Willow Glen Resident
News
False starts, delays have hammered Hacienda's development
By Alicia Upano
The Hacienda Gardens Shopping Center project has been on a bumpy ride from the time it was proposed in 2001.
After continuous delays, construction began in February. Then everything came to a standstill this spring.
Recently, workers picked up their hammers again after a superior court judge ruled in favor of Rite Aid Pharmacy, which sued the shopping center's owner and developer for breach of contract. The lawsuit says the city-approved plan to add residential and retail space violates Rite Aid's 1986 lease agreement.
Rite Aid's primary concerns include reduced parking and the loss of visibility if buildings or "pods" were constructed on Meridian Avenue.
In Santa Clara County Superior Court, Judge Mary Jo Levinger said in a July judgment that developer Mark Tersini and property owner Garret Rajkovich could not reduce Rite Aid's parking or construct pods close to the store without Rite Aid's consent.
San Jose approved a planned development permit in 2004, allowing Tersini's development company, Hacienda Gardens, to build 299 rental apartments and additional commercial buildings. The following year, Rajkovich sold the northern half of the aging shopping center, near PW Market, to Toll Brothers, which is now building 165 condominiums on the property.
On the southern side, home to Albertsons and Rite Aid, Tersini was still planning to build a mixed-use project that would include 55 rental units with commercial businesses. The project would front Meridian and Foxworthy avenues.
While the developer forged ahead with the plans, tenants objected. As early as November 2003, Rite Aid representatives met with the developer to express parking and visibility concerns, according to court documents. When the San Jose planning director approved the planned development permit in 2004, two residents, Rite Aid, Hometown Buffet and Cardinal Coffee Shops & Lounges appealed the decision.
Like Rite Aid, Hometown Buffet and Cardinal Coffee Shops questioned the decreased visibility that would be caused by the new buildings. The businesses were also unhappy about the reduction in parking. The parking was in line with city requirements but not consistent with the lease, according to a planning staff report.
According to the staff report, these inconsistencies should not preclude the property owner from being able to modify his property.
"It is the responsibility of the private parties to address issues related to the private agreements," the report stated. Based on this information, the San Jose Planning Commission upheld the decision and gave Tersini the green light to build.
In June, San Jose resident Keith De Filippis noticed construction had ceased at the center and heard Rite Aid had sued the developer.
"I don't blame Rite Aid. If I were Rite Aid, I'd sue, too. I don't blame the contractor," De Filippis said. "Before a piece of dirt was moved, [the city] should've considered it."
The lawsuit has slowed construction, which he said has already driven out businesses and made parking difficult.
The Rite Aid lawsuit, filed under Thrifty Payless, Rite Aid's parent company, went to trial March 29-30. The lease between Rite Aid, the owner and developer gives the store rights to "common facilities." This includes parking areas, sidewalks, streets and driveways, a March 27 trial brief stated.
"They thought the landlord was not paying attention to those rights," said Lee Rosenthal, attorney for Rite Aid.
Rite Aid also claimed the owner failed to maintain the shopping center, which led to a drop in retail sales. The store was losing at least $200,000 in revenue annually, court documents said. The court, however, said the revenue loss could be due to myriad factors.
Tersini and Rajkovich objected to the judge's April 10 tentative decision, saying Rite Aid's lease rights do not apply to the common areas. Rosenthal said such disputes between businesses and owners are common.
Levinger upheld her decision in her July judgment.
David Kornbluh, who represents Rajkovich and Tersini, said his clients would develop the center in compliance with the court's decision. The parking will be in line with Rite Aid's lease and city requirements.
