We’re all dying to know what will replace the Kmart in Scotts Valley Square Shopping Center off Mount Hermon Road. While the popular theory, “Target is going in,” would make for a much shorter article, the issue of replacing that business is much more complicated. So complex, in fact, that the City Council of Scotts Valley has offered a hand. Derek Timm, the Vice-Mayor of Scotts Valley, a licensed attorney, and owner of a brokered real estate company, was selected by his fellow Council members to help facilitate the process and was eager to dispel some runaway rumors.
According to Timm, the closure was expected, “As a corporation, Kmart has been going through the throes of bankruptcy. It was less a question of if they would close, but when.” This sparked the City Council’s desire to “help the owner of the center work towards securing a tenant and the resources they need and to roll out the red carpet to the retailers we’d like to see in Scotts Valley.” Ultimately, “They’re a private owner, so we can offer services and support, but we don’t have any ability to say what tenant they’ll take on the condition that the new tenant conforms with zoning laws.”
Timm then began describing the situation’s unique difficulties, “The ground is owned by one person, the people that lease the ground built out the center, and then they subleased the ground where the Kmart is to the Kmart corporation (now Sears and Roebuck). Kmart actually owns the building that they’re in, yet the pay on a lease for the ground to the shopping center owner, who then ground leases the land from the underlying owner. That’s the long way of saying we have multiple parties at play in this negotiation.”
The Vice-Mayor then explained the council’s role in the process, “As a city, what we’re helping them do, is to piggy-back off old studies we’ve done..., studies that helped define what kind of customer retailers serve in Scotts Valley. As a location, Mount Hermon Road is the second busiest road in our county. It is the key connector between ourselves and San Lorenzo Valley and you see approximately 40,000 trips a day going up the road, and our retail area, as a city, is actually much bigger. This is one of the stories you have to tell retailers, because if they look at Scotts Valley on a population basis alone, all they see is a town of 12,500 people with an average income of about 103,000 dollars per capita. That’s not a story a retailer gets excited about, until they hear our trade area is actually about 60,000 people. That combined with our proximity to Silicon Valley and our City being a key access point to the Central Coast- suddenly the story becomes very compelling to retailers.”
The current state of crisis has placed a few speed bumps on the way to finding the shopping center’s newest business. Timm “was supposed to be at an international shopping center convention… but it was canceled. We had meetings scheduled with retailers to talk about Scotts Valley and what’s attractive, but that’s been put off temporarily.” During this crisis, the center owner will continue “moving forward with plans to remodel inside and upgrade the plants around the center, in the hopes of attracting a high-quality tenant.” Despite the current set of obstacles, Timm looks forward to the period after “a retailer decides they like our situation. There comes a negotiation process, which the city is completely outside of… That process can take 3 months to a year, then it will take several months to do a build out. We want to help out with building permits, we want to incentivize, and speed the process. We want the retailer to know we’d love to help speed the process because we have a population that really needs, say a Target, in our community. It’s a missing part.”
Although we may be missing a large retailer, our retail community is stepping up to face this crisis. According to Timm, the owner of the Scotts Valley Square Shopping Center and Scotts Village Shopping Center (across the street and hosting Safeway amongst other businesses) are making big changes to their rent collection policies. Both shopping centers have “forgiven all rent for the month of April. They’re also a small business, with a sizable mortgage. They won’t be able to do it on an ongoing basis, but they want to help those businesses survive and get access to funds.” The City Council is also lending a hand to small business owners at the moment, “helping businesses access local funds and instituting an ordinance to keep commercial tenants from being evicted through May 3rd. Afterwards, they’ll have 120 days to make up the rent.” Overall, the Vice-Mayor is quite content with the way, “two of our major local centers and major landlords in town are trying to help local business thrive, during these trying times.”