It's back to the drawing board for at least part of Menlo Gateway. The project remains a concept three years after voters approved it in 2010, and in the face of a changing economy, developer David Bohannon plans to make some adaptations.
The plan is to build an office-hotel complex with nearly 1 million square feet of floor space on 16 acres along Independence and Constitution drives on the east side of U.S. 101. In addition to a seven-floor hotel, there would be office buildings, a restaurant, parking garages and a fitness club.
Mr. Bohannon told the Planning Commission on Dec. 16 during the annual project review that his company was "talking to somebody about the hotel and hopefully we'll reach an agreement with those folks soon, and then we can move forward."
But what will that hotel look like? Originally Menlo Gateway was going to incorporate a type of Marriott Renaissance hotel-sports club combination, but according to Mr. Bohannon, that ran into some problems, for a couple of reasons: The model "did not really take hold and capture the fancy of institutional financing"; as a result, Marriott has abandoned it. Also, funding for hotel construction has been "extremely limited since 2008" and full-service hotels are still not favored by lenders, he said.
So about nine months ago Mr. Bohannon also decided to walk away from the concept and start looking for hotel developers who had the ability to finance their own deals. "...We're down to final discussions with someone who's extremely capable, and once we're reached an agreement with them I'll be able to be much more forthcoming about a change we want to introduce. So we will be back asking to modify the permit."
Planning commissioners expressed encouragement for the success of the project, and curiosity about the changes, which for now remains unsated.
Mr. Bohannon described the change as "a very tough decision" and noted, "As much as I love you all, I'm not in love with coming back and having to go through that whole process again."
The hotel represents a key aspect of the development to Mr. Bohannon, who said he can't build it without also building the office space that will pay for the hotel's essential parking garage. Once the hotel financing is secured, he can then market the office space in hopes of securing 60 to 70 percent lease commitments to kick off funding for construction of the entire complex.
He remains optimistic. "We have so much interest in the project (that) I believe it will be successful."