Merchants at the Valley Oaks Shopping center in Valley Springs are facing a steep rent hike – almost $900 a month in some cases – with the center´s change in ownership.
Formerly owned by a partnership led by developer Brad White of Valley Springs, the shopping center at the junction of Highways 12 and 26 was bought by a Southern California partnership March 1, according to Jeannene White, the center´s former property manager.
Ron Harris is the lead partner of Valley Oaks LLC, and said he and two other partners have other commercial enterprises, most of them in the greater Los Angeles area.
This week the retail tenants received notices that the center´s management group, Spectrum Properties of Vacaville, was initiating a Consumer Price Index increase the former owner had the authority to institute annually, but never did.
And Spectrum is pro rating the hike back to 1995, meaning they´re figuring what the monthly rate would have been if those annual increases had been applied, and setting that as the increase.
Businesses that are charged according to their size presently pay $1.16 per square-foot, which includes a 16-cent maintenance fee for common areas, such as landscaping and lighting.
Figuring monthly totals with the square footage of some of the businesses, the new monthly rate will be about $1.45 per square-foot.
For the tenants, it means a monthly hike ranging from a couple of hundred dollars to almost $900, depending on how long the business has been open and its size.
Coming just days before the rent is due, the announcement has some tenants fuming.
“I cannot afford $600 more,” said Marianne Morgan, owner of the Health Habit.
Patti Campbell, owner of the Country Kitchen restaurant, will see her rent climb from $1,740 to $2,234 per month.
Zerrall McDaniel, owner of Showtime Video, will pay an additional $850 per month.
The letter also raised the possibility the new owners might collect all the past due annual raises.
That would leave Campbell facing a bill of more than $6,400 and McDaniel liable for $29,000.
If the tenants agree to pay the new monthly rate, the owners will “waive” collection of the total past-due amount, Campbell said.
Valley Oaks has 21 retail spaces and all were occupied at the time of the sale.
Seven business owners or representatives met Thursday morning to discuss their options.
McDaniel said she had the details checked by a local attorney who said the owners had the right to implement that high of a rent increase, and even get the uncollected total past due amount.
Campbell said she talked it over with someone and was told the tenants might consider a class-action suit, paying the current rent, but putting the increase in a trust account each month to be paid, if necessary, at the conclusion of the dispute.
Valerie Miles, of Valerie´s Day Spa, said she had heard the new owners had several nationally established businesses waiting for openings and really didn´t care if the local merchants stayed or left.
A Spectrum representative noted the Valley Oaks merchants had been paying well below the market rate in other areas of the county, McDaniel said.
A quick check with FHK Companies, owner of Frog Jump Plaza in Angels Camp, shows tenants there are paying an average base of $1.40 per square foot, plus an additional 35 cents for extras such as taxes and maintenance.
“But we´re not Angels Camp,” McDaniel said.
“Maybe they don´t understand the economy here,” Health Habit owner Marianne Morgan said.
Many merchants were concerned about the way they were notified, with letters hand-delivered Sunday night.
Since Showtime Video was open at that time, McDaniel was immediately aware of the situation.
Other merchants found the envelopes had been slipped under their doors when they opened Monday morning.
Because her restaurant is closed Monday and Tuesday, Campbell didn´t get her notice until Wednesday, one day before the rent is due.
Former owner Brad White said he contacted the new owners when he learned of the rate hike, and told them they were making a big mistake.
“You´re going to put the tenants up in arms,” White said he told the partners.
Harris said he could not discuss issues he considered a matter of confidentiality between his company and the tenants.
He did say, though, that he and his partners plan on giving the center a cosmetic upgrade, with some asphalt work, painting, revamping the landscaping and improving the irrigation system.
Future plans call for a physical expansion of the complex, and Harris said some retailers have already expressed an interest in the location.
“This will take some time,” Harris said.
Harris added he and his partners became interested in Valley Oaks because of the growth taking place in the area.
“(We) felt it was a very, very good area to invest,” he said.
White, himself, developed and built the center with the first tenants opening their shops in 1991.
Thursday´s tenant gathering did not end with any type of consensus and the merchants agreed to meet again Sunday night.
But dealing with disgruntled tenants isn´t the only problem with which the new owners are grappling.
The county Health Department recently sent a letter to the center claiming a sewage problem behind the complex represented a health hazard.
Brad White said the problem has been known for months, but extensive testing of the sewer and grease lines by a private plumbing firm and the county failed to disclose where the odor and leak might be coming from.
Even tests of the leak were inconsistent. White said one time the county found sewage contamination in the surface water, another time it was clean.
Harris said the sewer problem is their highest priority and they have someone working on it and will have it corrected “extremely quickly.”
Calaveras Enterprise story by Craig Koscho. For more Calaveras news, click: calaverasenterprise.com