September 12, 2006 > Dr. Treadway
TCV: What is the current status of the frontage property?
Treadway: Previously these parcels were declared "surplus" and the Sobrato Corporation was chosen to negotiate the financial terms. Now we are in the process of asking the board to issue a letter of intent, formalizing those negotiations and opening bids to any interested developer. The letter of intent is non-binding with Sobrato; it gives me the authorization to make a formal and public announcement of terms for any bids. There have been six months of negotiations leading to this and have reached mutually agreeable conditions in closed sessions. It is not anticipated that this will result in any agreements until next year.
TCV: Has any formal decision been made on what type of development will be allowed on each parcel?
Treadway: The request for bids will state the type of development for each parcel. This will follow the outline worked out with Sobrato; about 400 residential units and 60,000 square feet of retail. What was desired in the original request for proposals will probably be carried forward including a high-end grocery store, college amenities and housing including facilities for active adults. These are desired, but not an absolute requirement.
TCV: Are these parcels for sale or lease?
Treadway: About 20 acres of frontage will be long term leased, probably 60 years. There is an additional 17 acres of hillside proposed for sale but has been set aside, The board decided to hold that property in abeyance.
TCV: Will playing fields be moved?
Treadway: One of the parcels includes the current soccer field, the maintenance building and some parking. This was in the original master plan approved by the board. The baseball and soccer field were to be relocated. There have been some additional discussions since that time to locate the baseball field to the Newark campus.
No matter where we locate the baseball field, the question remains of where we will get the money to build it. The money would come from a prepayment of the lease by the developer. In concept, a participation lease would allow the college to receive an initial lump sum up front and the more profitable the developer is, the faster it would pay off allowing another lump sum payment and possibly a third within the 60 year lease period. We are a partner in the lease, but our risk is minimal since we get immediate funds to do what we need to do.
TCV: If all goes smoothly, when would ground be broken to build on these parcels?
Treadway: Somewhere around 18 months to two years. The time-consuming portion will be to go through the city processes to get the proper permits.
TCV: Is there any relationship or impact by this process on the Newark campus?
Treadway: Since the Newark campus will open in January '08, any disruption of classes or facilities on the Fremont campus in that calendar year could be absorbed at the other campus. If the baseball field is relocated to the Newark campus, monies from the lease prepayment could be used to build that facility.
With the loss of the maintenance building, we might end up with two buildings, one at the Newark campus and another on the Fremont campus. With rising construction costs, we have removed a maintenance building originally planned for the Newark campus.
TCV: With rising construction costs, will lease rates or terms be affected?
Treadway: The way we have heard this discussed, this project is more residential than retail. The residential market is still increasing and profitability is still there; on the retail side, high-end stores are being discussed. Rising costs of materials and labor mean that we need to take advantage of opportunities quickly or face severe increases in construction expense.
We had a budget of $3 million to repaint the Fremont campus. The cost is now $18 million and who knows what it will be in five years. We have a sense of urgency for getting on with this since every month or year that goes by, costs escalate. The bulk of the money from the frontage property will go to this campus for capital improvements. Already there are many things have fallen off the bond measure (Measure A) and more will be gone by the time we are done. Those expenses will be picked up by these funds.
There are also $40 million of deferred maintenance costs of which we have no funding. At some point, within ten years, we will need another bond measure. This will help to show the public that we have done everything we can within our own capacity to pay our costs although it will not be enough. The DeAnza/Foothill Community College District has gone to the voters twice in the last five years, much of it for deferred maintenance. I have suggested a land trust for the parcel in abeyance and allow funds to flow annually to handle some of the deferred maintenance. We are fortunate to have these alternatives through use of frontage property. Without use of these assets we will always be on a huge roller coaster that we can never get off.