Jay Paul Looks to Climb ‘Tall Tree’ in Palo Alto

By Sharon Simonson

San Francisco-based Jay Paul Co. has filed a request with the city of Palo Alto to allow the office developer and landlord to build more than 300,000 square feet near a highly trafficked corner not far from a Caltrain station.

The development company, best known regionally for its big bets on Sunnyvale’s Moffett Park, is seeking city interest in allowing it to redevelop a portion of 395 Page Mill Road, said Curtis Williams, Palo Alto director of planning and community development.

The property is known informally in commercial real estate circles as the AOL Inc. site, a moniker stemming from its high-profile tenant.

Jay Paul bought the 225,000 square-foot building and not-quite 10 acres of land in mid-2006. They are a block and a half from bustling El Camino Real and boast the well-regarded “Page Mill Road” address. AOL occupied as a subtenant of Google Inc., which leased the building but never moved in.

Jay Paul seeks to add two, 56-foot, four-story buildings and two levels of underground parking. The site’s proposed density would be three times what the city’s current zoning code contemplates. In exchange, the developer is offering to construct a $27 million shell building and related parking for a new 45,000-square-foot public-safety station, Williams said.

“The argument that the applicant is making in support of the project is that it is proximate to the Caltrain station, and office users would have access and not have to drive cars,” Williams said. The site is four blocks south of Palo Alto’s California Avenue Caltrain Station, according to Google maps.

“But the whole proposal is well beyond what is allowed by our Comprehensive Plan and zoning, so they are coming in with a planned community [application], which provides public benefits: the police building that we have been trying for years and years to build,” Williams said.

Based on that potential as well as other factors, the application marks a possible turning point in the land-use evolution of a commercially prominent Palo Alto intersection.

In late June, after a process that lasted more than a decade, the city council approved development of 82 apartments above nearly 50,000 square feet of research and development space on a site once zoned for manufacturing and designated for light industrial. The new, three-story building at 195 Page Mill Road would be across the street from AOL. The developer is Harold Hohbach and Hohbach Realty Co. LP.

“The marketing idea is that mixed-use means something is going on all of the time,” said James Janz, an attorney in San Francisco with Sideman & Bancroft LLP who represents Hohbach.

“We have talked to surrounding businesses, and we have talked to AOL, and its facilities director was thrilled. They want to rent some residential units so folks have a place to stay, and if their start-ups get too big, they can locate there,” Janz said.

Groundbreaking is expected later this year, and the project should be completed in 2014.

Meanwhile, Hohbach has a second application pending before the city to allow eight housing units in two stories above ground-floor retail on a site that is a quarter mile away. And a third application from MF Sherman LLC proposes housing on the top two floors above two stories of office and commercial uses at 385 Sherman Ave. The location is about a third of a mile from the AOL campus. That building application has not progressed for a year, however, according to city documents.

The Palo Alto project is one of the few his company is pursuing outside of Moffett Park, Jay Paul Chief Investment Officer Matt Lituchy told an informal gathering of the Urban Land Institute on Aug. 1 at the company’s Moffett Towers campus. “I am confident we will get approvals” in Palo Alto, Lituchy said. But it “is taking a lot of time and resources.”

The developer estimates the city would have to invest an additional $18 million to finish the interior of the public-safety building, including information technology and cabling, Williams said. The sum includes money to pay a proportional part of the expense of a proposed parking garage that would be shared with the office users.

The Palo Alto City Council is expected to “pre-screen” the Jay Paul application at its Sept. 10 meeting, the planning director said. The goal is to decide if the city or the applicant should expend the resources for a full application and project review based on initial reaction from council people. Preparing the environmental impact report alone would cost “hundreds of thousands of dollars,” he said.

“It’s hard to argue that the public benefit isn’t compelling. But is it an equal trade, the tripling of the square footage on that lot versus what our code will allow? Those are the questions we will deal with before we start moving it through a larger review,” Williams said.