CHARLOTTE 4601 Park Road, Charlotte, NC 28209 T. 704 372 5616 F. 704 372 9882 CARY 117 Edinburgh S Drive, Cary, NC 27511 T. 919 461 3950 F. 919 461 3939 WINSTON -SALEM 500 W 5th Street, Winston-Salem, NC 27101 T. 336 923 7650 F. 336 777 0624 ATLANTA 47 Perimeter Center East, Atlanta, GA 30346 T. 770 604 3387 F. 770 604 3959 grubbproperties.com
Grubb Properties, LLC
4601 Park Road, Suite 450
Charlotte, NC 28209
March 06, 2025
Jonathan Lait, Director of Planning
Planning and Community Environment Department
250 Hamilton Avenue
Palo Alto, CA 94301
[email protected]
RE: Pre-Screen Application for 788 San Antonio Road Project
Dear Mr. Lait,
On July 27, 2022, Grubb Properties acquired the pro perty located at 788 San Antonio Road with an exist ing entitlement in place for that certain 102-unit hous ing project that was approved by City Council on 11 /16/2020.
Since that acquisition, Grubb made a good faith eff ort to see that project through as entitled and sub mitted the building permit application that December 2022. In April 2023, we made the tough decision to put this project on hold as it was no longer economically viable. This was the result of three key factors:
1. Extreme Rate Hike in Park Impact Fees that went int o effect in 2022. This project’s feasibility and subsequent design were decided at a time when these fees were at the highest $4,116/unit ($419,832 total).
In 2022, the new rate hike went into effect increas ing the rate to $42,468/unit ($4,331,736 total). Th ese fees are now $48,302.43 per unit, representing an increase of $4,507,015 on this single impact fee.
2. Worsening Economic Conditions in Construction Costs. In the aftershock of Covid, construction escalation jumped to 14% in 2021 followed by 15.8% in 2022 - t he highest escalation on record in decades. On top of the unprecedented escalation, The Fed has sustained it’s high-interest rate policy making the cost of capital for housing projects prohibitively expensive.
3. Structural Design Modifications for Sub-grade Parki ng. As the team progressed through the permitting phase of the existing 102-unit project, the structural design of the subgrade parking garage was required to be enhanced to accommodate the groundwater conditio ns present. While this parking was originally budgeted at $70,000 per stall, a typical cost for subterranean parking, the required structural modifications increased the cost to $110,000 per stall. With 126 parking stalls, this represents a $5,040,000 increa se to cost.
grubbproperties.com
Grubb is submitting a new project application that responds to these factors outlined and represents a feasible housing project in the year 2025. Increased building height, increased FAR, and reduction to parking ratios are the core aspects of the modification requested. Despite Builder’s Remedy being an available avenue for us, Grubb never felt this was the appropriate pathway for our project as our intent is to move forward in partnership with Palo Alto.
As you begin the process of crafting the San Antonio Road Area Plan, our intent is to work in collaboration with you for the broader vision of this area while upholding our needs as a Stakeholder in its future. We understand that this project requires bold change from the City of Palo Alto; however, the requested changes are deeply rooted in our shared commitment to contribute meaningfully to the Housing Goals of this community.
We look forward to bringing 788 San Antonio Road back to life.
Sincerely,
Megan Watson
Senior Director, Grubb Properties
[email protected]
CC: Ted O’Hanlon, Consulting Project Manager
Project Description - 788 San Antonio Road
Scope - The request for the City Council Pre-Screen is to review an updated 168 rental unit plan, with 8 floors above grade consisting of a 2 story podium of mixed indoor parking with 73 car stalls, amenities and residential units and 6 U-shaped floors on top of residential units providing an open court yard in the middle, with maximum heights of 85'-0".
Uses - The property currently has 2 vacant commercial/light industrial buildings on a 1-acre parcel. In 2020 the property was approved to build a 50’ high multi-family project with 102 total units on 4-levels and a 2-level subterranean garage. The proposed use of 68 units would consist of (31) 2-bedroom/2 bath units, (90) 1-bedroom units and (47) studios. As required by the City, 15% of these (25 units) will be designated for Below-Market Rate qualified users or an in-lieu fee would be paid.
Purpose of Change - The 788 San Antonio Road project was the “catalyst” project for the Housing Incentive Program (HIP). The project was approved in 2020 using the HIP program from 2019, which presently is no longer feasible due to several market changes:
• Increased construction costs (materials, labor, and below-grade parking) • Higher interest rates that create more significant financing burdens • Significant increases in Developer Impact Fees implemented in 2021, for example, park impact fees increased 10x
• The need, call and demand for more housing in a new housing element cycle with new state laws promoting housing development as well as Palo Alto’s own focus on housing Design, Materials, Landscaping, Lighting – The 2020 project was approved for 102 units by Palo Alto Architectural Review Board including a final Subcomittee review. While the new project proposes more units, height and above grade parking, the intent of the project is to maintain the approved design intent, materials, colors and construction methods.