lease.That surely is not the City of Palo Alto's problem.
Maybe Sand Hill needs new lawyers.

11 people like this
Posted by I Got Mine
a resident of Mountain View
on May 1, 2017 at 6:16 pm

" Whatever grocery store eventually moves in, it is going to be a battle to keep the rodents, odors, and traffic down to an acceptable level."

Are you referring to the lawyers in this case? It looks like you are...

Destroying a priceless structure: Sand Hill probably did this on purpose; they didn't want the hassle of maintaining the house that would cut into their profit structure. The problem now is a similar problem. Sand Hill would probably want to level the present grocery store, now that the fines take much of the profit away.

in the history of Sand Hill, they screwed their renters in East Palo Alto for many years; Once they Organized, the government could take care of their Sand Hill Slumlord. For the record:My family and I used to live there in East Palo Alto; we were victims of a process the City of Palo Alto did at the time. The city historians know what was done and will refuse to talk about and the Shame of Palo Alto Politics in the 1950s and early 60s.
Sand Hill is only into anything that makes money. That is what they think about: MAMMON is who they pray to. Palo Alto not allow these kind of people to build anything within Palo Alto. Period.

13 people like this
Posted by Curmudgeon
a resident of Downtown North
on May 1, 2017 at 6:36 pm

"I think they are the first developer to actually pay a fine,..."

At a minimum, Sand Hill is guilty of gross incompetence in failing to properly romance city hall prior to getting its PC application approved. That will be a major lesson for them.

But maybe their lawyer can argue Sand Hill is being treated arbitrarily and capriciously by this highly unusual enforcement of a PC ordinance.

9 people like this
Posted by SH Buys Fox Theater RWC
a resident of Duveneck/St. Francis
on May 1, 2017 at 9:08 pm

Web Link

Redwood City's Fox Theatre sold to Atherton businessman

Peter Pau of Atherton, principal and founder of Menlo Park's Sand Hill Properties, has acquired Redwood City's Fox Theatre, it was announced on Feb. 28. (2017)

8 people like this
Posted by Holy Moly
a resident of Duveneck/St. Francis
on May 2, 2017 at 2:41 pm

Further proof that despite their alleged financial and legal battles, Sand Hill Properties owners have way too much cash on hand!

[Portion removed.]

7 people like this
Posted by Isadore
a resident of Greenmeadow
on May 5, 2017 at 8:05 am

The Mercury News, Sand Hill's lap dog, finally picked up this story. See Web Link

The comment on the story by Sunnyvale Councilman Jim Griffith is funny.

"So now Peter Pau is suing Palo Alto?
Welcome to the club. We have t-shirts."

What do the t-shirts say? "Peter Pau Sued My City and All I Got Was this Lousy T-Shirt!

What would have happened with fake "Public Benefits" if Sand Hill has been able to pass their ballot measure in Cupertino, which they spend $7+ million promoting.

When will all these cities wake up and stop believing that Lucy will not yank the football away at the last minute.

4 people like this
Posted by Isadore
a resident of Greenmeadow
on May 5, 2017 at 8:16 am

[Post removed.]

5 people like this
Posted by Paul
a resident of College Terrace
on May 9, 2017 at 8:26 am

What everyone is missing here is this: God does not want a grocery store at Edgewood Plaza. It is not part of God's plan, and you can't argue with God.

Here is an excerpt from an article about Peter Pau which can be read at Web Link .

"As the Bible says, it's not always about you," Pau said. "If God's plan is not for me to get it, it doesn't matter what I do, it's not meant to happen.

"Any project I do, I pray about it," he added. "If you think this is good for me, then allow this thing to happen. At the same time, if you don't allow it to happen, then I won't complain about it, because your plan is better than our plan."

Anyone that is upset about the lack of Sand Hill's compliance with the public benefits agreement is clearly anti-God. I hope that Sand Hill's legal team brings this up in a jury trial in Palo Alto over these fines, and that Sand Hill beats all the god-less communists.

I never realized that God concerned himself, or herself, with real estate projects until I was enlightened by Pau's statement in that article.

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