News

'Workforce housing' project in limbo because of dispute with neighbor

Developer bristles at demand from neighbor for $750K in 'tieback' fees

The Palo Alto City Council approved on June 5, 2018, a proposal by Windy Hill Property Ventures to build a 57-unit housing development at 2755 El Camino Real. Now, the project is in limbo because of Windy Hill's disagreement with a neighboring property owner. Rendering by BDE Architecture.

When Palo Alto approved in June 2018 a proposal for a 57-apartment development on the prominent corner of El Camino Real and Page Mill Road in Palo Alto, members of the City Council lauded it as both an important boost to the city's anemic rate of producing housing and a critical experiment with "workforce housing."

But now, having spent years clearing the necessary political and zoning hurdles, the development by Windy Hill Property Ventures is in danger of faltering because of an unexpected obstacle: a neighboring property owner who has demanded $1 million in exchange for the right to extend "tiebacks" under its building, according to emails obtained by the Weekly.

Welltower, the Ohio-based real estate company that specializes in health care facilities and senior housing, informed Windy Hill in late July that it is concerned about the company's proposed use of "tiebacks" — horizontal rods that get drilled into the soil to stabilize retaining walls for construction — for shoring at the new housing project. Welltower, whose properties include Sunrise Senior Living at 2701 El Camino Real, argued in a series of letters that the tieback scheme poses a "risk" for the senior community and that the company should be compensated for that risk.

Initially, Welltower had asked for $1 million, or about $67,000 for each of the 15 tiebacks. After some negotiating, it reduced its demand to $750,000, or about $50,000 per tieback, and requested that Windy Hill perform additional analysis to revise its project plans. The request appears to have surprised Windy Hill, which wasn't aware of Welltower's concerns until this past summer, more than a year after the project won the city's approval. It has also left Windy Hill scrambling to review its engineering plans and to seek help from the city.

The City Council only recently learned about the hiccup, which Councilwoman Liz Kniss alluded to on Sept. 23, when the council was discussing new reforms to encourage housing. The project has already benefited from significant assistance from the council, which created a new zoning designation last year specifically to make the development feasible.

The site was previously zoned as "public facility" and previously was used as a parking lot by the Santa Clara Valley Transportation Authority. The council voted in June 2018 to rezone the site to create the city's first "workforce housing combining district." The goal was to allow the construction of a housing development with small apartments that could be affordable to local employees.

The city has also tried to mediate the dispute, with little success. The approval process specifically states that shoring for basement excavation, including tiebacks, "must not extend onto adjacent private property or into the city right-of-way without having first obtained written permission from the private property owner and/or an encroachment permit from Public Works."

This gives Welltower significant leverage over Windy Hill in potentially delaying or stopping the project, leverage that Windy Hill acknowledged in its correspondence with the neighboring property owner.

Last month, Planning Director Jonathan Lait wrote a letter to Nicholas Rumanes, Welltower's head of development, expressing the city's desire to see new housing and its disappointment in seeing the project held up. Days later, however, Lait concluded in a separate email to Windy Hill that the dispute is a "civil matter between two parties," with no role for the city to intervene — a position that Windy Hill described as "disappointing."

Windy Hill has already agreed to fulfill several demands from Welltower, including provision-of-reliance letters from engineers explaining potential impacts of the tiebacks on the neighboring site and increasing insurance coverage from $10 million to $50 million. But Tod Spieker, co-founder of Windy Hill, indicated that his company is willing to meet these conditions but cannot pay the $1 million that Welltower had demanded in a July 30 letter from Laura Bartos, a Welltower executive.

Bartos wrote to Spieker that the Sunrise property is a "high-profile asset for us" and that the company isn't "comfortable with the risk and disruption of tiebacks."

"To compensate for that, we are offering the $67,000 fee per tieback. Our team feels this is an appropriate starting point for negotiating a fee which takes into account the risks and impacts this process poses to our building and residents," Bartos wrote.

Spieker responded that Windy Hill doesn't have the $1 million in its budget. He also stated that had Windy Hill known about Welltower's stance in February, there would have been other opportunities to mitigate the project costs. Now, those opportunities have been taken away, and the project is in danger of falling well behind schedule or faltering entirely.

"You have total leverage over us right now, but we have nothing to offer you," Spieker wrote. "And it feels terrible to be in this spot."

Spieker also indicated that without Welltower's permission to use tiebacks, the only options Windy Hill has are to put the project on hold and redesign the shoring or to "mothball the project altogether."

"We are asking for your understanding and cooperation," Spieker wrote. "You know how hard it is to entitle and develop property, especially in Palo Alto. You expect challenges from the city and pushback from neighborhood groups but not from other developers."

In his correspondence with Welltower, Lait acknowledged the city's disappointment in seeing the project held up. The city, he wrote, has a goal of producing 300 housing units per year, and while it is not meeting the target, the Windy Hill project "gets us 57 units closer."

"I will acknowledge that I am discouraged that with all the interest across the state in providing more housing, including deed restricted housing, and with threats from Sacramento to constrain local zoning laws in communities that fail to meet their housing obligations, that we'd find ourselves in situation where we are unable to issue a building permit because two parties, both familiar with development, are unable to find a reasonable solution to a routine construction activity."

Spieker declined to comment for this story. Welltower did not respond to questions about the dispute.

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Comments

86 people like this
Posted by What a Joke
a resident of Crescent Park
on Sep 30, 2019 at 7:33 pm

Oh, how the wealthy suffer. Windy Hill, a company that has developed hundreds of millions of dollars of properties, can't afford $750,000?

And it even wanted the city to step in to help it?

The City should say "NO" in giant letters. The whole "workforce" housing idea is an abomination, backed by the pro-developer majority on the City Council. There won't be a single below-market-rate unit in the entire building, so "workforce" actually means high-paid tech workers, not those who work in our schools, hospitals, stores, and restaurants.

Frankly, I hope Windy Hill really can't afford the money, gives up, and a 100% below-market-rate project gets built there instead, like the one at Wilton Court. Now that would be great news.


58 people like this
Posted by merry
a resident of Palo Alto Hills
on Sep 30, 2019 at 7:37 pm

merry is a registered user.

That was never a good project.


17 people like this
Posted by JS
a resident of Another Palo Alto neighborhood
on Sep 30, 2019 at 7:47 pm

An alternative to external bracing for the shoring (I.e. tie backs, etc.) is for Windy Hill to internally brace the shoring. Yes, it costs more than the tie backs, but it puts the decision solely back into WIndy Hill’s control (needing no permission from Welltower. The tie backs under Welltower’s property negatively impact Welltower in an almost negligible way ( only unless Welltower redevelops their property and excavates a deep basement will they ever encounter the tie backs - which they are not going to do anytime soon because the Sunrise project is less than 15 years old and will likely last another 50-75 years).

So clearly, Welltower is just trying to reap a big windfall from Windy Hill. If it were my decision, I would opt for the internal bracing and leave greedy Welltower high and dry.


62 people like this
Posted by anon
a resident of Evergreen Park
on Sep 30, 2019 at 8:03 pm

Agree with the comments of what a joke !

Why does the article call it a dispute” between neighbors.
There isn’t any shared interest to dispute over rather one party, the developers of the VTA lot, would like to have access their neighbors property to build on and not Pay for it.!!!!

My goodness that doesn’t seem at all fair! Would you let someone build on your property for free.

The developers of the VTA lot already convinced the city council to upzone their property from a public use to private to put $$$ in their pockets and now they want even more?!?

This parcel should have been offered to and purchased by the city when it could only accommodate a public use before it was upzoned and reserved for below market rate housing.

What a racket!?!


56 people like this
Posted by The One Percent
a resident of Another Palo Alto neighborhood
on Sep 30, 2019 at 8:18 pm

[Portion removed.] So this is how the 1% do and don’t do business.

However Windy Hill thought the City should rescue it is a mystery, but wouldn’t be appropriate or likely legal. It’s in its own agreement that it had to solve the tie back issue and that’s what it must do - re-design or pay the asking price.

As for workforce housing - hardly! The headline is misleading. Of the 57 units, only 12 units are dedicated to less than market rate but are considerably higher than below market rate housing. The other 45 units are expensive studios and 1 bedrooms - not affordable micro-units as once talked about.


18 people like this
Posted by musical
a resident of Palo Verde
on Sep 30, 2019 at 8:48 pm

So tack on an extra $100/month rent (x57) for 15 years to cover the $750,000 at 4.5% APR.


33 people like this
Posted by Rookie
a resident of Midtown
on Oct 1, 2019 at 10:49 am

Please!

The developer is either extremely naive or unbelievably whiny.

This situation happens in 90% of urban infill developments. The fact that it is coming up so late in the process is due to either whiny political grandstanding or a public display of development team incompetence.

All the development team needs to do is shore the building internally (whalers and deadman) during early construction and get on with the project.

If I was a project investor, I would not be happy with this level of lack of foresight in the development team.


15 people like this
Posted by World's Tiniest Violin
a resident of Mountain View
on Oct 1, 2019 at 10:50 am

[Post removed.]


9 people like this
Posted by Mark Weiss
a resident of Downtown North
on Oct 1, 2019 at 11:36 am

Mark Weiss is a registered user.

I follow this stuff on and off and now the way I follow baseball in that just last night to a Yankees fan I was trying to remember the name of the Hall of Fame shortstop who flipped the ball to the catcher to tag out Jason Giambi and eliminate the A’s from their last playoff venture – – isn’t there in the file a letter from Jeff Morris the local well-funded developer similarly criticizing the project or did Morris flip to wellrise or whoever?
I mean if I had my parents at the sunrise and all of a sudden they’re building something outside his window I’d be kind of pissed off.
Also if you’re a residentialist and not do-whatever-the-developer-say and pretend it helps raise all boats class-wise, you’d still have to ask a piece of land zoned “public facility” the default would be something that is not being privatized for the greed of the locals oligarchs.
Mind the rod, spare the grampa.


29 people like this
Posted by Rose
a resident of Old Palo Alto
on Oct 1, 2019 at 1:31 pm

Rose is a registered user.

They should build one or two right-turn lanes on that property, previously public parking, to help move traffic onto El Camino. It should never have been sold. It’s a terrible location for housing.


37 people like this
Posted by Language manipulation
a resident of Midtown
on Oct 1, 2019 at 3:49 pm

I get suspicious when a hard nosed developer uses adorable language to describe itself, like 'Windy Hill' or 'Workplace Housing' for expensive apartments.
That is language intended to cover up what is really happening.


13 people like this
Posted by musical
a resident of Palo Verde
on Oct 1, 2019 at 4:17 pm

^ @Language, which definition of "Windy"?

-- following a curving or twisting course
-- marked by or exposed to strong winds
-- using many words that sound impressive but mean little; long-winded
-- suffering from or causing an accumulation of gas in the alimentary canal


25 people like this
Posted by World's Tiniest Violin
a resident of Mountain View
on Oct 1, 2019 at 4:56 pm

Ironically, that quote from Tod Spieker (well known and well monied opponent of tenants rights and rent stabilization) seems to describe how most tenants might feel when faced with a sudden rent hike:

"You have total leverage over us right now, but we have nothing to offer you," Spieker wrote. "And it feels terrible to be in this spot."


35 people like this
Posted by Certain sectors
a resident of College Terrace
on Oct 1, 2019 at 6:34 pm

Certain sectors is a registered user.

Certain sectors of the economy are continuing to expand their local workforce at a rate that far exceeds the ability to add new housing in an area already fully developed. Why should we be bullied into converting our cities into high-rise dormitories when it is time for companies to move on and expand in areas that can more easily accommodate their growth?


13 people like this
Posted by Dana St. George
a resident of South of Midtown
on Oct 2, 2019 at 11:33 am

I'm skeptical about the likelihood of developers doing anything significant to provide low cost housing to service workers unless the city gets seriously behind it. All employers that are expanding their workforce should be required to house their workers.

Dana St. George


16 people like this
Posted by Peace and Quite
a resident of College Terrace
on Oct 3, 2019 at 7:24 am

Welltower is 100% in the right here.

If I was Welltower, my only interest is in the protection of the piece and quite and structural integrity of their senior assisted housing residents.

The audacity and outright incivility of Spieker/ Windy Hill here is astounding. Conducting this business in public shows a clear lack of tact, maturity, and understanding.

I would not want this creep to drill under my grandparents dwelling either.

They should be ashamed.

CPA should revoke the project entitlement then sell the property to Welltower so they can construct additional badly needed senior assisted living housing.


2 people like this
Posted by Judith Wasserman
a resident of Leland Manor/Garland Drive
on Oct 3, 2019 at 10:23 am

Judith Wasserman is a registered user.

OK - there's a giant piece of structural info missing from this piece, and therefore from the commentary. The tiebacks are TEMPORARY shoring for the duration of the construction. When the building is finished, they can be cut, removed, left in place - whatever the 2 parties agree on. The results would be no different than if they weren't structurally required.
This fight is not about the value or quality or benefit of the project, it's about greed.


Like this comment
Posted by Anon
a resident of Another Palo Alto neighborhood
on Oct 3, 2019 at 10:43 am

Posted by Judith Wasserman, a resident of Leland Manor/Garland Drive

>> This fight is not about the value or quality or benefit of the project, it's about greed.

We are all agreed about that. We aren't all agreed on how it is apportioned in this instance.


8 people like this
Posted by Family Friendly
a resident of Old Palo Alto
on Oct 3, 2019 at 12:31 pm

I doubt that this is about money, per se. Welltower’s property will be dramatically affected by this new monstrosity. This may be leverage to use in extracting other mitigation’s of those separate problems.


14 people like this
Posted by Zoning change
a resident of College Terrace
on Oct 3, 2019 at 5:05 pm

Zoning change is a registered user.

Welltower bought a property that was next to a property not only zoned Public Facility but also on a corner of an intersection that already has CalTrans lowest rating, F. For political reasons the zoning was changed and I am in full sympany with Welltower and its inhabitants. Especially because this new building is going to be car light, which once again means insufficient parking. Even if an occupant signs a lease that forbids owning a car, who is going to spend the time and money to keep track of what an occupant who uses the neighborhood to park owns.


Like this comment
Posted by enor blogger
a resident of Palo Verde
on Oct 4, 2019 at 1:12 pm

JS has the answer. Internal Bracing... get on with it


1 person likes this
Posted by Nick
a resident of another community
on Oct 5, 2019 at 10:25 am

It's always about money.


5 people like this
Posted by Why Is This In Public
a resident of Esther Clark Park
on Oct 5, 2019 at 5:17 pm

This is a negotiation between two private landowners.

To think one party has gone to the City crying that they don't like the deal they are trying to negotiate is mind boggling.

This is a PRIVATE matter that should not involve public comment or waste the time of CPA public employees.

This sounds suspiciously like the developer (Spieker/ Windy Hill ) did a poor job of communicating the risks of development to his investors and now will need to ask them for more money to cover unforeseen costs that a more experienced developer would have accounted for.

Yes, it all comes down to money.


3 people like this
Posted by Resident 1-Adobe Meadows
a resident of Adobe-Meadow
on Oct 9, 2019 at 9:02 am

Resident 1-Adobe Meadows is a registered user.

I am very familiar with this property - a relative - MIL - was at the Sunrise Retirement home next door and is the noted "other party". The third floor of that home is for people who are suffering from dementia. When that property was built the corner was a empty lot put to good use by parkers. At least quiet. It is not a cheap retirement home - a lot of resources are in place there to make the inhabitants comfortable. It is a corporation that has every right to protest encroachment and noise directly next to where people are out sunning and relaxing.

This is not a "private matter" between two different land owners. Any one who has a relative at that home should be concerned. This situation is going to be a day to day continual noise and confusion which any relative did not buy into. The third floor is a challenge for the people who live there and their relatives who come and have to deal with their relatives decline. That is the last place your relative will live in and you hope that it can be at least a pleasant and peaceful place. Kudos to the help who have to work with dementia patient every day. I used to bring new clothes - soft gym type and they would end up on someone else because no one even knew where they were or who you are. Sunrise has every right to complain as this is interfering with all of the people who reside at that location and their relatives who have paid to keep them safe.


1 person likes this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Oct 9, 2019 at 9:25 am

Posted by Resident 1-Adobe Meadows, a resident of Adobe-Meadow

>> I am very familiar with this property [...] It is a corporation that has every right to protest encroachment and noise directly next to where people are out sunning and relaxing.

I thought this project was dumb from the get-go, so, maybe I'm biased. But, you bring up a curious point-- people in various zoning areas, single-story/40-50 foot height limits, etc., often worry about "the daylight plane" relative to solar water heaters, PV arrays, south-facing windows, etc. And, despite SB--whatever, that are intended to destroy zoning restrictions, -we- feel that the daylight plane is a legitimate concern.

Nevertheless, people in high-density zoning areas are not usually assumed to have such concerns because, well, if the area is zoned high-density, then, I guess, "what is sauce for the goose is sauce for the gander". So, this is a new question: what kind of "daylight plane" protections should taller buildings in high-density areas get, if any? Is there any kind of legal framework for providing "daylight easements" except via zoning?


4 people like this
Posted by Annette
a resident of College Terrace
on Oct 12, 2019 at 8:47 am

Annette is a registered user.

I think Family Friendly's above post is probably right on the money. I guess it was just a matter of time before monied interests went at one another in this way. If Welltower's concerns about the impact of tiebacks are valid and the tiebacks could threaten the integrity of the Sunrise building, how helpful is $750k, really?

I also think it disingenuous for Windy Hill to infer that $750k or even $1m is a hardship. Of course they have the money, but they may not want to spend that additional amount on this sort of housing at this particular site. What pencils out in Palo Alto is high-end housing and commercial space.


13 people like this
Posted by Another Giveaway
a resident of Another Palo Alto neighborhood
on Oct 12, 2019 at 9:22 pm

When Windy Hill was in front of City Council requesting a zoning change for this project, councilman Eric Filseth estimated the zoning change would produce an instant $10M increase in the value of the property and a $10M instant windfall for Windy Hill.

Windy Hill would probably be happy to use any excuse to abandon the project, sell off the property, and take an instant $10M profit on the zoning change. That would prove very embarrassing for the pro-development members of our city council who approved the zoning change, and that is why the pro-development faction of our council will intervene in this matter on Windy Hills behalf. Windy Hill has them over a barrel.

(this isn't a workforce housing project. It is just another real-estate scam)


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