SOFA project could lose retail space | September 28, 2007 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - September 28, 2007

SOFA project could lose retail space

Developers of 260 Homer Ave. say retail-leasing no longer viable

by Sue Dremann

Long-discussed plans to develop the former Palo Alto Medical Foundation property as mixed use with housing, retail shops and medical offices may be scrapped to make way for a single, large tenant.

Menlo Equities, which is developing a project at Homer Avenue and Bryant Street, told the Palo Alto Planning and Transportation Commission on Wednesday night that a changing market no longer makes retail leasing viable.

The building's owner asked the commission to amend the development agreement, dropping the 10,000-square-foot limitation per tenant and allowing a single tenant to occupy more than one-third of the office space.

The changes could make way for a venture-capital firm to potentially lease the entire building, with the exception of the third floor, which is allocated for housing, according to Jane Vaughn, a partner at Menlo Equities, which owns the building.

She also asked that medical offices not be allowed.

Developed in accordance with the South of Forest Avenue (SOFA) I Coordinated Area Plan, the approved project consists of four residential units and 35,542 square feet of commercial space.

The original plan limited the amount of space a single tenant could occupy to 10,000 square feet in order to prevent a monolithic single occupant, such as the former Palo Alto Medical Foundation, which heavily impacted the surrounding residential community, according to Commissioner Patrick Burt.

At the time the SOFA I plan was developed, the community's concern was that Palo Alto Medical Foundation had been buying up the surrounding land, Burt said.

The site is currently under construction, with a giant steel frame rising from a deep pit.

But Vaughn told commissioners retail tenants can't afford to move in. She estimated retail space leases at $4 to $5 per square foot.

A tenant such as a venture-capital firm would please area residents because it will generate less traffic than medical offices or other uses, she added. The historic AME Zion Church, which is also part of the redevelopment, would be leased separately.

Vaughn said discussions with several residents indicated continued displeasure with potential traffic from retail and medical tenants. She said certain architectural elements of the French Laundry might be concealed by a drop ceiling and a wall to comply with the 10,000-square-foot limit, but several commissioners said any partitioning of the French Laundry would need to undergo review.

"Two bays were lopped off in consideration of the larger plan with the understanding that architectural elements would be replicated and in some ways preserved," Commissioner Lee Lippert said.

"This was the bone — the smelly bone. The commercial building wasn't greeted with enthusiasm, but it was the essential economic element that got the park, heritage preservation" of AMR Zion Church and French laundry and other considerations, Burt added.

Lippert said he felt the changes white-washed or diluted the intent of SOFA I to support a neighborhood with small offices, medical and retail uses. The building was intended for medical use and smaller offices so people could live and work within the neighborhood, in keeping with the city's objective of a walkable Palo Alto, he added.

Commissioner Arthur Keller expressed concern that changing the plan could open the door for other developers to change zoning when it doesn't suit their purposes. One such allowance has already taken place, he said.

"395 Page Mill Road was built under one type of zoning and then changed when it was not convenient for the owner. We went along with that. We're doing it again, and the building is not even occupied," he said.

Commissioners made three motions about the project. Commissioner Daniel Garber initially moved in favor of granting the changes.

"Market forces are very dynamic in this part of town. The number of examples of zoning not aligning with market forces are legion," he said.

Commission Chair Karen Holman then made a motion to deny the changes, saying she wasn't convinced about the bleak retail prediction. In the end, the commission unanimously agreed to continue the discussion to allow city staff to gather more information.

Commissioners agreed, though did not vote, to keep the medical-use option for the building.

"Almost all of the SOFA plan prohibited (medical offices). This building sought exemption for that. It is the only one allowed for medical use," Burt said.

Keller suggested a Conditional Use Permit could allow for a low-impact large tenant while preserving the original intent of the project. If the tenant moved and another use was desired, a new permit could be required that would protect the community from higher impacts. Several commissioners agreed a Conditional Use Permit could be an option.

The development has been in the making for many years, and a turnover of commissioners and City Council members have left many with little background on the original intent of the plan, commissioners said.

They plan to review the original agreement and explore the feasibility of a Conditional Use Permit during their Oct. 10 meeting, they said.

Staff Writer Sue Dremann can be e-mailed at


Posted by another resident/shopper, a resident of Another Palo Alto neighborhood
on Sep 29, 2007 at 12:03 am

If this happens it will again show who is really running this city!!They state that stores cant pay the high rent they want so the zoning should be changed to allow them to make more, much more money. If this happens there it should be a basis for zone changes throuout the entire city. As long as it applies to everyone it might be ok. I should be able to convert my house into a business location as I can make more rent!

Just like Alma Plaza being converted from a neighborhood shopping center to a super money making high density housing project and a very few small stores that no one needs or will shop at. I suspect that the rent will be so high that a ordinary store will not be able to locate there either.

The upcoming vote for council members is very important as it is the only way for the residents to have some say in what this city is to become. Will it become a city of industry and super high density housing (except for enclaves of the rulers) or remain to some degree a residental community with no fears of a "Hyett" coming to your neighborhood.

Posted by Maybe, maybe not, a resident of Midtown
on Sep 29, 2007 at 8:37 am

It's true that zoning changes in Palo Alto seem to be coin operated, and this leads to an inevitable worsening of the city, because short term financial benefit for some people or corporations outweighs the weak planning efforts made over time that might benefit the city.

But in this case the neighborhood apparently prefers the change, so at least it might benefit someone in Palo Alto.

Posted by Elaine Meyer, a resident of University South
on Sep 29, 2007 at 2:43 pm

The neighbors prefer the change? Who says that? I am not aware that the neighbors were asked what they thought at least that information hasn't reached me.
If the developer would like to do a small survey of the neighbors, we would be glad to cooperate.

Posted by Jeremy Loski, a resident of Ventura
on Sep 29, 2007 at 6:24 pm

I think it all depends on who the single large tenent is, no?

I, too, find this somewhat concerning, but $4-5 per sq ft is a VERY big burden on small retail. Run the numbers.

I have said it before, and I will say it again - Palo Alto is heading for very high end boutique retail and restaurant services. Some of those businesses will be "hobby" businesses affordded by those who can afford to take loses.

We have to pay attention to market forces, and then work with developers and neighbors to come up with something that will work for both sides. This is a sensitive site.

Posted by another resident/shopper, a resident of Another Palo Alto neighborhood
on Sep 29, 2007 at 11:03 pm

If they can't find retail stores that will only pay what they can and make a reasonable profit let the space set empty until the owners decide it better to get some rent than none.!! The build was allowed to be built on the condition of having retail.
The city is renting space near university Ave. at a loss to the taxpayers. and it's at a lot less then $4 to $5 a sq.ft. I believe.

The neighbors prefer a change! What a joke. They probably found one or two and they probably work for the developer.

Posted by David Bubenik, a resident of University South
on Oct 1, 2007 at 5:26 pm

I live one block from this project, and I actually know a neighbor who favors this proposal, and I know that the developer also knows that neighbor, so cherry-picking the neighborhood sentiment is not hard to do. The trick is knowing who NOT to ask.

I do not blame the developer. The representation is accurate as far as it goes, and it worked extremely well throughout the Byzantine SoFA process that gave us this woefully misplaced building. However, almost anyone over age 12 can see through this ruse, and I’m gratified to see that most of the current Planning Commission seems to be over age 12.