Santa Clara’s City Council has approved The Irvine Co.’s plans to build almost 1 million square feet of office space in a six-building, $150 million project on city-owned land along the city’s western edge.
The Newport Beach-based developer proposes constructing enough office space on Great America Parkway at Highway 237 to encompass 20 football fields.
“It is as important as the Intel campus is on the Montague side,” said assistant city manager Ron Garratt. “It is a focal point; you really want to do it right.”
The project has been three years in the making, but on April 25 five of the seven city council members (two were absent) approved the terms of an agreement to lease 42 acres of city-owned land to Irvine for 75 years.
Irvine plans to build 911,115 square feet of office/R & D; space in six, six-story buildings at an estimated cost of $150 million. Depending on the tenant mix, the space could accommodate 2,000 to 3,000 employees.
Spec Construction Atypical
Although the company does not usually build speculative projects, it is willing to start the first building before a tenant is signed, said Dick Sim, president of the Irvine Co.’s investment properties group. The company plans to configure the buildings to meet the needs of varied tenants.
The Irvine Co. also is building the McCarthy Center in Milpitas,19 two-story buildings on 68 acres along the 880 Nimitz/East Bay freeway, just north of Route 237. Cisco Systems Inc. already has signed a lease for 10 of those buildings, or 572,000 square feet. So far, the company has completed four of the 10 buildings Cisco will occupy.
In Santa Clara, the Irvine Co. intends to start by designing three of the six buildings and, depending on the market, build them in phases. Infrastructure for the site should be in by November, after which it would take 15 to 16 months to get the buildings up.
Spectrum Helped Win Bid
In 1997 the city circulated a request for proposals for the site and got more than a dozen inquiries from across the country. The Irvine Co. was selected in late 1997, based on its economic package and the success of its existing projects.
The Irvine Spectrum,a 5,000-acre development with 2,200 business tenants,impressed Santa Clara City officials, Garratt said. “One of the reasons we have so much confidence in them is that they have so much leasing capability,” he said.
This new project has been complex. The 42-acre site is adjacent to the closed city landfill on which the Santa Clara Golf & Tennis Club was built. The city had to move two golf holes to make room for the Irvine Co.’s project. The city also had to mitigate for burrowing owl habitat and finish the landfill closure.
The city has placed a $3.8 million cap on the cleanup. If the cost goes beyond that, the city has the right to negotiate with the Irvine Co. about the added expense. That could mean a piece of the 42 acres will be taken out of the deal so the city can capsulate the waste and bury it there, rather than shipping it off-site, which would be much more costly, Garratt said.
The city purchased about 600 acres in the area for the landfill in the mid-1960s. Of that, roughly one-third is leased to entities such as Paramount’s Great America Theme Park, the San Francisco 49ers, the Westin Hotel and others. The Santa Clara Golf & Tennis Club leases more than 170 acres.
Under the Irvine Co. lease, not only will Santa Clara receive $7 million a year in rent for the 42 acres, it also will get an estimated $2 million a year in property taxes.
And if companies locate their marketing staffs and headquarters at the site, the city would receive substantial sales taxes, along with transient occupancy taxes as a result of business travelers staying in local hotels, Garratt said.
Long-Term Development
The rent will kick in seven months after the city finishes preparing the site for development, which is supposed to happen in the fall. The Irvine Co. then will have 13 years to develop the project. It hasn’t set a completion date.
LPA Inc., Irvine, will most likely do the architecture, but no contractor or real estate brokerage has been selected yet, Sim said.
The Irvine Co. will construct the buildings in a park-like setting surrounding two central courtyards roughly the size of football fields.
All parking will be at the surface level, and the buildings will be flexible to accommodate all types of tenants.
Until 1995, the Irvine Co. concentrated on its 60,000-acre Irvine Ranch property in central Orange County. But three years ago it began expanding into Silicon Valley and San Diego.
Now it has 2 million square feet of office and R & D; buildings and 1.5 million square feet planned or under development in Silicon Valley. In San Jose, the company also has 1,000 apartments either completed or under construction and plans to break ground on 2,000 more by year-end.
“We’re not only bringing the jobs, we’re providing the housing,” Sim said.
The Irvine Co. builds its properties as long-term investments.
It has 26 million square feet of office, industrial and retail properties and 21,000 apartments in Silicon Valley, Los Angeles, Orange County and San Diego.
“Our business is to build income properties and to hold them for the long term,” Sim said. “We’ve never sold a building.”
Graebner is a staff writer at The Business Journal, San Jose.
