News

Developer seeks a pass from city's retail law

Lund and Boyd Smith say former home of Pet Food Depot is not viable for retail

Palo Alto's recently adopted retail-preservation ordinance will be put to the test on Aug. 14, when the City Council considers whether to give an exception to a developer who's been struggling to find a new tenant for his vacant Portage Avenue building.

The property at 425 Portage Ave., in the Ventura neighborhood, was most recently occupied by Pet Food Depot. The shop closed down earlier this year and, under the city's new law, the owner is required to replace it with another retail use.

But on June 29, the city received requests from Boyd and Lund Smith of D&B Properties, urging a waiver to this requirement and arguing that finding a retailer for this building is an impossible task.

Located on a road connecting El Camino Real and the Fry's Electronics parking lot, the property is adjacent to offices and industrial businesses. Across the street is the Equinox gym and parking garage.

According to the materials provided by the developers, the property attracted inquiries from at least 11 prospective tenants or brokers over the past year.

Three of them -- AltSchool, The Learning Experience and C&W Services -- were disqualified because they did not comply with the retail ordinance. The remaining eight -- a list that includes include a cafe, a rock climbing gym, an art gallery and a restaurant -- all dropped out either because of inadequate parking or because they felt the location wasn't retail-friendly (in some cases, both reasons applied).

The waiver request from Lund and Boyd Smith is the first that the city has received since it approved the retail-preservation law on a permanent basis in March, though it likely won't be the last. A report from the Department of Planning and Community Environment notes that it is "unclear if this proposed waiver request will encourage others to similarly seek relief from the retail preservation ordinance."

In making his case for the exemption, Lund Smith argued that the 9,129-square-foot building is not viable for retail because of site constraints and existing parking that "make our building suited for warehouse, not retail." The site's location, he wrote, has surrounding uses that "lack retail vibrancy, accessibility and visibility" and the building's design "is unsuitable to support a retail use."

"We have marketed our space since March of 2016, and retail businesses have again and again shown no interest in our warehouse building," Lund Smith wrote. "For this building, Palo Alto's retail preservation ordinance has created a vacancy that does not serve public safety or appeal for the area. Instead, the vacancy allows for potential homeless trespassing, vandalism and criminal activity."

For the council, the request presents a conundrum. Last August, council members unanimously rejected a similar plea for an exemption from Michael Morris, whose family owned the building at 100 Addison Ave., which once housed Addison Antiques (the longtime retailer moved out in 2015).

Despite arguments from Morris that the area is ill-suited for retail (particularly since its neighbor, Anthropologie, moved to Stanford Shopping Center last year), the council refused him the waiver.

"The retail protection of ground-floor space won't have any effect if we just grant exceptions when someone complains," Councilman Tom DuBois said at the time.

In this case, however, planning staff are encouraging the waiver. In a July 5 letter to Lund Smith, Planning Director Hillary Gitelman concurred with the developer's finding that the area is ill-suited for retail. She tentatively approved the request for a waiver, a decision that will now go to the City Council on "consent calendar." That means the decision will become final unless three council members choose to remove it from the calendar and the entire council then votes to deny the developers' request.

Heghnar Balian, whose father, Hrair Tashjian, owned Pet Food Depot, concurred in a February letter to the City Council that the Portage building is a poor retail site. The family moved the business from a nearby location on El Camino Real to 425 Portage Ave. after Equinox moved into the former site. Since moving there, the business has struggled to survive in the warehouse building, with sales dropping by about 45 percent. Ultimately, this led Hrair Tashjian to close down the shop.

"Despite our landlord's help in reduced rents and despite our making every effort to make the business profitable, retail just doesn't work here," the letter from Tashjian and Balian states.

Ironically, the one factor that may help the developer is the fact that the retail operation at 425 Portage Ave. was illegal in the first place. The site is zoned service commercial, which is intended for services that "may be inappropriate in pedestrian-oriented shopping areas, and which generally require automotive access for customer convenience," according to the report from planning staff.

The report notes that retail services "were never authorized by the City at this location and could not have been approved based on the lack of on-site parking to support the land use." The site includes nine parking spaces, while the zoning code requires at least 24 spaces for retail at this site.

"Adoption of the retail preservation ordinance required the subject location (to) remain as retail even though it was never developed, intended or approved to be a retail use," Gitelman wrote in the July 5 letter, explaining her decision to approve the waiver.

Prior uses for the property were warehouse- and storage-related, according to the city. These are precisely the types of use that Lund and Boyd Smith hope to see in the future, if the waiver is granted. It's also what city planners expect to see at the site, particularly since office use is not allowed on the property because of a lack of on-site parking, according to the staff report.

"Redevelopment is also a possibility, and any new project would be subject to applicable codes with provisions to ensure adequate parking, compatible design and appropriate pedestrian access," the report from the Planning Department states.

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Comments

18 people like this
Posted by Anon
a resident of Evergreen Park
on Aug 1, 2017 at 5:05 pm

last year the owners claimed that the pet food store was a warehouse and not retail, so they've completely changed their story.

The weekly should know this.... they covered the story, link:

Web Link

Heres a solution. They can rebuild, but under the retail preservation law they have to retain the present retail space and could add housing above !!! Voila! Problem solved, no waiver needed, community benefits from new housing.


47 people like this
Posted by Sunny
a resident of Crescent Park
on Aug 1, 2017 at 5:37 pm

Hey Boyd and Lund, if you'd rent the property at a reasonable rate it would be very viable for retail. How can any retail survive with the crazy high rent? How much more money do the two of you need anyway? You've been raking it in for over 30 years now with your commercial property. If you'd charge a reasonable rent, not just "what the market will bear," you will attract viable retail, beneficial for the neighborhood, and still make a profit - - not the enormous profit you want, but still a profit.

If parking is a problem, why not tear down the building and add an underground parking garage? Isn't that what you have planned anyway if you tear it down and build an office building? We don't need more office buildings. We need to keep retail on El Camino.

I remember when El Camino Real was full of gas stations, fast food, funky shops, garages, restaurants, bowling alleys, etc. Now all retail is being replaced with housing and offices - all so developers can make a huge profit. Palo Alto is becoming such a blah town.


22 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Aug 1, 2017 at 7:43 pm

The need for retail is one thing that we want but additionally we want activities also. The idea of a rock climbing place is good because we don't have enough of that type of thing. I would imagine that exempting a rock climbing place from retail zoning would be a plus since it would attract people who just might use the retail next door before or after as well as any food establishment.

We need some common sense when it comes to waivers and exemptions.


40 people like this
Posted by Maybe the Problem is the Owners
a resident of Crescent Park
on Aug 1, 2017 at 7:54 pm

So the owners have completely changed their story from one year to the next. Last year, they claimed it was a warehouse that didn't sell items to the public, which made no sense to those of us who shopped there. Now, the same owners are saying Pet Food Depot was a store after all.

Oh, and now they're also saying it didn't have adequate parking to be legal as a store. So why did they rent it out as a store? Apparently, they didn't mind breaking the law. Gosh.

So here's another theory why they can't find a new tenant. Maybe no one wants to rent from owners who have proven to be so dishonest. How could anyone trust them at this point?


22 people like this
Posted by Not a place for retail
a resident of Duveneck/St. Francis
on Aug 2, 2017 at 7:47 am

Not a place for retail is a registered user.

I agree with the developers, this is not a good location for retail. Neither is the old Anthropologie building or the former Addison Antiques. But I also don't think the gym on Cal Ave is an appropriate business for that location.


33 people like this
Posted by Sunny
a resident of Crescent Park
on Aug 2, 2017 at 9:30 am

Anthropology did just fine in its former location. I actually preferred that location to its current location at Stanford Shopping Center. Stores in San Francisco where there is only street parking, and parking garages are several blocks away, also survive. Every time I visited Anthropology there was a line at the cash register and a wait for the dressing room. I also never had a problem finding a place to park.


8 people like this
Posted by Don
a resident of Evergreen Park
on Aug 2, 2017 at 10:36 am

> But I also don't think the gym on Cal Ave is an appropriate business for that location.

There's no way traditional retail would survive in a space with that kind of overhead (likely $20-25K per month). It's a huge, 6,000 square foot space.

If the gym survives (we'll see) it's certainly better than a failing retail store.


5 people like this
Posted by Pet Food Depot customer
a resident of Crescent Park
on Aug 2, 2017 at 11:48 am

The Portage Avenue site is not good for retail. It was sad to see a useful business like Pet Food Depot struggle after its move to that location. With limited visibility, it was obviously difficult to attract new customers.


10 people like this
Posted by Chris Gaither
a resident of Mayfield
on Aug 2, 2017 at 11:59 am

Perhaps the Portage avenue site should be sold and re-developed, or simply re-developed. Also, why didn't the owners advertise to car shops or mechanics if that is one of the initially intended purposes for the site? Certainly, in Palo Alto, we could use more auto mechanic shops. We lost the one on Park Boulevard due to presumed office building development by Jay, which never has occurred. Now, that site is also a fitness place, which we need more of like a hole in the head. Also, with all due respect to PA councilman Dubois, developers and owners should be able to present exemptions and ask for exemption approvals. This does not mean that every owner with Retail space is going to be asking for exemptions. If a location does not work for retail simply put, the owner should be able to re-visit the issue with the City of Palo Alto. And, as the city staff has pointed out, that location was never actually zoned for retail.


30 people like this
Posted by Exceptions galore
a resident of Downtown North
on Aug 2, 2017 at 12:48 pm

The Smiths got exceptions for their huge building at Alma/Lytton, the so-called Lytton Gateway, like reduced paarking.

They are MAJOR contributors to Greg Tanaka's big $$$ campaign.
(along with developers and supporters Roxy Rapp, Jon Goldman, Jim Baer, Charlie King, King Asset Management, Dan Garber, David Kleiman, David Giannini, Lee Lippert, Richard Karp, Steven Levy, Larry Klein, Vic Ojakian, Betsy Bechtel, Huey Kwik (Palantir), Barbara Gross, Bern Beecham, Gab Layton, Zack Bogue, F. McGrew, and many more.)

Tanaka should recuse himself from


13 people like this
Posted by Shame on them
a resident of Community Center
on Aug 2, 2017 at 12:54 pm

The retail protection of ground-floor space won't have any effect if we just grant exceptions when someone complains,"

Some council members never cease to amaze me with their poorly right out comments . The last complaint was not granted an exception. So what is the problem, Tom?

Exceptions galore - you are confused we are discussing the new retail protecting ordinance. This has nothing to do with new development. But not surprised someone would use it as a reason to attack tanaka.
Btw, how is that recall effort coming along. I thought maurucio donated big bucks to get it started


17 people like this
Posted by paresident
a resident of Downtown North
on Aug 2, 2017 at 1:10 pm

I am not sure why pet food depot went out but I thought it was the landlord hiking the rents. I thought it was a great location for what the place was. The antique shop was doing fine until that landlord got greedy and hiked the rent and they could not afford it. They are now wanting to change the rules there. Just because you hike the rent and basically kick out the longtime tenants doesn't mean you can't find the retail


15 people like this
Posted by Miriam Palm
a resident of Old Palo Alto
on Aug 2, 2017 at 1:13 pm

Miriam Palm is a registered user.

Pet Food Depot closed because the owner wanted to retire. He sounded delighted with retirement when I spoke with him.

It was a fine place and had off-street parking. It was easier to access than their previous location on busy El Camino. I wish a similar business could occupy the space.

Many years ago there was a similar business on Hamilton Ave downtown - where Reposada is now. We could drive thru and pick up our pet food. It was great!


3 people like this
Posted by Jack
a resident of Palo Alto High School
on Aug 2, 2017 at 1:35 pm

I think it's a bit hypocritical to complain about the developer's desire to make some extra money when that's the exact same reason the City wants to preserve retail. Thanks to Prop 13, cities have spent 40 years developing an unhealthy addiction to retail and the sales tax revenue it provides, and now that addiction is coming back to bite them in an era of online shopping. I used to buy pet food at Pet Food Depot, but why would I bother schlepping over there anymore when I can have the food delivered directly to my door at a cheaper price?

Let's call a spade a spade --- rather than continue to impose an unrealistic burden on developers who want to convert underused properties, the City should allow developers to pay an in lieu fee. The City will get the pound of flesh that it craves, and the developers will get a chance to build something useful.


1 person likes this
Posted by Gale Johnson
a resident of Adobe-Meadow
on Aug 2, 2017 at 2:32 pm

Memories...ah...sweet memories. We 70, 80, and 90 year olds have them, and we remember what retail meant back in the day...the 60's, 70's, and 80's (last century). I've written stories about my memories of those. And I referred to the 'manly' stores, Bergmans, Harrimans, and Weidemans, where we did a lot of our shopping. Those wonderful family owned shops/stores are gone forever. I've accepted that. And in case CC members haven't been reading the newspapers lately, indoor malls are starting to suffer also. People buy things in a whole different manner now. The outdoor malls seem to be doing okay...Stanford Shopping Center is a good example. They have multitudes of shops, restaurants, big department stores (some high end), jewelry, produce, fast food, and so many others, in a patio like setting, to choose from. Great venue to shop. And adequate parking if you don't mind driving up to the top level.

I followed CC activity leading up to the retail saving ordinance. It was never clear to me if the members, and those running for office, were really serious in thinking they could save it, or whether it was simply a campaign issue that they wanted to be on the right side of, to get us old folks' votes, to get elected. Hmmm! Still wondering! Another election cycle is coming up next year. Anxious to hear what the selling points will be. ADU's are a done deal. Housing, and especially affordable housing, is always popular, but check the record with the current incumbents on how far we've come on that. Pretty disappointing and dismal record. Lots of confusion on how to solve the transportation/transit and parking problems. Stay tuned!! Council had a well deserved vacation...not it's time to go back to work.


25 people like this
Posted by Exceptions galore
a resident of Downtown North
on Aug 2, 2017 at 2:40 pm

Jack, you've got it backwards. Those who advocate for retail are thinking about the convenience of residents and the liveliness and human scale of our business streets. The influx of technical tenants creating blank store fronts has deadened many business streets. (That's where the money is.)

In-lieu fees means zoning is for sale. That happens again and again including Smith's Lytton Gateway.

You are concerned about "an unrealistic burden on developers." My eyes teared up at the image of Billionaires lugging heavy burdens. What you mean to say is, slightly less profit. No burdens involved.

And yes, Tanaka should recuse himself from this item. He received huge donations from the Smiths. Thousand$.


Like this comment
Posted by Don
a resident of Evergreen Park
on Aug 2, 2017 at 2:54 pm

> Gale Johnson wrote:
>
> The outdoor malls seem to be doing okay...Stanford Shopping Center
> is a good example

Their time will eventually come too.


Like this comment
Posted by Don
a resident of Evergreen Park
on Aug 2, 2017 at 2:58 pm


Business Insider: Warren Buffett just confirmed the death of retail as we know it

Web Link


4 people like this
Posted by Max E. Mart
a resident of Ventura
on Aug 2, 2017 at 3:28 pm

I'm all for strict enforcement of the code so that the vision for an area is realized. Granting exceptions because land owners don't feel like doing what's required is bad policy.

In this case, the council has caused a significant problem for itself in that it has zoned the relevant district specifically for non-retail commercial use. That actually makes sense in that part and is an appropriate vision. Applying the retail-preservation ordinance in a zone that discourages retail does not make sense. It is up to the council to resolve this conflict so that development in the neighborhood can be consistent with the intended vision. Mutually exclusive requirements won't work.


17 people like this
Posted by hard to believe
a resident of Another Palo Alto neighborhood
on Aug 2, 2017 at 3:51 pm

So at 537 Hamilton the Smiths got a Design Exception, density bonuses with TDR's requiring only 19 parking spaces instead of 58 spaces
using mechanical lifts for 10 of the spaces. The
staff has never answered the question of whether the lifts are practical and are actually being used. In light of the severe and growing impacts of of all the office overdevelopment, which is overwhelming the City, which is apparent to everybody,it's time for the developers in this
town to give back, not ask for more. But that doesn't seem to be part of their mindset.


19 people like this
Posted by Enforce the zoning
a resident of Downtown North
on Aug 3, 2017 at 12:01 am

Aren't these the developers who brought us the giant ugly "Survey Monkey" or "Gateway" building on Lytton and Alma. What an ugly disaster.

I dare say they could find someone to rent the place if they stopped charging rates that only the tech sector will pay. Why not charge a retail oriented rate.

The city council needs to support residents needs for retail and recreation. Do not change the zoning to appease developers, enforce the zoning and down size all development.

We are overcrowded and do not need anymore office or tech space. Only allow resident useful retail.


16 people like this
Posted by sunshine
a resident of Barron Park
on Aug 3, 2017 at 7:05 am

Retail in Palo Alto is in the pits. We have lost many retail sites. Those that are now gone were among the best and they have been replaced either with yet another chain restaurant or retail that does not fit the area needs or wants.
This site must be replaced with another retail unit. It might require the owner of provide some upgrades. That would be welcome.
There are too many exercise/fitness places in Palo Alto now. Such places should be placed on side streets, not in retail areas. Main downtown areas should have retail that encourages shoppers to come in. I certainly do not want to watch people sweat through the large plate glass windows. I want to see interesting retail items.
Palo Alto has consistently discouraged retail--art, book, household supply stores and many related enterprises to leave the city. The City should work to bring these back to California Ave, El Camino, and University Ave. The Exercise places and professional offices should be located on the side streets or in small shopping centers. Similarly, restaurants should be on the second floor or a side street.
The site under discussion needs another full service pet supply place, similar to Pet Depot. I now must drive to Mt View to purchase what I need for my cat.


2 people like this
Posted by Gale Johnson
a resident of Adobe-Meadow
on Aug 3, 2017 at 1:38 pm

Don't beat your heads against the wall...arguing for retail in that location. Why spend so much time and effort supporting retail that is destined to fail there? Another pet store? @sunshine...you must not know about the store at Charleston Center right here in PA. Check it out. You don't have to drive to MV. Approve the request on the 'consent calendar' and move on to the many more important and pressing issues in our town. Wow! That was a long recess. We only got 15 minutes when I went to school. lol! I hope CC members had good vacations and are well rested to tackle all the problems ahead. But, beware...I'll be watching and listening! Another election cycle is coming up.


3 people like this
Posted by PAmom
a resident of Mayfield
on Aug 3, 2017 at 1:53 pm

I like the climbing gym idea. With a kids section. We need more indoor stuff like that especially since the parks are getting overcrowded. And when the weather is bad there's not place to do indoors around here or it's just overcrowded. The town is becoming very unfamily friendly. CLIMBING GYM! CLIMBING GYM!


9 people like this
Posted by Exceptions galore
a resident of Downtown North
on Aug 3, 2017 at 4:38 pm

> at 537 Hamilton the Smiths got a Design Exception, density bonuses with TDR's requiring only 19 parking spaces instead of 58 spaces using mechanical lifts for 10 of the spaces. The staff has never answered the question of whether the lifts are practical and are actually being used. <

At the Planning Commission it was mentioned that the lifts don't work for parking. We can hope they will eliminate that subterfuge.

19 spaces where 58 were required for that glass box. Cool move, Mr Smith.


3 people like this
Posted by Exceptions galore
a resident of Downtown North
on Aug 5, 2017 at 1:15 pm

For a *partial* glimpse of Boyd Smith's enormous wealth, he is asking for exceptions to zoning, see Web Link
-scroll to the bottom of the page.

Not to mention his holdings in billion dollar WSJ Properties, 3201 Ash St.
WSJ owns many properties around Fry's Electronics.

It will be interesting to watch which council members vote to give zoning exceptions to billionaires at the Aug. 14 meeting.


Sorry, but further commenting on this topic has been closed.

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