The announced closure is the latest blow to a plaza that had been in developmental limbo for years and that is still seen by many as a prime example of the local zoning process going awry.
Developer John McNellis received approval for the "planned community" zoned project in early 2009 after a lengthy dispute with the city and area residents over the types of "public benefits" the development would have to offer in exchange for PC-zoning exemptions. The city's approval allowed McNellis to build 37 single-family homes and 14 below-market-rate units, with the grocery store serving as the chief public benefit.
Now, it looks like this public benefit is about to come to an end. Michael "Miki" Werness, the former Berkeley Bowl manager who founded Miki's, said the store has been having trouble keeping up with back rent and has to close down.
"For me and my wife, it's over. It's pretty devastating," Werness told the Weekly Monday morning.
When the store opened, the hope was to bring to south Palo Alto a store that would offer organic and specialty foods at an affordable price — a Berkeley Bowl on a smaller scale. The site had been vacant since Albertsons left in 2005, leaving the commercial plaza nearly deserted and area residents frustrated about the lack of progress.
The council voted in January 2009 to approve McNellis' proposal, an approval that followed about 15 public hearings on the controversial development. With the economy in flux, it took another two years for McNellis to find a grocer to fill that vacancy. He announced Werness' decision to set up shop in the plaza in July 2011, more than a year before the store opened its doors.
McNellis said the store's closure is due to poor sales and shoppers' failure to embrace Miki's. He said the market hadn't paid any rent since it opened, and he attributed its financial woes to vendors starting to cut off the grocer. The sales at Miki's, he said, fell below those of Lucky's and Albertsons, its plaza predecessors.
"This is not a case of a landlord kicking him out," McNellis said. "This is a case of sales being so low that even without rent, he could not pay vendors. It's a very, very sad situation."
Werness told the Weekly that his first concern in regards to the closure is his employees, followed by his vendors. He called Miki's brief history in Palo Alto "a lot of coulda, shoulda, woulda."
"But I can't sit here and second-guess myself," Werness said.
For McNellis, the departure of Miki's means the search is on yet again for a grocer to occupy the plaza in the 3400 block of Alma Street. The city had viewed the grocery store as the plaza's anchor, a fact that is reflected in the conditions of the council's approval. The council had specified that McNellis would be allowed to build half of the plaza's homes once he signed the lease with a grocer and the other half after the grocer moved in.
In February 2012, McNellis signed an agreement with D.R. Horton to build the first 19 homes. Last fall, with the opening of Miki's, McNellis was allowed to proceed with construction of the remaining half.
The plaza's residential component is both the most controversial and the most financially lucrative part of the development for McNellis.
The city's planned-community ordinance for Alma Plaza also reflects the city's commitment to having a grocery store anchor the 4.2-acre plaza, which also includes a Starbucks and a community room. The ordinance specifies that the mixed-use building at Alma Plaza would be reserved "for grocery store uses in perpetuity." The ordinance also specifies that the grocery store would have "a minimum ground-floor size of 11,500 square feet and total minimum size of 15,000 square feet (including approximately 3,500 square feet of basement for office, storage and service area supporting the grocery store)."
McNellis said that Miki's departure will mean another period of vacancy for the plaza and another search for a grocer to fill the void. He said he doesn't know how long this search will take.
"We're calling every market we can," McNellis said.
Thomas Fehrenbach, Palo Alto's economic-development manager, said the city has reached out to McNellis to offer help in finding the next tenant. He also said the city is ready to assist the developer with routine issues such as replacing signage.
"We'll do what we can to let people know about the site's availability," Fehrenbach said.
This article was originally posted on Monday, March 25, on www.PaloAltoOnline.com. To stay current on all of the latest local news, go to Palo Alto Online.
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