|Toll Brothers, the high-flying nationally ranked home builder that was retained by Hewlett-Packard to develop a huge housing project on its 27-acre Mayfield Mall site, appears to be on shaky ground in its involvement with the project, saying it cannot build the required tunnel to the train station or pay the land price it had negotiated with HP.
Toll Brothers spokesperson Jo Price said the $6 million tunnel -- which would connect the San Antonio station to the project at 100 Mayfield Ave. by going under Central Expressway -- was no longer feasible, a sentiment that could kill the project altogether.
Three members of the City Council, Jac Siegel, Margaret Abe-Koga and Laura Macias, told the Voice on Tuesday that they would vote against Mayfield unless they were assured the tunnel will be built. It only takes three votes from the seven-member council to kill the project because Council member Ronit Bryant must recuse herself due to her husband's employment with HP.
Toll Brothers expects to have its last City Council hearing on the 495-unit project Dec. 9. So far only the 42 single-family homes around the perimeter have been approved; 408 more homes await the green light in Mountain View, while Palo Alto is expected to approve 45 additional homes Dec. 8.
Apparently due to financial pressure, Toll Brothers has recently elected not to exercise its final option to buy the property for the price it negotiated with HP. Instead, the company wants to reassess the property's value next year, a move that would appear prudent to stockholders, Price said.
Reflecting the housing industry's decline due to lower home values, the financial crisis and a lack of credit in the economy, Toll Brothers' stock price finished at $20 a share Monday. It peaked at $57 a share in 2005.
"Hewlett-Packard is not going to get what Toll was willing to pay for that site five years ago," Price said.
Although Toll Brothers has not placed a total value on the project, using a conservative estimate of $700,000 average retail price per unit, the Mountain View portion alone could bring in $350 million or more before expenses. The last negotiated price of the land remains undisclosed, but appraisers had estimated several years ago that the site was worth $80 million.
Price said Toll Brothers has spent five years and millions of its own dollars to plan the project, often in the face of major neighborhood opposition and, after the 2006 election, a recalcitrant City Council. The new (and current) City Council voted to decrease the size of the Mountain View portion of the project from 578 units -- the number originally called for in the 2005 gatekeeper request -- to 450 units today. The unusually long planning and approval process involved about 30 meetings.
"Toll decided not to go with the project at the negotiated price," said Council member Jac Siegel. "Hewlett-Packard said 'We'd like to hire you to go ahead and get the entitlements. We want to get the OK to get the units' -- which makes the land more valuable for HP. Toll may or may not do the project."
Price denied that Toll was simply going through the motions in getting entitlements for Hewlett-Packard.
"We've been getting calls [from Monta Loma residents] asking, 'When is it going up for auction?'" Price said. "We want to see this through the long term. We're still building on the Peninsula while others have closed up shop. That says a lot."
Tunnel a stumbling block
"The tunnel is just not going to work at the moment," Price said, citing a feasibility report commissioned by the city which she says was based on incorrect information about the location of the existing tunnel under the tracks.
"The city paid $150,000 for that report and it's fundamentally flawed," she said. "That's money down the drain."
Council members said the city stands by the report, and many members had strongly advocated for the tunnel earlier this year as a requirement, saying the project would not be transit-oriented "smart growth" without it.
"A tunnel that connects residents to transit is a smart growth principle that must not be waived because of developer whim," said Council member Laura Macias in an e-mail.
The impression many City Council members have is that Toll Brothers is no longer the developer -- and the project will be up for grabs next year.
"If Toll can't do it, Toll can't do it," Abe-Koga said. "I'm not sure HP has decided on Toll as the developer."
City staff members were told several weeks ago that HP would take on a larger role in the project, said city planning manager Aarti Shrivastava.
Still, Price said, "Our goal is still to purchase the property. Hewlett-Packard is hoping we will. We just need to be prudent in these unchartered times. Plenty of projects up and down the Peninsula and the Bay Area have been killed. And that's because these deals are just not penciling out. Sales are slowing down to even a standstill -- that's what hurts a lot of builders."
Despite the ongoing credit crunch, Shrivastava said Friday that Mountain View's planning department is still seeing a lot of activity.
"People are still pulling permits and planning applications," Shrivastava said. "Small developments have gone down a bit -- people might be proceeding a little cautiously."
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