Two years ago, the corner of University Avenue and Bryant Street was one of the liveliest in downtown Palo Alto, with pedestrians streaming in and out of Walgreens, Subway, Starbucks, Kan Zeman and Noah’s Bagels.
Then a fire ravaged the two-story Walgreens building at 300 University, forcing its demolition, and developer Roxy Rapp decided the time was ripe to rebuild its neighbor across the street at 278 University. He put his tenants on month-to-month leases, and Starbucks and Noah’s eventually moved out.
This year, the intersection was to rise again, bigger and better than before, with new four-story buildings approved for both corners. In January, developer Jim Baer began construction at 300 University, where a new Walgreens will be topped by three floors of offices. But Rapp’s plans for 278 University have hit a roadblock: the credit crunch.
“I put it off for a year because of the market,” Rapp said. It’s not that the businesses couldn’t succeed, he added. “It’s just that there’s no money out there now.”
More specifically, he said, banks wouldn’t loan him money unless he already had lease agreements with the major retail tenants. In the current economy, he said, that’s just not feasible.
That means another 12 months of temporary tenants on the ground floor. For now, one storefront is still occupied by Kan Zeman restaurant, another holds overstock for a Persian Rug merchant, and a third is vacant.
“I’m very disappointed,” Rapp said. “I was looking forward to that (redevelopment project) keeping me busy this year. Now I’m just going to take care of my existing portfolio.”
Rapp is particularly frustrated because the project was all but approved last summer when a resident appealed to the city council to block it. The council agreed with Lynn Chiapella that the city’s architectural review board had been too lax in granting an exception to the traditional 50-foot height limit.
A tweaked design eventually won approval in November. By then, however, the financial crisis had hit, and the national retailer that Rapp had lined up for the ground floor dropped out.
Baer’s project has moved along more smoothly, thanks in part to insurance money from the Walgreens fire.
Closure on the blaze came last month, when a jury convicted Donald Ray Williams of East Palo Alto of arson. He’s scheduled to be sentenced in March.
E-mail Will Oremus at woremus@dailynewsgroup.com.
