Palo Alto Tells Jay Paul To Go Forward with Page Mill Development

By Sharon Simonson

Enticed by the chance to gain a $26 million down payment on the construction of a long-sought police station, the Palo Alto City Council has encouraged developer Jay Paul Co. to push forward with a plan to add more than 300,000 square feet of offices at an already-congested Page Mill Road address.

If allowed, the new development would more than double the existing square footage at the so-called AOL Inc. campus site near the southeast corner of Page Mill and El Camino Real.

But if a deal were worked out, based on the current early framework, the new development would come with a substantial community benefit: the completed shell of a new public-safety structure, something council people have discussed for years.

The council direction came Sept. 10 in a first-ever council “prescreening” of a major development proposal. The session, which did not permit formal council votes, was intended before all else to be a forum for the council people to alert the developer if they had no interest in the ideas, saving staff time and the developer money.

But after more than three hours of discussion, the nine-member City Council agreed that Jay Paul should press forward with the proposals, being mindful of surrounding single-family housing, the long shadows cast by too-tall and bulky buildings and the near gridlocked traffic conditions in the area during peak commute times.

“I think this is an exciting concept, and we should move forward. Whether it is acceptable or not is not clear. When we have a proposal like this we have an obligation to vet it and see if it works,” said Larry Klein, a long-time city council member who has served as both city mayor and vice mayor.

At the same time, Klein said, “I think we have a serious problem” with existing traffic at Page Mill and El Camino Real.

Jay Paul is seeking city permission to redevelop the nearly 10-acre site, where the San Francisco developer and landlord owns an existing building with not quite 220,000 square feet where AOL has offices and incubator space.

It seeks to build two additional office towers, each with 154,000 square feet and both more than twice the currently allowable 35-foot height limit, including rooftop mechanical equipment. The ratio of building to land would rise from half-a-square-foot of building for every foot of land to nearly 1.25 square feet of building per square foot of land.

Besides underground parking, the developer proposes to donate a neighboring 1.4 acres where it would construct the public safety building and an attached garage with parking for both police and the offices. At 61 feet, the public safety building and garage would also be 25 feet taller than the current city height limit for the site.

The office-property site is within walking distance of California Avenue, a lively but older retail and restaurant strip that the city seeks to rejuvenate. All are adjacent to the California Avenue Caltrain station.

Council member after council member thanked the developer for the time and dollar investment to date.

“We appreciate the out-of-the-box proposal. It has merit, and it is interesting to explore,” said Council Member Gregory Scharff.

Yet he cautioned that the office project had to stand on its own, separate from the community benefit conferred by the new police station. “I don’t want a suburban office park with a cafeteria inside. We want people to leave the office buildings and to go to California Avenue and shop,” he said.

The developer assured him there were no cafeteria plans.

Palo Alto has been at the epicenter of the technology recovery since 2010, and commercial property values and rents have soared. The town has seen a notable uptick in new construction, with projects downtown and along the El Camino Real corridor, especially as it approaches Mountain View, another hot Peninsula property market.

AOL is in the Page Mill building on a sublease from Google Inc. AOL in turn sub-subleases space to Playdom Inc., a social gaming company bought in June 2010 by The Walt Disney Co., and Medallia Inc., a customer-experience management company. Some space is also being used by AOL to seed high-tech start-up companies in which it invests. It also has set aside some space for Stanford University students to work on projects.

The Jay Paul proposal highlights a conundrum facing the city: development pressure seems to be outrunning planning capacity.

The Jay Paul site is among the larger in a roughly 40-block area where the council already has a detailed planning review underway. That review does not come before the council’s Planning and Transportation Commission until this fall, said Planning and Community Development Director Curtis Williams.

At the same time, the council is on the cusp of receiving two new reports, one on the Caltrain rail corridor and a second on the infrastructure needs of the broader community.

“The [California Avenue Concept] Plan is the one that most directly affects land use,” Williams said. “It looks at a variety of mixed-use alternatives in the area south of Page Mill Road.”

The concept plan includes the city blocks south of California Avenue between El Camino and the Caltrain tracks, past Page Mill Road to the Fry’s electronics store site. The area is fully built out, but lot sizes tend to be irregular and the development is a broad mixture of types from big-box retail to small stand-alone commercial buildings.

As a public benefit, the Jay Paul Co. is offering to provide the land and to build the structure and exterior shell for a public safety building. The developer estimates the value of its contribution to the city at $26.7 million. The 1.41-acre site at 3045 Park Blvd. is worth $9 million, the developer says. The city’s cost to complete tenant improvements and provide parking is a projected $20 million, including $2.7 million for information-technology cabling and equipment.

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