Options narrowing for downtown train hub

But the conversation about the next tenant of the main retail site on the northern end of the site, a 5,000-square-foot building where the Melting Pot operated since 2008, has accelerated since the fondue restaurant announced its closure last week.

Though councilmembers considered whether a new restaurant, retailer or a museum featuring digital games, among other uses, could thrive in either building, the discussion sparked a larger question of what the site welcoming hundreds of commuters to San Mateo daily could look like years in the future for Mayor Rick Bonilla. He looked to the city’s upcoming downtown plan update as an opportunity for officials and residents to explore how to best leverage the site’s downtown location.

Though he acknowledged a Digital Game Museum — an establishment focused on preserving the history of digital game development whose leadership had expressed interest in the smaller building — could work well in the downtown, Bonilla wondered whether the city could find a tenant with more promising finances and make the most of the transit-oriented site. Kleinbaum noted the museum is requesting to pay $2 per square foot each month, nearly half of the market-rate rent, and has indicated it still needs to raise funds to be able to move into the space and may only be open four or five days a week in the afternoon.

“I think it’s just sadly way underutilized,” said Bonilla. “As a station, it’s a very lively and well-used station, but I think that somehow we’re missing a lot of opportunity there.”

Formerly home to the Downtown San Mateo Association and the San Mateo Area Chamber of Commerce, the smaller building has been commercially listed for some three months and has received interest from potential office tenants and a handful of retailers, said Deputy City Manager Kathy Kleinbaum, who added the potential retail tenants have declined to pursue next steps once they visited the building.

The building’s location on the periphery of the downtown core and the limited foot traffic it receives outside of peak commute hours are among the reasons why the building may be a challenging site for retailers, she said.

In addition, Kleinbaum noted to make the space ready for another use would likely require significant tenant improvements the city would be expected to share, such as relocating the bathroom and upgrading the plumbing.

Though councilmembers considered taking more time to explore what uses could be successful in the smaller building, they ultimately gave staff the green light to see if an office tenant could be found to occupy the space, citing concerns about whether they could charge market-rate rent for a retailer given the site’s challenges. Councilwoman Maureen Freschet was absent from the meeting because she traveled with a team of girls softball players to Toyonaka, Japan, San Mateo’s sister city.

Though Deputy Mayor Diane Papan said she would prefer a more active establishment, such as a shop selling coffee and drinks or a florist, over a more private use, she said she ultimately prioritized a tenant able to make rent payments and that doesn’t require as significant tenant improvements.

“I kind of feel as a public servant/landlord we sort of owe it to our coffers to get the greatest amount of rent,” she said. “At this point, I’m very focused on the financial part of it.”

And though councilmembers considered seeing what types of prospective tenants may step forward for the smaller building in the coming weeks, Brett Barron, who was the leasing agent for the city’s lease with Redkix, noted it would be well-suited for small businesses seeking office space. Because office tenants are often in more immediate need for space when they express interest in them, Barron said they typically don’t wait long for a lease approval and advocated for councilmembers to give city staff the authority to sign a lease with an interested office tenant.

A real estate agent with Burlingame’s Capital Realty Group, Barron said the space has been successful with smaller startups in need of a more permanent office space, acknowledging adswizz, an online video and audio advertising company moved to a larger location on El Camino Real prior to Redkix.

“That space is a great story,” he said. “Personally, I’m supportive of having an office space there … we haven’t had tenants that failed there.”

Barron said the larger restaurant space could also be popular among potential office tenants, especially since it doesn’t have a full-service kitchen and would require a costly restaurant build-out for interested restaurant owners. He suggested councilmembers tour the site to see if there are any uses they would like to see in that space.

Though Councilman Joe Goethals joined the three other councilmembers present in voting to allow staff members to prepare letters of interest with office tenants for councilmembers’ review, he wondered whether a cart selling magazines, newspapers or flowers could be accommodated at the site to serve commuters and make the space more active. He also asked whether more outreach could be done to gauge the interest of new restaurants that could operate during the day in the larger restaurant space.

“I’d love to see us try to wake up the space during the day make it more active,” he said.

In response to Councilman Eric Rodriguez’s question as to whether the city would be able to recover rent the Melting Pot owes the city, Kleinbaum didn’t think the city would recover much since the restaurant was significantly in debt in the months leading up to its closure. In June, city officials approved a new lease with the franchise after it failed to make rent payments in March and April, according to a June 18 staff report. The new agreement included financial concessions aimed at affording a new manager time to make tenant improvements this summer.

Though Rodriguez acknowledged the merits of having a tenant in tune with the goals of activating the space, he was hesitant to make too many concessions to get the right tenant and risk losing those who may be able to pay the rent.

“I really do think that we’re as a city not in a position to provide too many subsidies for this spot,” he said. “I think that the solution … it’s going to take a little bit of thinking out of the box.”

anna@smdailyjournal.com

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