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Staff Report 8315
City of Palo Alto (ID # 8315) City Council Staff Report Report Type: Consent Calendar Meeting Date: 8/14/2017 City of Palo Alto Page 1 Summary Title: 425 Portage Avenue: Approval of Retail Preservation Waiver Title: 425 Portage Avenue: Approval of the Planning and Community Environment Director's Determination to Authorize a Waiver From the Retail Preservation Ordinance. Environmental Assessment: Exempt in Accordance With the California Environmental Quality Act (CEQA) Section 15061(b)(3) Guidelines From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council ratify the Director’s decision approving the subject waiver request. Background This report transmits the Planning and Community Environment Director’s tentative approval for a waiver from the retail preservation ordinance adopted by Council on March 20, 2017. Pursuant to that ordinance and Section 18.40.160 of the Municipal Code, owners of properties outside the Ground Floor (GF) and Retail (R) combining districts may apply for an adjustment or waiver from ground floor retail protections based on a showing that the a permitted retail or retail-like use is not viable, that the proposed use will support the purposes of the zoning district and Comprehensive Plan land use designation, and that the proposed use will encourage active pedestrian-oriented activity and connections. Applicants must provide substantial evidence to support their application and bear the burden of proof. The Director renders a tentative decision, which is then placed on the City Council’s Consent agenda. The Council may accept this decision on Consent, or alternatively, three councilmembers may pull this item and require a future public hearing before Council. Discussion & Policy Implications City of Palo Alto Page 2 The owner of the property at 425 Portage requested a waiver from ground floor retail protections on June 29, 2017 and provided supporting information about leasing efforts over the past 16 months, tenant/broker inquiries, surrounding land uses, the lack of on-site parking to support retail and retail-like uses and other information (Attachment B). The last known tenant to occupy the building was the Pet Food Depot. At the time the interim ground floor retail protection ordinance was enacted in May and June of 2015, this use was operating and included a retail services component. 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 that land use. Prior uses were warehouse and storage related. The property owner provided testimony to the Council regarding the waiver provisions when the updated ground floor retail protection ordinance was being considered, suggesting that the interim ordinance provided too difficult a standard for this owner and other owners to meet. Accordingly, the Council, when enacting the current ordinance, sought to include an additional standard that would still be protective of most ground floor retail uses, but that provided an opportunity to grant a waiver under appropriate conditions and locations. The ordinance gives the director the authority to waive the provision requiring preservation of a retail or retail-like tenant space. This decision is based on a determination that a retail or retail-like use is not viable at the location, that an alternative use will support the purposes of the zoning district and comprehensive plan, and that the proposed use will encourage active pedestrian-oriented activity and connections. The Director reviewed the attached waiver request including the supporting information that was provided, and believes that it meets the standards of the Section 18.40.160(c)(1)(B). In accordance with the provisions of the ordinance, the Director’s decision letter is included with this report as Attachment A. The subject site is zoned Service Commercial (CS) and has a similar designation in the Comprehensive Plan. The CS zone is intended for services that “may be inappropriate in… pedestrian-oriented shoping areas, and which generally require automotive access for customer convenience…” (18.16.101(d)). While there is no identified replacement use, staff anticipates another warehouse or storage use would occupy the building, which is consistent with the historic use of the site. Surrounding land uses are mostly office, though an office use would not be permitted at this site due to a lack of on-site parking. Redevelopment is also a possibilty, and any new project would be subject to applicable codes with provisions to ensure adequate parking, compatible design, and appropriate pedestrian access. This is the first request the City has received for a waiver pursuant to the new provision in Ordiancne No. 5407 approved in March 2017. It is unclear if this proposed waiver request will City of Palo Alto Page 3 encourage others to similarly seek relief from the retail preservation ordinance. The subject waiver approval is not precedent setting, however, as each request received will be evaluated on its own merits and be subject to Council acceptance. Any future use of the site must comply with applicable zoning regaulations and the Comprehensive Plan. Resource Impact The recommendation in this report has no significant budget or fiscal impacts. However, granting relief from the retail presevation ordinance is anticipated to address the long standing vacancy of the site, which may have marginal fiscal benefits to the city and other unquantifiable benefits to area businesses. Timeline Council’s acceptance of this determination takes place immediately and is final. A request to pull this item would result in a future public hearing before Council in October. Environmental Review This determination is exempt from the provisions of the California Environmental Quality Act (CEQA) in accordance with Section 15061(b)(3) of the CEQA Guidelines in that it can be seen with certainty that there is no possibility the decision to waive this property from the city’s retail preservation ordinance will not cause a significant effect on the environment. Attachments: Attachment A: 425 Portage Ave Waiver Determination (PDF) Attachment B: 425 Portage Ave Waiver Request (PDF) CITY OF PALO ALTO PLANNING & COMMUNITY ENVIRONMENT 250 Hamilton Avenue. 5th Floor Palo Alto, CA 94301 650 329 2441 July 5, 2017 Lund Smith O&B Properties 3260 Ash Street Palo Afto, CA 94306 Subject: 425 Portage Avenue: Retail Preservation Waiver Determination Dear Mr. Lund, In accordance with Palo Alto Munlcipal Code Section 18.40.160 (c){l){b), your request for a waiver from the city's retaH preservation ordinance is tentatively approved. This determination will be placed on the City Council's August 14, 2017 consent calendar agenda. If pulled by three or more council members, you will be notified of a future public hearing on the request. If accepted on consent, this decision will be final. The determination is based on information prov~ded to the city, including effort over the last 16 months to lease the property, information on tenant/broker inquires, surrounding land uses, substandard parking spaces to support retail and reta il-like uses, testimony from your last tenant, and, a ten year history of previous land uses. It is further noted that the last tenant's transition from warehousing to retail services was not authorized by the city and would not have been approved due to the lack of required on-site parking to support retail services. Adoption of the retail preservation ordinance required the subject location remain as retail even though it was never developed, intended or approved to be a retail use. Based on the foregoing information, I find that retail and retail-like uses are not viable at this location at this time. Any future non-retail or retail-like uses that complies with the underlying zoning for permitted and conditionally permitted uses, and other applicable provisions of the municipal code, would be consistent with the purposes of the zoning district and consistent with the city's Comprehensive Plan. In terms of encouraging active pedestrian-oriented activity and connections, the existing site does little to advance and promote these objectives. To the extent a future tenant requires building improvements or upon site redevelopment, the dty through it's discretionary design review process will encourage design elements that enhance pedestrian connections, as appropriate. If you have any questions regarding this determination, please do not hesitate to contact me, or Assistant Director, Jonathan Lait. c ltyO f Pa I oA lto.org Printed with soy·based inks on 100% recyclad paper processed without chlorine Page 1 of 2 D&B Properties ______________________________________________________________________ 3260 ASH STREET • PALO ALTO, CA 94306 • TELEPHONE (650) 493-5484 June 29, 2017 City of Palo Alto Attn: Hillary Gitelman Director of Planning and Community Environment 250 Hamilton Avenue Palo Alto, CA 94301 Re: Waiver from enforcement of City of Palo Alto Retail Preservation Ordinance 18.40.180 for 425 Portage Avenue, Palo Alto, CA. (Building). Dear Hillary Gitelman: Pursuant to multiple conversations and meetings we have had with Jonathan Lait and Amy French, as well as written and oral communications we have made to the Palo Alto City Council, we respectfully request approval in waiving the City of Palo Alto Retail Preservation Ordinance 18.40.180 for 425 Portage Ave, Palo Alto, CA. Retail use for this Building is not viable due to i) site constraints and existing parking that make our building suited for warehouse, not retail, use (ii) a location whose surrounding uses lack retail vibrancy, accessibility, and visibility, and (iii) an existing building design that is unsuitable to support a retail use. We have marketed the space since March of 2016, and retail businesses have again and again shown no interest in our warehouse building. For this Building, Palo Alto’s Retail Preservation Ordinance 18.40.180 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 15 months, we have been actively marketing the Building to prospective retail tenants at an annual square foot price of $21, and later, $18 (per square foot annually). According to Exhibit 1 (attached), we are offering the Building at 60% to 75% below the Palo Alto market rents. Our marketing includes hiring Cushman and Wakefield to engage in a widespread marketing of the building including internet advertisements, email distribution to retailers in the area, mailers to retail brokers, building sign, and targeted phone calls to pet food stores and other retail showroom tenants in the area. In addition, we have posted full page advertisements in the Palo Alto Weekly on several occasions and advertised on Craigslist. See Exhibit 2 (attached) showing advertisements. Despite our efforts, no retail tenant has expressed serious interest. Please refer to Exhibit 3 (attached) that provides a detailed list of tenant/broker inquiries who have expressed initial interest for their clients and subsequently declined. Even with offering the Building at deeply discounted rent and using all marketing efforts possible, we have had only eleven inquiries from prospective tenants in 15 months and of the eleven inquires, only eight would comply with the retail ordinance. Each prospective tenant has subsequently declined interest in leasing the Building due to the following viability issues: 1) Site characteristics: Insufficient parking for retail use: The Building offers 9 parking spaces, and the City of Palo Alto requires 24 parking spaces for the least intensive retail use of the Building. A restaurant or health club would require significantly more parking. For Palo Alto parking requirements, refer to Exhibit 4 (attached). Additionally, there are no opportunities to expand the existing parking, given the small lot size and shared fire easement with the adjacent office building at 435 Portage Avenue. The property was originally developed in the 1950’s in conjunction with 435 and 455 Portage as three freestanding warehouse structures with minimal surface parking. Today the narrow site of 425 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Year Built: Tenant Imp:$10000 Effective Rent:$55.43 NNN Base Rate:$52.20 Free Rent:none NNN Cost:$4.35 Date Signed:06/06/2014 Lease Term:60M Lease Start:07/01/2014 Rentable SF: 06/30/2019 935 SF Lessee: 1 PA-El Camino Corridor 1962 Zone: Unit: Major Use: Sublease: Lessor: ADDRESS WITHHELD (PROPRIETARY) Retail Neigh Ctr GLA:4,702 Retail Anchor... Rental Adjustments... 3% annual increases NNN Lease Expiration:CA Year Built: Tenant Imp:$22 Effective Rent:$54.15 NNN Base Rate:$51.00 Free Rent:none NNN Cost:$0.00 Date Signed:02/01/2015 Lease Term:60M Lease Start:02/01/2015 Rentable SF: 01/31/2020 1,131 SF Lessee: 2 PA-Bayshore 1973 Zone: Unit: Major Use: Sublease: Lessor: Retail Office GLA:20,660 Retail Anchor... Rental Adjustments... NNN Lease Expiration: ADDRESS WITHHELD (PROPRIETARY) CA Year Built: Tenant Imp:$20 Effective Rent:$54.15 NNN Base Rate:$51.00 Free Rent:none NNN Cost:$0.00 Date Signed:02/01/2015 Lease Term:60M Lease Start:02/01/2015 Rentable SF: 01/31/2020 1,269 SF Lessee: 3 PA-Bayshore 1973 Zone: Unit: Major Use: Sublease: Lessor: GLA:20,660 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp: Effective Rent:$61.90 NNN Base Rate:$54.00 Free Rent: NNN Cost:$0.00 Date Signed:08/01/2014 Lease Term:120M Lease Start:08/01/2014 Rentable SF: 07/31/2024 1,628 SF Lessee: 4 PA-Bayshore 1968 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:1,905 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Page:1June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. EXHIBIT 1 OfficeRetail ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Year Built: Tenant Imp:$25 Effective Rent:$53.65 NNN Base Rate:$0.00 Free Rent: NNN Cost:$0.00 Date Signed:06/09/2015 Lease Term:120M Lease Start:06/09/2015 Rentable SF: 06/09/2025 4,291 SF Lessee: 5 PA-El Camino Corridor 1955 Zone: Unit: Major Use: Sublease: Lessor: Retail Mixed Use GLA:9,235 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp:$15 Effective Rent:$54.00 NNN Base Rate:$54.00 Free Rent: NNN Cost:$11.00 Date Signed:05/09/2014 Lease Term:90M Lease Start:06/01/2014 Rentable SF: 11/30/2021 1,100 SF Lessee: 6 PA-Bayshore 1956 Zone: Unit: Major Use: Sublease: Lessor: Retail Strp Ctr GLA:36,300 Retail Anchor... Rental Adjustments... Flat for 7.5 years then a 15% increase. NNN Lease Expiration:CA Year Built: Tenant Imp:$20 Effective Rent:$54.00 NNN Base Rate:$54.00 Free Rent:None NNN Cost:$11.86 Date Signed:01/17/2014 Lease Term:84M Lease Start:03/01/2014 Rentable SF: 02/28/2021 2,397 SF Lessee: 7 1949 Zone: Unit: Major Use: Sublease: Lessor: GLA:136,350 Retail Anchor... Rental Adjustments... 5% every 30 months NNN Lease Expiration:CA Year Built: Tenant Imp:As Is Effective Rent:$86.23 NNN Base Rate:$78.00 Free Rent:0M NNN Cost:$12.84 Date Signed:02/10/2016 Lease Term:120M Lease Start:02/10/2016 Rentable SF: 02/08/2026 1,389 SF Lessee: 8 PA-Downtown 0 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:0 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Page:2June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Retail ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Comments & Agent Information Year Built: Tenant Imp:As Is Effective Rent:$82.55 NNN Base Rate:$88.92 Free Rent:4M NNN Cost:$12.84 Date Signed:08/29/2016 Lease Term:38M Lease Start:09/01/2016 Rentable SF: 10/31/2019 693 SF Lessee: 9 PA-El Camino Corridor 1949 Zone: Unit: Major Use: Sublease: Lessor: Retail Neigh Ctr GLA:136,350 Retail Anchor... Rental Adjustments... 3% annual; 4M Free NNN Lease Expiration:CA Year Built: Tenant Imp: Effective Rent:$34.92 NNN Base Rate:$34.32 Free Rent: NNN Cost:$0.00 Date Signed:12/22/2016 Lease Term:60M Lease Start:03/01/2017 Rentable SF: 02/28/2022 875 SF Lessee: 10 PA-El Camino Corridor 1940 Zone: Unit: Major Use: Sublease: Lessor: In Line Retail GLA:5,726 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp:$35.00 Effective Rent:$88.19 NNN Base Rate:$65.00 Free Rent:2M NNN Cost:$15.27 Date Signed:12/22/2015 Lease Term:120M Lease Start:04/01/2016 Rentable SF: 03/31/2026 5,598 SF Lessee: 11 0 Zone: Unit: Major Use: Sublease: Lessor: GLA:6,000 Retail Anchor... Rental Adjustments... 3% annual; 2M Free NNN Lease Expiration:CA Year Built: Tenant Imp:As Is Effective Rent:$32.11 NNN Base Rate:$26.87 Free Rent:none NNN Cost:$0.00 Date Signed:09/30/2014 Lease Term:240.7M Lease Start:10/14/2015 Rentable SF: 10/31/2035 8,000 SF Lessee: 12 PA-El Camino Corridor 0 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:5,000 Retail Anchor... Rental Adjustments... 12% increase every five years NNN Lease Expiration:CA Page:3June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. PA-El Camino Corridor Retail ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Comments & Agent Information Year Built: Tenant Imp:None Effective Rent:$45.96 NNN Base Rate:$48.00 Free Rent:7M NNN Cost:$15.00 Date Signed:01/24/2014 Lease Term:84M Lease Start:05/01/2014 Rentable SF: 05/01/2021 1,093 SF Lessee: 13 PA-Downtown 2014 Zone: Unit: Major Use: Sublease: Lessor: Retail Retail GLA:59,000 Retail Anchor... Rental Adjustments... Flat rate for years 1-5 and 15% increases for years 6 & 7 NNN Lease Expiration:CA Year Built: Tenant Imp:None Effective Rent:$39.00 NNN Base Rate:$36.00 Free Rent:none NNN Cost:$15.00 Date Signed:11/11/2014 Lease Term:120M Lease Start:01/01/2015 Rentable SF: 12/31/2024 1,499 SF Lessee: 14 PA-Downtown 2014 Zone: Unit: Major Use: Sublease: Lessor: Retail Retail GLA:59,000 Retail Anchor... Rental Adjustments... 2% annual increases NNN Lease Expiration:CA Year Built: Tenant Imp:None Effective Rent:$46.56 NNN Base Rate:$43.80 Free Rent:3M NNN Cost:$10.80 Date Signed:09/21/2015 Lease Term:60M Lease Start:12/01/2015 Rentable SF: 11/30/2020 1,590 SF Lessee: 15 PA-Bayshore 1951 Zone: Unit: Major Use: Sublease: Lessor: GLA:10,000 Retail Anchor... Rental Adjustments... 3% annual increases NNN Lease Expiration:CA Year Built: Tenant Imp:Carpet & Paint Effective Rent:$39.00 NNN Base Rate:$34.20 Free Rent:2M NNN Cost:$10.20 Date Signed:09/02/2015 Lease Term:120M Lease Start:01/15/2016 Rentable SF: 01/14/2026 5,145 SF Lessee: 16 PA-Bayshore 1956 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:9,151 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Page:4June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. Retail ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Comments & Agent Information Year Built: Tenant Imp: Effective Rent:$52.92 NNN Base Rate:$49.80 Free Rent: NNN Cost:$0.00 Date Signed:08/14/2016 Lease Term:120M Lease Start:01/23/2017 Rentable SF: 01/22/2027 3,084 SF Lessee: 17 PA-Bayshore 1952 Zone: Unit: Major Use: Sublease: Lessor: Retail Strp Ctr GLA:7,470 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp:$40 Effective Rent:$85.15 NNN Base Rate:$72.00 Free Rent: NNN Cost:$0.00 Date Signed:05/01/2016 Lease Term:144M Lease Start:05/01/2016 Rentable SF: 04/30/2028 2,585 SF Lessee: 18 PA-Downtown 0 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:2,585 Retail Anchor... Rental Adjustments... 3% annual increases NNN Lease Expiration:CA Year Built: Tenant Imp: Effective Rent:$66.99 NNN Base Rate:$58.44 Free Rent: NNN Cost:$0.00 Date Signed:06/01/2014 Lease Term:120M Lease Start:06/01/2014 Rentable SF: 05/30/2024 1,600 SF Lessee: 19 PA-Bayshore 1956 Zone: Unit: Major Use: Sublease: Lessor: Retail Neigh Ctr GLA:18,275 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp:As Is Effective Rent:$86.13 NNN Base Rate:$86.13 Free Rent: NNN Cost:$12.00 Date Signed:10/05/2015 Lease Term:60M Lease Start:02/01/2017 Rentable SF: 01/31/2022 4,185 SF Lessee: 20 PA-El Camino Corridor 1955 Zone: Unit: Major Use: Sublease: Lessor: Retail Mall GLA:1,380,000 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Page:5June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld 2014-TD Retail Lease Comps in Palo Alto Size & Price InformationProperty Information Comments & Agent Information Year Built: Tenant Imp:$30 Effective Rent:$74.42 NNN Base Rate:$64.92 Free Rent: NNN Cost:$0.00 Date Signed:11/01/2015 Lease Term:120M Lease Start:02/01/2016 Rentable SF: 01/31/2026 3,304 SF Lessee: 21 PA-Downtown 1910 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:5,000 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp: Effective Rent:$88.67 NNN Base Rate:$81.00 Free Rent: NNN Cost:$0.00 Date Signed:11/01/2014 Lease Term:84M Lease Start:11/01/2014 Rentable SF: 10/31/2021 2,066 SF Lessee: 22 PA-Downtown 1925 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:2,400 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp: Effective Rent:$72.77 NNN Base Rate:$63.48 Free Rent: NNN Cost:$0.00 Date Signed:05/01/2015 Lease Term:120M Lease Start:05/01/2015 Rentable SF: 04/30/2025 9,986 SF Lessee: 23 PA-Downtown 1973 Zone: Unit: Major Use: Sublease: Lessor: GLA:8,800 Retail Anchor... Rental Adjustments... NNN Lease Expiration:CA Year Built: Tenant Imp:As Is Effective Rent:$90.26 NNN Base Rate:$94.96 Free Rent:none NNN Cost:$20.07 Date Signed:07/05/2016 Lease Term:60M Lease Start:10/01/2016 Rentable SF: 09/30/2021 2,850 SF Lessee: 24 PA-Downtown 1925 Zone: Unit: Major Use: Sublease: Lessor: Retail GLA:2,850 Retail Anchor... Rental Adjustments... 3% annual increases NNN Lease Expiration:CA Page:6June 28, 2017 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE.WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE. Retail ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) ADDRESS WITHHELD (PROPRIETARY) Cushman & Wakefield Proprietary Information Withheld EXHIBIT 2 EXHIBIT 3 425 Portage Avenue (Tenant/Broker Inquiries) Prospective Client Inquiry Use Date Reason for Not Pursuing AltSchool school February, 2016 Does not comply with retail ordinance Book Store from Mountain View retail March, 2016 Not a retail friendly location and un-insulated and un-air conditioned Health club recreational use April, 2016 Use requires more onsite parking than can be provided The Learning Experience school August, 2016 Does not comply with retail ordinance Gym / Personal Training recreational use October, 2016 Use requires more onsite parking than can be provided Art gallery showroom October, 2016 Not a retail friendly location Coupa Café warehouse / café November, 2016 Not a retail friendly location, un-insulated, un-air conditioned, and lack of parking Golden Road Brewing restaurant December, 2016 Significantly short of parking requirement Planet Granite rock climbing gym February, 2017 Use requires more onsite parking than can be provided C&W Services Warehouse March, 2017 Very interested in the space, but does not comply with retail ordinance Samsung retail showroom March, 2017 Lack of parking and unsuitability of structure (un- insulated and un-air conditioned) YELLOW HIGHLIGHT: Even with offering the Building at deeply discounted rent for over one year and using all marketing efforts possible, 8 client inquires would comply with the retail ordinance, yet most declined due to insufficient parking. Fergus Garber Young Architects 81 Encina Avenue Palo Alto CA 94301 phone 650/473-0400 June 27, 2017 City of Palo Alto Hillary Gitelman Director of Planning and Community Environment 250 Hamilton Avenue Palo Alto, CA 94301 Re: 425 Portage – Waiver from Retail Preservation Ordinance Request Parking requirements for CS Zone allowed uses 425 Portage = 8,352 sf gross sf Existing Site provides 9 parking spaces CS Zone Allowed Uses Vehicle Parking Requirement Required Spaces Business & Trade Schools 1 per 250 gross sf 33 spaces Churches & Religious Institutions 1 per each 4-person capacity1 38 spaces Private Schools & Education(a)(b) 2 per teaching station 2 8 spaces Private Schools & Education (c) 4 per teaching station 2 16 spaces Private Clubs or Lodges 1 per each 4-person capacity1 25 spaces Office/General Business Uses 1 per 250 gross sf 33 spaces Eating & Drinking 1 per 60 gross sf 3 70 spaces 1 per 200 gross sf 3 21 spaces 91 spaces total Retail – Intensive 1 per 200 gross sf 42 spaces Retail – Extensive 1 per 350 gross sf 24 spaces Service Use – Animal Care 1 per 350 gross sf 24 spaces Service Use – Banks & Financial 1 per 250 gross sf 33 spaces Service Use – Personal Service 1 per 200 gross sf 42 spaces Commercial Recreation 1 per each 4-person capacity4 30 spaces Warehouse 1 per 1,000 gross sf 8 spaces Allowed Uses as per PAMC 18.16.040 Parking requirements as per PAMC 18.52.040 Required Parking less than .5 space rounded down 1Assume 150 person capacity 2Assume 4 teaching stations 3Assume 50% of space is public service and 50% is other areas (service/back of house) 4Assume 120 person capacity Exhibit 4 FE R G U S G A R B E R Y O U N G A R C H I T E C T S 81 E N C I N A A V E N U E P A L O A L T O , C A 9 4 3 0 1 PH O N E : 6 5 0 . 4 7 3 . 0 4 0 0 © FERGUS GARBER YOUNG ARCHITECTS 2017 42 5 P o r t a g e A v e . - Ex i s t i n g S u r r o u n d i n g U s e s Mo n d a y , J u n e 2 6 , 2 0 1 7 RM-30 R-1 CS CS PF CS CS CS CS CS GM SU B J E C T PR O P E R T Y OF F I C E / R&D OF F I C E OF F I C E OF F I C E AU T O S E R V I C E S RES I D E N T I A L / STO R A G E OFF I C E / R&D OF F I C E OF F I C E OF F I C E OF F I C E OF F I C E OF F I C E AUT O M O T I V E SER V I C E S OF F I C E OF F I C E / R&D HO T E L OFF I C E H O T E L RES T A U R A N T CO M M E R C I A L REC R E A T I O N SF H UTI L I T Y FA C I L I T Y (AT &T) PA R K (PU B L I C FA C I L I T Y ) OF F I C E / R& D OF F I C E / R&D OF F I C E SIN G L E F A M I L Y H O M E S PRO P O S E D MIX E D -USE OF F I C E / R& D RE T A I L S E R V I C E S HO T E L PRO P O S E D MIX E D -USE SF H SF H RET A I L SER V I C E S RES T A U R A N T HO T E L AUT O M O T I V E SER V I C E S AU T O M O T I V E SE R V I C E S MUL T I -FA M . RES . OF F I C E RE T A I L SE R V I C E S & R E T A I L SER V I C E S RETAIL USES - RETAIL SERVICES - EATING & DRINKING SERVICES OFFICE, SERVICE, RECREATION & RESIDENTIAL USES - OFFICE/R&D, COMMERCIAL RECREATION, AUTOMOTIVE SERVICES, SINGLE FAMILY & MULTIFAMILY HOMES PROPOSED MIXED-USE PROJECTS - CURRENTLY IN REVIEW WITH THE CITY OF PALO ALTO PUBLIC FACLITY - CITY PARK RES T A U R A N T EXHIBIT 5 EXHIBIT 6 425 Portage Avenue (10 Year History of the Site) Square Footage Time Frame Tenant Suite # Use Prior to 2010 Windows System Group A 4,773 Warehouse with 1,500 SF of office Windows System Group B 3,579 Storage TOTAL: 8,352 01/01/2010 - 12/31/2011 Windows System Group A 4,773 Warehouse with 1,500 SF of office Pet Food Depot B 3,579 Storage / warehouse TOTAL: 8,352 01/01/2010 - 3/31/2016 Pet Food Depot A 4,773 Wholesale sales with 1,500 SF of office Pet Food Depot B 3,579 Storage / warehouse TOTAL: 8,352 04/01/2016 - 2/28/2017 Pet Food Depot stopped paying rent, and we allowed them to stay and try to sell their business, but no retailer was interested due to its site constraints and location. We then allowed them to liquidate their inventory and close their business. (Property was marketed for rent beginning March 2016) 03/31/2017 - PRESENT VACANT EXHIBIT 7 PET FOOD DEPOT 425 Portage Avenue, Palo Alto, CA 94306 650.852.1277 February 10, 2017 Mayor Gregory Scharff & The Palo Alto City Council Members: Liz Kniss, Tom DuBois, Eric Filseth, Karen Holman, Adrian Fine, Lydia Kou, Greg Tanaka, and Cory Wolbach Palo Alto City Hall, 7th Floor 250 Hamilton Avenue Palo Alto, CA 94301 Dear Mayor Gregory Scharff, Vice Mayor Liz Kniss, and City Council Members Tom DuBois, Eric Filseth, Karen Holman, Adrian Fine, Lydia Kou, Greg Tanaka, and Cory Wolbach: I am Heghnar Balian and my father, Hrair (Harry) Tashjian is the owner of the Pet Food Depot, Inc. I Have helped my father run our family business since 2001. In January of 2012 we moved from our El Camino Real location where Equinox now sits to the 425 Portage site. We moved to the warehouse on Portage because we had no choice. We were given 30 days to move and in that short time frame there was nothing else available. We had no choice but to settle for a warehouse building. Since our occupancy at the 425 Portage Avenue location, our business has struggled to survive. We have not been able to attract new customers because it is not a retail location given its poor location, lack of visibility, lack of parking, and the fact that the building is a warehouse. Specifically the move from El Camino to this location resulted in a drop of sales of about 45% and unfortunately we are closing shop because we cannot survive. We have no doubt that new business trying to establish itself here would fail given the constraints we mention above. It is simply put not a retail building or a retail location and the parking shortfall has a major hindrance on attracting customers to the location. Our landlord, Mr. Boyd Smith has been very generous and helpful. He even substantially reduced our rent in order to help us. 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. EXHIBIT 8 A few years ago, we approached the City about purchasing the City’s pet supplies from our store. We were told the City does its purchasing online. It’s unfortunate that the City of Palo Alto does not support its own small businesses. The City can mandate whatever it wants, but that doesn’t make it a reality. This property is not conducive as a retail business location. Our experience has shown that this property should be used for a non-retail use that does not require visibility, parking, and can operate in a warehouse building. Sincerely yours, Hrair Tashjian and Heghnar Balian Pet Food Depot, Inc. EXHIBIT 9