Walgreens Caught Between Plans and New Ordinance That Would Prohibit Them

Lincoln Road

Susan Askew
Susan Askew

Walgreens Caught Between Plans and New Ordinance That Would Prohibit Them:

Calling it a "convenience store", city says "no" to Lincoln Road location

Another business may get caught between in-process plans to do business on Miami Beach and an ordinance to prohibit businesses like them from locating in certain places. Walgreens wants to locate a large two-story retail outlet in a renovated building at 947 Lincoln Road but an ordinance approved by the City Commission on first reading this month would effectively shut the door on those plans if Walgreens is not grandfathered in.
 
Last month, MedMen, a medical marijuana dispensary found itself caught between its plans to located on Lincoln Road and a new law requiring distance separation between dispensaries. The Commission did not grandfather MedMen in and, this week, the company sued the City of Miami Beach.

In this case, the City Commission adopted an ordinance in March, 2017 prohibiting certain uses on Lincoln Road including check cashing stores, souvenir and t-shirt shops and tattoo studios. It also prohibited pharmacies and convenience stores. At issue is the definition of convenience stores which are characterized in the ordinance as “containing less than 6,000 square feet of floor area that is designed and stocked to sell primarily food (packaged and/or prepared), beverages, newspapers, magazines, and other household supplies.”
 
After hearing that Walgreens was planning on opening up on Lincoln Road, Commissioner Ricky Arriola who has championed the prohibition of formula retail and restaurants on the City’s more iconic streets – Ocean Drive, Ocean Terrace, and Lincoln Road – sponsored an ordinance to change the definition of convenience stores. He expressed his displeasure in a Facebook post on January 11.

 

Under the new ordinance, there would be no reference to size of stores and the definition becomes a retail store “that is designed and stocked to sell a mixture of goods such as non-prescription medications, beverages, magazines, food (packaged and/or prepared), school/office supplies, cosmetics, and other household supplies.”
 
In the case of 947 Lincoln Road, City Planning Director Tom Mooney told City Commissioners at their meeting this month the City was not aware the use would be as a convenience store. 
 
Carter McDowell, an attorney for Walgreens said that the ordinance “came out of left field from our perspective.” He said Mooney made them aware that the proposed ordinance “is something that might affect the project that we are working on.”
 
McDowell said, however, “We don’t believe it does affect the project.” Based on equitable estoppel law, when a project is already in the application phase, changes in the law that would make that project non-conforming “shall not be enforced against the application of a project,” he said. 
 
McDowell noted Walgreens entered into a 50-year lease with the owner of 947 Lincoln Road in 2015. After four hearings before the Historic Preservation Board (HPB), the owner of the property received approval in October of 2017 for the renovation of the building “to be occupied by a single tenant” with conditions for “how retail would operate in this space” including setbacks of shelving and checkout counters. [Rendering above.]
 
In August of last year, Walgreens submitted building permit drawings which went through first review. When the second set of plans were submitted with responses to the City's comments on the first set, McDowell said “The City has told us we’re not going to review plans anymore.”
 
He said nearly $2 million has been spent to date on the project. 
 
“We believe under your Code and under any interpretation of equitable estoppel that this ordinance should not apply to this Walgreens store and to this project,” McDowell told Commissioners. “Our hope is to avoid litigation.”
 
“Tom’s reason,” he said referring to Mooney was “’You didn’t tell us you were going to be a convenience store. I’m here to tell you, as of today, we’re not a convenience store. We are almost 14,000 square feet on two floors,” he said referring to the current definition of convenience store being less than 6,000 square feet.
 
“As importantly for those who are concerned about Lincoln Road, the entire first floor will be cosmetics and other beauty products,” McDowell said. “When someone walks by this building, they will see a cosmetic store. The convenience materials will be on the second floor, invisible to anybody on Lincoln Road. You will be able to find them. They will be a convenience to anybody who lives and works along Lincoln Road including all of their employees.”
 
“There’s a significant investment in this property and we really want to avoid a further dispute,” McDowell said. “Where we sit today, we will not be able to avoid that if it moves forward.”
 
Mike Llorente, attorney for the Lincoln Road Business Improvement District (BID) which includes property owners on the street, said, “Mr. Mooney appropriately described this legislation as cleanup. Two years ago, this body determined that certain types of establishments including convenience stores were not appropriate for Lincoln Road. I think that that decision included all convenience stores whether 1,000, 2,000, 5,000, 10,000 square feet and so today’s legislation clarifies that. When you prohibited convenience stores two years ago, you really meant to prohibit convenience stores so we are supportive of this legislation.”
 
Mayor Dan Gelber said, “There’s a question as to what we want on Lincoln Road and then there’s a question as to the process of this as it went through, specifically.”
 
Mooney said, “The use placed within the application [before the HPB] was retail… what was shown to the board was a basic shell for retail which is fairly typical.”
 
“It did not disclose the use as a convenience store,” City Attorney Raul Aguila said.
 
The HPB gives general approval for buildings and how retail furnishings are viewed from the outside but does not approve specific uses or tenants, Mooney said. 
 
In reviewing the application, “Staff identified the floorplan as potentially being consistent with that of a convenience store,” Mooney said. At that point, “We let the property owners know there was legislation coming forward that could potentially affect their use and we put a hold on their permit.”
 
Commissioner John Alemán said, “I’m concerned about fairness… I’m concerned that these guys are vested. I’m concerned about equitable estoppel. When you say that somebody’s been at the HPB four times and gotten their HPB approval, that they had a full permit review already and that they were addressing comments, and that they invested $2 million already in a project, I’m concerned.”
 
“Listen, I don’t love a Walgreens or similar,” she said. “I didn’t like it when CVS went on Ocean Drive. I don’t love a Walgreens on Lincoln Road.”
 
She said she agreed with Arriola’s Facebook post (though she didn’t comment on it). “I agreed with the public sentiment of it and what he was expressing… but in this particular case, I am concerned about fairness and I’m not sure that we’re there.”
 
Responding to questions regarding potential litigation, Aguila said, “We’re prepared to defend it based on the facts Tom gave us.”
 
Commissioner Michael Góngora, co-sponsor of the ordinance, said, “I like Walgreens… I like having it in strip malls. I like having it on the corner of my house. I don’t like having them on Ocean Drive. I don’t like having them on Lincoln Road. It really makes me not want to move forward with a $70 million renovation plan [for Lincoln Road] if we’re just going to be adding discount stores and drug stores and pharmacies. It’s just counterproductive to what this body’s trying to do and that’s why I jumped on this with a co-sponsorship.”
 
“Our residents don’t want to see Walgreens on Lincoln Road. They don’t want it.,” he said. “The other retailers don’t want it. There’s nobody that wants it. The only people that want it is Walgreens so I am going to continue to support this ordinance.”
 
“I feel very bad that they’re in this predicament, that they’re in this situation, and I’m sure that it was through no wrongdoing on their part,” Góngora continued, “but I have to vote for the better good of the City and the better good of the City is not to open it up because if we grandfather in this one, then what’s the point of not allowing any more? We might as well just throw this ordinance out.”
 
Arriola agreed. “I think residents are really tired and now we’re hearing from the Lincoln Road BID of what’s happening on Lincoln Road. This particular building used to house four or five, maybe more, small businesses… and now it’s going to be one giant national retailer, 14,000 square feet. That, from a policy perspective – I think we’re all unified – is not the direction we want to see Lincoln Road go in.”
 
“We’ve heard from our residents,” he continued. “They certainly don’t want us to encourage more of this type of tenant. There’s no disrespect meant to Walgreens or anybody. This is not targeting them. It’s really to say what do we want on Lincoln Road. We don’t want more big box.”
 
“Tom [Mooney] is, in my opinion, correct, and before I sponsored this legislation, I talked to him and to our City Attorney, ‘Can we do this legally’ and the answer was ‘Yes’,” Arriola said. Regarding the $2 million spent on the building, he said the owner can recoup that with another tenant.
 
“Very crafty legal arguments are being made that this is not a convenience store,” Arriola added. “It is exactly a convenience store. If Walgreens wants to come and say that they’re going to use, have a different use, make it a big cosmetic store, maybe that’s the way out of this is that they’re not going to be a traditional Walgreens…  the use is something other than a convenience store.”
 
Góngora said, “I don’t think a high-end cosmetic store is incompatible with Lincoln Road. I think Sephora is a wonderful addition… What I don’t like is the idea of them selling candy bars and magazines and gum and condoms, although those are important, I think they could find their place in other types of stores in our city.”
 
Commissioner Mark Samuelian weighed in saying “I do have some sympathy on fairness. Directionally I’m comfortable with the policy and I can see the argument that many of our residents may not want a Walgreens there. But, as a point of fact, if Walgreens is gonna invest all this money to put it there, they must believe someone wants it there, that someone’s gonna be shopping in this environment and that there is a need. Maybe it’s not residents. It could be tourists or visitors. Either they’re making a really, really bad decision or some consumers see value in having it there.”
 
“The second thing I would say is really around fairness,” Samuelian continued. “I obviously trust our advisors and City Attorney on the legal side, so I’m not sure where that line is in terms of where you get to keep going [with plans]. My sense is we’re pretty close to it from a fairness standpoint.”
 
“We may not love the prospect of a standard Walgreens,” Samuelian said, “but If this doesn’t happen, are we going to have an empty storefront? What’s gonna happen? We talk about retail vacancies. This looks like it could go in, not sure of the timeframe. How quickly if they’re not allowed could a new deal be put [together]? When does something come in? What’s that process look like? Are we going to be here six months talking about more empty storefronts when there was a tenant who could have been there? So, I’m intrigued by Commissioner Arriola’s thought of looking at uses but, while I support the policy, I share Commissioner Alemán’s concerns around fairness for this one applicant.”
 
“It’s not just this, because we had it with MedMen and I suspect we’ll have it with others,” Arriola responded. “When we hear about Certificate of Appropriateness [granted by land use boards], what exactly did we say was okay? So, if we say ‘Yes, retail is permitted there’ and then we have the lawyer come in who said, ‘You said Walgreens was okay'... That’s not exactly what we said okay to.”
 
“So, let’s make sure that we always have the exact facts because this issue of equitable estoppel really was at the top of my mind before I even sponsored this,” Arriola said. “I checked with Tom [Mooney] and Raul [Aguila] to make sure this was okay because I wouldn’t want to sponsor something that was unfair to someone, but based on my briefings we did not know that it was going to be a Walgreens convenience store until very, very late in the game. The fact that they had a lease between two private entities four years ago, that’s of no business or concern to us. You could sign a lease on your business today that until it comes before the City we would have no way of knowing that they were signing a lease and it’s very telling that residents strongly support the policy that we were sponsoring and even the Lincoln Road BID is supportive of this. We’re being asked to invest $50-70 million on Lincoln Road. Let’s keep that in mind.”
 
Gelber wrapped it up. “From a policy perspective, I agree with my colleagues…. Secondly, on the legal, I think we have to defer to our professionals who say this is a defensible position. On the fairness one, frankly, there is a fairness issue here but I’m not sure that it rises to overwhelm the policy directive. I think Commissioner Góngora aptly said, if it’s in the best interest of our residents and somebody feels slighted I think that’s something we, you know, it’s hard to say we’re gonna not do what we think is best for the City in that moment.”
 
The ordinance passed unanimously on first reading but several Commissioners asked for further discussion of the applicability to Walgreens on second reading in April.
 
Postscript: The fact that the tenant was Walgreens was known to the City last summer. 
 
In his statements to the Commissioners, Mooney did not say the City was not aware the tenant was Walgreens. He used the term “convenience store” when saying the City was not aware that would be the use. 
 
RE:MiamiBeach obtained a copy of the building permit application which was filed with the Miami Beach Building Department on July 30, 2018 by 947 Lincoln Road Holdings. Under description of work it reads “Build out of new Walgreens store inside existing shell including complete demo. Exploratory Demolition, Demolition, Build-Out of Walgreens Retail.”
 
According to the City’s Finance Department, a check for $25,613.60 for permitting fees was paid on August 10, 2018. The check was from the Walgreens Family of Companies.
 
We asked if having the check from Walgreens impacted the opinion of the defensibility that Walgreens would not be allowed to occupy the space. A City spokeswoman responded, “We cannot comment on pending or potential litigation.”
 
Arriola said he first became aware the tenant was Walgreens in January of this year. “I heard a rumor and then apparently it was substantiated when we put this on the Commission agenda because their lobbyist came in protesting.”
 
Asked if the date of the check changed his mind regarding applicability to Walgreens, he said, “We’re told by our legal team that our actions are proper and legal so it doesn’t change my mind.” We did not have a copy of the building permit when we talked to Arriola.
 
The question may then come down to whether the proposed 14,000 square foot Walgreens met the definition of “convenience store” at the time of their application: “…containing less than 6,000 square feet of floor area that is designed and stocked to sell primarily food (packaged and/or prepared), beverages, newspapers, magazines, and other household supplies.”
 
Second reading will be at the April 10 Commission meeting.
 
Rendering: Zyscovich Architects

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