Editorial: Properties flip after winning city approval | August 22, 2012 | Almanac | Almanac Online |



Viewpoint - August 22, 2012

Editorial: Properties flip after winning city approval

Much to the chagrin of at least one Menlo Park City Council member, when the city approves an exception to the zoning rules for a specific property that favors a developer, there is nothing the city can do if that site is then sold to another party. The agreement stays with the property, not the developer.

That was the case when after 10 years of haggling, the city finally gave in to local property owners John and Dan Beltramo, who wanted a substantial reduction in the required number of below-market-rate (BMR) units in their project at 1460 El Camino Real, from three units to one. Over the course of the discussion, city officials appeared to be persuaded that as small, local developers up against the economic downturn, the Beltramos would be harmed financially if required to include three BMR units in their 16-unit townhome project. The mixed-use project also includes a two-story, 26,800-square-foot commercial building on a 1.54-acre site at the intersection of El Camino Real and San Antonio Street in Menlo Park.

But six months after receiving council approval for only one BMR unit, the Beltramos entered negotiations to sell the property to a large, professional developer, and finalized the deal in March.

Councilman Rich Cline was not happy when he found out. "First, the applicant wanted relief on the BMR allocation. That was no small feat, but understanding that the applicant was not a professional developer and did not have the kind of resources a classic land developer would have, kind of played into the discussion," he said.

"Speaking for myself, the way this property flipped hands so quickly has never sat well with me." Although he also noted that all landowners have the right to sell, "We gave relief and basically passed on more entitlements for the applicant to sell."

But regardless of the ultimate outcome, the Beltramos were just getting the best deal they could. In an April 2010 letter, the brothers provided numbers that a shaky economy, coupled with losing about $600,000 per BMR unit, made the project financially risky. In the end they benefited by negotiating with the city for only one BMR unit, which they projected would sell for $250,000, compared with an estimated $850,000 for a full market price unit at the time.

In our view, the question is whether the City Council should bargain with developers over zoning requirements, or stick to the ordinances. The public would be much better served if the council spent time either revising or reaffirming its BMR ordinance rather than succumbing to pleadings from applicants nervous about economic conditions or other factors.

It's not easy to handicap the real estate market. For example, as the Silicon Valley economy recovers, it's possible the Beltramo units could bring a much higher price than predicted in 2010. Who knew about the Facebook effect back then?

Another approved property at 1300 El Camino Real, the former Cadillac dealership, also changed hands in March, but from one large developer (Sand Hill Properties) to another (Bayfront Investments). This property became embroiled in a dispute over whether it could include space for a large grocery store, which was opposed by an anonymous plaintiff who later turned out to be with the grocery workers union. The final call is for 110,000 square feet of retail and office space, which is authorized by the development agreement that expires next year. But the city and the new developer could convert some or all of the site to housing, which would help the city meet its housing requirement.