SRI rebuilding plans on hold SRI rebuilding plans on hold (January 29, 2003)

** Research facility will withdraw proposal, plans resubmission, says CFO.

By Pam Smith
Almanac Staff Writer

Like many people in Silicon Valley, a nonprofit research park in Menlo Park has decided that it must put its ambitions to renovate on hold for a while due to the dismal state of the economy.

"We have been affected the same as everyone has been affected," said Thomas Furst, senior vice president and chief financial officer, explaining why SRI International has decided to formally -- and temporarily -- withdraw its requests for the city to allow a $250 million to $400 million campus renovation.

Applications for a development agreement and a modified conditional development permit will be formally withdrawn in the next four to six weeks, and SRI plans to resubmit in 18 to 24 months, said Mr. Furst.

"Nothing has changed about SRI's fundamental requirement. We still are living in a campus where many of the buildings were built shortly before, or shortly before the end of, World War II," said Mr. Furst. "We need to rebuild our home."

SRI proposed in 1999 revamping of much of its research park, which lies between Middlefield Road, Ravenswood Avenue and Laurel Street. The demolish-and-build plans included reducing the number of total buildings, adding more floor area, and creating a small housing development on the perimeter of the campus.

SRI has planned to finance the 10- to 15-year project with a combination of cash from its own ventures, and borrowed money through bond issues, said Mr. Furst.

Though long-term interest rates are favorable for borrowing right now, and SRI's annual revenue is estimated to have grown by more than 10 percent last year, the values of stocks SRI owns in its spin-off companies have dropped off substantially, said Mr. Furst. "The stock market has been universally brutal, almost, to young technology firms."

The value of SRI's portfolio peaked at "several hundreds of million of dollars" during the boom, but has since fallen by about two-thirds, said Mr. Furst.

Nearly a year ago, SRI decided it needed time to reassess its financial plans in light of the changing economy, and reconsider its security needs in light of the terrorist attacks of September 11, 2001, said Mr. Furst. It asked the city to put environmental review of the proposal on hold for four to six months.

When it became apparent that a brief hiatus wouldn't be adequate, SRI began talking to city staff last fall about withdrawing its application, with an eye on resubmission, said Mr. Furst.

SRI doesn't want to lose the work that's gone into extensive discussions with the city, neighbors and other stakeholders in the project in recent years, Mr. Furst emphasized.

"We intend to build on that going forward," he said. "We don't intend to reset the clock."