Plans for A plan for Andronico's Community Markets to open a grocery store at Edgewood Plaza Shopping Center has apparently fizzled, with different takes from property owner Sand Hill Property Company and the would-be grocery tenant on why it did not succeed.
Developer John Tze of Sand Hill told residents in an email Monday night that Andronico's inexplicably pulled out of what both sides believed was a done deal except for the signing. But Andronico's told the Palo Alto Weekly that it was giving up after failing to reach a consensus after months of negotiations among Andronico's, Sand Hill and The Fresh Market, which retains the lease of space from Sand Hill but closed its store last year.
Tze has said his company can't control the negotiations and the sublease terms, and he has had difficulty finding a replacement grocer. In recent months, Tze had been hopeful that The Fresh Market and Andronico's had come to terms. Two weeks ago both companies had agreed on the sublease documents, he said. Both grocers just needed to reaffirm their board approvals and sign the contract, he added.
"I didn't anticipate having to write an email like this since we should have seen 'Coming Soon' signs go up, but only days ago Andronico's emailed all parties saying they decided not to move forward at this time," Tze wrote.
"I immediately called The Fresh Market, who was shocked by the email, too; they weren't aware of any issues and were scheduled for their own board approval in days. So I then asked Andronico's if there's anything we can do to get back on track and their CEO responded, 'Not at this time.' It made no sense," he wrote.
Tze said that he heard informally that "Andronico's may be buying a local grocery chain, which would increase their store count dramatically."
"I only guess that their board at the last minute decided moving forward with Edgewood too would overtax their resources. I'm very sorry we couldn't bring Andronico's, but Sand Hill remains committed and is working hard to find a desirable grocer," Tze said.
But Andronico's statement on the matter seemed to dispute those assertions.
"We've worked with The Fresh Market and the Edgewood Shopping Center for 6-7 months and could not get the three parties in alignment. We love the Palo Alto area and will continue to look for prospects in the south bay," company officials stated in an email.
Tze did not return requests for comment regarding Andronico's statement. But Drewry Sackett, The Fresh Market's public affairs manager, said, "We are disappointed that Andronico's no longer plans to take over the space at Edgewood Plaza. We will continue to work with Sand Hill Property Company to pursue other interests."
The grocery store space, located at 2080 Channing Ave., which has been vacant for more than a year after tenant The Fresh Market closed shop in March 2015, has been a major concern for nearby residents who want a grocery store in the renovated shopping center, as was promised when Sand Hill was granted a "planned-community" (PC) zoning designation.
Sand Hill received the designation, which allowed the developer to build homes along the north edge of the shopping center, in exchange for keeping a grocery store on the site as a "public benefit."
The shopping center, a rare example of a retail development by Joseph Eichler, was finally thriving after years of vacancy and decay. But The Fresh Market, an East Coast high-end grocery chain, shut down the store in Palo Alto after just six months as part of a larger business strategy that resulted in the closure of all of its California stores as the company receded back to is eastern and Midwest base. Fresh Market holds a 10-year lease to the grocery store building and was to sublet to Andronico's.
Residents, who had successfully lobbied the city to fine Sand Hill $1,000 per day for not having an operating grocer, which is a violation of its PC zoning ordinance, again expressed their displeasure with Sand Hill's failure to find a grocer.
"It's been over a year now that we've had no grocery store at Edgewood Plaza, despite the developer being required by law to provide one," residents Carla Carvalho and Jeff Levinsky wrote in an emailed statement. "Sand Hill Properties needs to be open with the community about what terms it is offering grocers, because many fear it's aiming to evade its commitments by claiming no grocer is interested."
City of Palo Alto officials released a statement Wednesday calling the failed negotiations "unfortunate." The City was not involved in the negotiations and does not have access to the specific terms of any agreement, the statement noted.
However, "Sand Hill Property Company continues to be in breach of its agreement with the City to establish and maintain a grocery store at this location," officials said.
Since Sept. 30, the city has assessed Sand Hill $193,250 in penalties and has collected $179,250 for violating the planned-community ordinance. Sand Hill has been responding with timely payments, the city noted.
But officials seem to be eyeing other strategies to get a grocer at Edgewood.
"City staff are exploring options to encourage a resolution to this violation and anticipates making a report to the council within the next several months," officials wrote.
The Fresh Market has also been going through changes. Equity firm Apollo Global Management announced plans on March 14 to buy the specialty grocery chain in an all-cash deal valued at approximately $1.4 billion, according to multiple business media reports.
An investor filed a federal class-action lawsuit against Fresh Market and Apollo on April 11, alleging breach of fiduciary duty because Apollo is to pay $28.50 per share to investors in the buyout, which the lawsuit claims is considerably lower than its share value just prior to the agreement.