By Carolyn Schuk
A plan to restore an urban center to Santa Clara will stay on hold at least until mid-summer as potential developers wait for the uncertain credit and real estate markets to stabilize.
One of the two companies invited to bid on the project declined to participate. The other, while remaining enthusiastic, says that current economic conditions make it impossible at this time to develop accurate financial projections for the projects by the RFP deadline. These projections are necessary for construction loans as well as providing the project's budget.
The project has been under discussion since 2003 when the City Council made downtown revitalization a top priority. In 2006 the City issued a Request for Qualifications to about 40 developers, six of which responded.
Two were invited to submit proposals -- SummerHill Homes/Highland Development Company and the CIM Group -- based on prior success with similar mixed-use projects, project team working experience, and financial strength. Currently, Summerhill/Highland is the only project bidder.
"Both companies have very strong track records," explains Assistant City Manager Ron Garrett. "Their project teams were cohesive, they had worked together. One of the problems with other teams was, literally, they were meeting for the first time. They hadn’t worked on a project."
Mixed-use development presents many more challenges than residential development alone. "You have to have serious interest on the part of retailers, and we don't have that," explains Garrett. "The retail has to be successful – you can't have people living above papered-off windows."
Developer enthusiasm for new retail projects is also likely to be chilled by the ongoing legal fight between Cupertino Square shopping center (formerly Valco) and its lender Gramercy Capital. Earlier this month Gramercy moved to take control of the shopping center, claiming it had been mismanaged and wasn't worth outstanding loans, according to reports in the San Jose Business Journal.
Garrett says that the City hopes to get the proposal moving again in July. "We'll see what's going on and what the retail community is saying," he says. If conditions don't stabilize -- or worsen – the City Manager's office will evaluate the situation and review alternatives.
You can read more about the downtown project and the history of Santa Clara's MIA downtown, look up Putting the "There" Back: Downtown Revitalization Q&A, March 17, 2007 and Downtown: Why There's No There, There, January 24, 2007. A May 13, 2008 City Council agenda report details current developments. Council agendas and documentation are available at the City Clerk's database, santaclaraca.gov/city_clerk/city_clerk.htm, City Libraries, and the Clerk's office in City Hall.
