As Khoury's Market closes, building owner seeks to get out of paying $140,000 in fines | Town Square | Palo Alto Online |

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As Khoury's Market closes, building owner seeks to get out of paying $140,000 in fines

Original post made on Jan 8, 2020

To get out of paying the city of Palo Alto hundreds of thousands of dollars in fines, the owner of College Terrace Centre has filed an injunction in Santa Clara County Superior Court.

Read the full story here Web Link posted Wednesday, January 8, 2020, 9:55 AM

Comments (34)

20 people like this
Posted by torreyaman
a resident of Midtown
on Jan 8, 2020 at 10:59 am

I feel badly for the neighborhood, but it appears that clearly a grocery store is not going to work here, for whatever reasons.


47 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 8, 2020 at 11:01 am

Online Name is a registered user.

Of course the fine applies in perpetuity -- or as long as that monstrous building lasts.

Anyone want to bet that the 7 -- SEVEN -- months of black shroud ends as soon as a decision's reached.


31 people like this
Posted by plantfruittrees
a resident of Greendell/Walnut Grove
on Jan 8, 2020 at 11:32 am

plantfruittrees is a registered user.

They knew what it was when they bought the building.


46 people like this
Posted by Nayeli
a resident of Midtown
on Jan 8, 2020 at 12:14 pm

Nayeli is a registered user.

I have to say that this is one of the ugliest buildings that I've seen in Palo Alto. It is something of an eyesore on El Camino Real.


29 people like this
Posted by rsmithjr
a resident of Duveneck/St. Francis
on Jan 8, 2020 at 12:18 pm

rsmithjr is a registered user.

The underlying problem is the PC ordinance ("Planned Community" development). It allows developers to promise "benefits" to the community in return for overriding zoning. The value of the zoning override is so enormous that the developers go to great lengths to get it.

Eventually, however, something goes wrong with the "benefit". The idea of having a neighborhood grocery store just isn't that great. Once the developer has built his building, he will contrive to find ways out of the obligations.

Palo Alto has 3 PC grocery stores. All three have had problems. One is in court right now, and it looks like a second one is about to end up there.

There is no point in getting into one of these messes. The PC ordinance should be repealed or seriously rewritten.



10 people like this
Posted by What Will They Do Next
a resident of Old Palo Alto
on Jan 8, 2020 at 12:21 pm

What Will They Do Next is a registered user.

@torreyaman....the "for whatever reason" is simple. People in the neighborhood don't shop there accept for convenience items. A carton of milk, loaf of bread, etc. Can't survive on that. and there won't be a market replacement that will survive either. The footprint of the store is too small to carry a larger variety of product and the profit margins in grocery stores are small. And, there is very little parking.

Crying about it won't do any good and fining the building owner won't either. Maybe the neighbors should be charged for not shopping there and subsidize the Khoury family so they can stay open.


39 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 8, 2020 at 12:34 pm

No more "Planned Community". Ever. No more upzoning. Ever. No more mixed-use. Ever. It is too bad that the lawyers involved can't find something better to do than help their clients cheat on the agreements, but, there is no way any city will ever be able to go toe-to-toe with the best corporate lawyers to enforce this kind of agreement. Just, don't make any more such agreements. Ever.

But, if the lawyers involved happen to read this sometime between now and when hell freezes over, would your parents be proud of you for participating in this travesty?


37 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 8, 2020 at 12:36 pm

Online Name is a registered user.

"Crying about it won't do any good and fining the building owner won't either."

Fining the "building" sends a message to other developers that Palo Alto won't tolerate gaming the system. At the very least they shouldn't be allowed to use the space for lucrative offices.

Instead maybe force them to convert the space into housing so we don't get more workers who will make the jobs/housing imbalance worse.

How about converting it into BMR housing and/or getting the TV dwellers out of the rental unit RVs?


38 people like this
Posted by Annette
a resident of College Terrace
on Jan 8, 2020 at 12:41 pm

Annette is a registered user.

It's deja vu all over again.

One might conclude that Palo Alto ordinances are not taken seriously by developers who spend many millions of dollars to acquire properties, apparently not in the least concerned about in-place obligations and restrictions. As I read this I found myself wondering (humorously) if AGB is related to AJ Capital or just taking a page from AJ Cap's book. I also wondered if someone in a key position gave Oberman reason to believe the various things he is claiming. That's a lousy thought but these costly errors need to be questioned. Is it just coincidence that they favor developers?

Molly and her team need to clean up any vagueness or omissions in the CTC ordinance and the City needs to enforce that ordinance so that such agreements are respected. Do all PA ordinances need to be peer reviewed for errors and omissions? Speaking of which, has the troublesome typo that contributed to the Hotel President debacle been corrected?

City leaders often brag about how exemplary Palo Alto is. Let's prove that by having clean documents and enforcing agreements.


42 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Jan 8, 2020 at 12:43 pm

If this was filed last July, then the writing was already on the walls.

I strongly suspect that this was orchestrated completely so that the grocery store would fail and they could get out of the fine as well as the necessity of providing a public good. Instead they can then rent out the space for offices, which is obviously what they wanted from the start.

This is a big can of worms and it is going to get very ugly. But, I suspect that we, the residents will be the ones that end up suffering from it the most, both financially (our money) and our public benefit.


35 people like this
Posted by rsmithjr
a resident of Duveneck/St. Francis
on Jan 8, 2020 at 1:06 pm

rsmithjr is a registered user.

While I believe that the situation we are in is ridiculous from many points of view, the one thing the city must do is to enforce the PC ordinance. They city must take the developer to court and enforce all terms of the deal including the fees.

The reason for this is that the city cannot establish the principle that it is a push-over to developer demands and will not stand behind the contracts.


38 people like this
Posted by Anon
a resident of Greendell/Walnut Grove
on Jan 8, 2020 at 1:38 pm

It’s interesting to note the building is out of compliance with the conditions of approval for the (lucrative ) zone change in other ways.
Most significantly, the conditions of approval prohibited any medical uses in the retail space yet ....
Laser Away, a chain of facilities offering procedures regulated as medical by the state of California was allowed to operate there.
No judgement on those wishing to obtain medical procedures offered in dermatology departments classified as “aesthetic dermatology@ at all; but if a procedure is governed by the state medical board is required to be administered by a medical official overseen by a physician it is a medical use.
Let’s make sure the whole site is compliant and offering a benefit to the community fir the big financial benefit that was granted


34 people like this
Posted by Landscaping
a resident of College Terrace
on Jan 8, 2020 at 2:03 pm

Landscaping is a registered user.

I also don't think they have planted all the landscaping that was on their plans presented to the city and approved by the council.


32 people like this
Posted by Novelera
a resident of Midtown
on Jan 8, 2020 at 2:30 pm

Novelera is a registered user.

People who develop commercial properties are greedy and duplicitous. Big surprise.


29 people like this
Posted by Online Member
a resident of Old Palo Alto
on Jan 8, 2020 at 2:39 pm

None of this is surprising. The developer knew that a grocery store would not make it and that he would be able to re-lease the grocery space to a high-rent user once the grocery store went bust and increase the value of the building. He bragged about this He didn't care that the grocery store owners would lose large sums of money on the space. Really bad guy, ask his former employer in San Francisco about the terrible things he had done.


8 people like this
Posted by Which developer?
a resident of College Terrace
on Jan 8, 2020 at 2:50 pm

Which developer? is a registered user.

@online member
Are you referring to the original developer or the one that currently owns the building?


11 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 8, 2020 at 3:02 pm

Posted by Novelera, a resident of Midtown

>> People who develop commercial properties are greedy and duplicitous. Big surprise.

The next time I see Diogenes, I'll ask him if he has met an honest Developer. In the meantime, apparently there is no way to enforce the kind of restriction that is the *basis* for these PC and "Public Benefit" restrictions. So, let's just stop doing that. Period. Just stick to the zoning. If we, the public, want a "public benefit", then, let's just buy the land and put in the benefit. You know, like, say, sidewalks. Oh wait-- they get to privatize the public sidewalks, too, but we don't get to collect taxes on that. Same as privatizing bicycle lanes and putting in mobile pizza shacks and RVs.


24 people like this
Posted by landscaping
a resident of College Terrace
on Jan 8, 2020 at 3:22 pm

landscaping is a registered user.

I understand the original PC was supposed to be where the building itself was a public benefit. Possibly Channing House was the first PC. Over time wiley developers were able to persuade city staff and developer friendly council majorities to exchange the building itself as the public benefit to requiring developers to provide minor public benefits that usually didn't pan out.

Can't we just stop the pretence and say no to upzoning? Oh, I forgot, council majorities, with few exceptions, are pro big office developments, whatever impression they give to get themselves elected.


26 people like this
Posted by Resident
a resident of College Terrace
on Jan 8, 2020 at 4:53 pm

The market does not work for several reasons. J&J Market was on the side facing the gas station. It was easy access for walking as well as parking. NOW a bank sits on the eastern side of the building and the very difficult to park location of Western side of the building is where the market is.

There is no signage and it doesn't get much pedestrian traffic on that particular side of the building. It's also extremely difficult to park. The best places to park are on the Southern side or the Eastern side, but they gave those prime locations up to the bank and other renters.

Not having the building open up in the center (as a courtyard) where people in the building (i.e. Mozart school students or banking customers) can naturally pass by and walk through or by the supermarket also prevents pedestrian traffic into the market.

They've designed this building for maximal charges for businesses, while ensuring the market wouldn't thrive. City really should have demanded the location where J&J Market (facing the gas station) side should have been allocated for the market.


30 people like this
Posted by Sjw
a resident of College Terrace
on Jan 8, 2020 at 7:23 pm

There is a public benefit that is owed. The City with the input of nearby residents must figure out what that is. Child care, homeless shelter, meeting facility. Whatever. It cannot be turned into office space that increases our housing problem. Think about it neighbors and force the City to stop making these deals that create over sized fortresses that rip away at the fabric of the neighborhood.


19 people like this
Posted by ReuVen
a resident of Barron Park
on Jan 9, 2020 at 12:32 am

Willing to bet my life that this is a theatrical show; EVERYONE is being played!


6 people like this
Posted by What Will They Do Next
a resident of Old Palo Alto
on Jan 9, 2020 at 9:53 am

FYI....JJ&F was not doing well and was not profitable. The store footprint was too small for them to succeed in an area where larger markets drew most of the shoppers, including those in the neighborhood. This from a Garcia family member whom I know very well. It's why they didn't reopen up in this location.


22 people like this
Posted by Eileen
a resident of College Terrace
on Jan 9, 2020 at 10:38 am

Yes, many CT residents also believed that a market as a public benefit was a bad idea and opposed a zone change. However, the developer at that time played many residents convincing them that a market was a great benefit even though from day one they worked against it!


21 people like this
Posted by paly
a resident of College Terrace
on Jan 9, 2020 at 1:34 pm

The rich write the rules- they wont pay a dime.


25 people like this
Posted by resident
a resident of Stanford
on Jan 13, 2020 at 12:39 pm

The city shouldn't let the owner get out of paying the fines. The owner purposely destroyed a family business to prove that a market can't survive there. Painting a building for 7 months? That's sabotage.


17 people like this
Posted by mjh
a resident of College Terrace
on Jan 13, 2020 at 1:15 pm

Read today's e-newsletter from Palo Alto Matters and scroll down to get the most up-to-date information on Jason Oberman's lawsuit to get all the fines and the market requirement voided.

Web Link


13 people like this
Posted by Curmudgeon
a resident of Downtown North
on Jan 13, 2020 at 4:01 pm

A classic scripted failure.


27 people like this
Posted by Annette
a resident of College Terrace
on Jan 14, 2020 at 3:42 pm

That there would be a public benefit in the "grocery space" was a requirement of the up-zoning. That was the deal when the PC was approved and that's the deal today. Sometimes, living up to your end of a deal is inconvenient and sub-optimal. In this instance, the monthly revenue from the commercial leases at 2180 should sufficiently soften that blow for Mr. Oberman.

After last night's CC meeting, someone forwarded me a link to the July 21, 2015 Silicon Valley Business Journal. In it, Jason Oberman, current owner of College Terrace Centre was profiled in the article titled "Silicon Valley 40 Under 40 2015." Here's what he had to say about the best advice he had received:

"I remember hearing the expression, "you're only as good as your word," when I was younger. I may not have fully grasped the significance of the saying at the time, but it sure means something to me now . . . . I have learned "your word" equates to honesty and integrity, which enables me to feel good about myself, my work and the people I touch."

If a contract isn't the embodiment of one's word, what is? I hope Mr. Oberman will prove himself to be who he thought he was in 2015, end the legal proceedings, pay all fines due, and work with the City to fulfill his obligation to provide a public benefit in that space.


23 people like this
Posted by Terry Terraceter
a resident of College Terrace
on Jan 15, 2020 at 10:57 am

Make them hold to the contract. Developer knew the deal, agreed to it, and recognized the grocery might need a subsidy. That was all calculated in at the outset. The City needs to hold them to their commitments or fine them heavily. No excuses.


12 people like this
Posted by Annette
a resident of College Terrace
on Jan 16, 2020 at 7:04 am

The long-standing scaffolding and black shroud suggest that the owner doesn't want a grocery at the College Terrace Centre. Assuming the City isn't going to waffle on the requirement that the grocery space serve a public benefit, it might be interesting to learn what public benefit Mr. Oberman has in mind. There are several public needs the space could serve. Given the housing shortage, two obvious needs are homeless shelter and BMR housing. Or maybe he could enlarge the parking structure and provide free parking. I realize we are supposed to be going "car light" but traffic and parking problems indicate that this isn't happening. So, we need to park the cars that all the office workers drive in everyday.

I also wonder what revenue is needed for a grocery to be viable at that location. The daily fines are 1k; 2k if the City Attorney accomplishes the required correction to the schedule. Would an additional 30k or 60k make the critical difference to the grocery? If yes, doesn't it make more sense to spend that money supporting an enterprise than it does spending it on fines, on "improvements" that damage the business, and on legal fees to avoid complying with a contractual obligation?


12 people like this
Posted by Anonymous
a resident of Duveneck/St. Francis
on Jan 16, 2020 at 10:30 am

I don’t live there and hadn’t been to any grocery there. But, I did “go through” the multi-year Edgewood Shopping Center “deal” with Sand Hill Co. when they negatively impacted our neighborhood region by failing to maintain a grocery, per the upfront agreement with the City of PA. Now, thankfully, we have a possibly viable grocery and we do walk to it. Sand Hill profited bigtime, immediately by being handed the benefit of building luxury high-density housing.
A question is whether a grocery is viable in this spot and if not, an agreement should not have been made in the first place. The solution isn’t giving the developer of the big ugly building a pass, though.


3 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Jan 16, 2020 at 11:31 am

One thing that should be said when comparing this grocery store with Edgewood Market is that Edgewood serves East Palo Alto residents and in particular those who are not Hispanic which is a demographic which is increasing in EPA. College Terrace probably has a much smaller target catch.


8 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 16, 2020 at 2:42 pm

Posted by Resident, a resident of Another Palo Alto neighborhood

>> College Terrace probably has a much smaller target catch.

Doesn't matter. It was built in to the original proposal, and the new owner wants to renege.

"you're only as good as your word"


11 people like this
Posted by mjh
a resident of College Terrace
on Jan 16, 2020 at 2:48 pm

On Monday night Molly Stump, Palo Alto's legal counsel, told the council that before the original schedule of fines approved by the then council, but not properly added to the appropriate legal documents at the time, will have to have a second council vote in order to do so now. However, she is not planning to bring this back to council for approval for three weeks. When the fines for the vacant grocery store at the Edgewood Plaza went up to $4,000 a day the developer, have produced a long list of possible grocers that had turned them down and claiming it wasn't possible, almost immediately leased the space that is now the very successful Edgewood Plaza Market.

If the city were to act fast and set the fines at $4,000 a day starting the first day the Khoury Market closes, perhaps Jason Oberman will find that he can work with the Khoury's to keep them open. They want to stay, but are getting ready to close. If they close and go away they won't then come back.


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