Mountain View approves teacher housing ground lease, with option to buy land

Mountain View Whisman’s school board approved the ground lease for its staff housing development at a Thursday evening meeting, paving the way for local educators to start moving in as soon as next month, as well as signing off on an agreement that gives the district the chance to negotiate a deal to buy the property.

At the Jan. 23 special meeting, the board took unanimous votes to approve both the ground lease and an “option to purchase” agreement with the real estate developer who owns the land.

The school district currently owns the apartment building, but not the land. The ground lease calls for the district to pay roughly $1.9 million annually to rent the land, subject to a 2-4% annual increase based on inflation.

While the board approved the ground lease on Thursday, they also voted to enter into an option agreement that would give the district until June 30 to negotiate a deal to buy the land. That would potentially obviate the need for the ground lease, which district officials say could be a better financial set up for the district. The purchase price will be subject to negotiations with the real estate developer.

Although the board agreed on both the ground lease and option agreement, some trustees expressed reservations about the process that led the district to its present situation, where it owns the apartment building but not the land beneath it.

“I find value in the project itself, even if I have a lot of questions about exactly how it all went,” newly-elected board member Lisa Henry said. “I think right now, the right path is to approve the ground lease to let people move in.”

Mountain View Whisman has been pursuing employee housing for nearly a decade. The district ultimately entered into an agreement with Mountain View Owner, LLC in 2019 to build 144 subsidized employee apartments adjacent to 572 market-rate units that the developer planned to build at 777 W. Middlefield Road.

The district ultimately spent roughly $88 million in proceeds from its 2020 Measure T bond to construct the apartments, which were completed last year. Out of the 144 apartments, 123 are set aside for the school district, the city of Mountain View has access to another 20 units to its staff, and one unit is reserved for a property manager.

The district expects to receive the necessary city approval next month to begin occupying the units. However, without a signed ground lease in place, the developer would be under no obligation to actually allow the district onto the site, attorney Phil Henderson told the board.

Interim Superintendent Kevin Skelly and Henderson both said that elements of the teacher housing project should have come to the board for approval sooner, including the ground lease. Henderson noted that issues around insurance for the building took more time than expected.

A handful of members of the public addressed the board at Thursday’s meeting, all raising concerns about the staff housing project and generally advocating against signing either the ground lease or option agreement. In some cases, speakers suggested pulling out of the project entirely.

“We absolutely need an exit strategy, because it has taken millions of dollars away from our schools, and too many hours from our district staff,” Lily Hendra said. “The district’s job is to educate our children. There are other ways to help our teachers with housing.”

Some speakers particularly objected to a provision in the option agreement that requires the district to pay the developer $100,000 to enter into it, $50,000 of which is non-refundable.

Henderson told the board that the reason for the $50,000 price tag is that the district was the party who asked the developer to consider selling. The developer will undergo costs to negotiate the potential sale, Henderson added.

Public speakers also raised concerns about whether enough teachers and district staff will be interested in moving into the building, as well as the increasing costs of the project over time.

“We can’t keep doing this, you guys,” Karin Dillon said. “Please, please don’t sign this lease.”

The district has said it is in the process of vetting employee applications to move into the new apartments. In the event that not enough Mountain View Whisman staff are interested, the district can then rent the units to employees in neighboring districts, followed by members of the general public who meet certain income requirements.

The district also argues that the apartments will be an effective tool to attract new teachers.

“We have a hiring season coming up,” Skelly said. “This will be a tremendous opportunity for us, in terms of recruiting, in what is a very difficult market to get staff members.”

Board members argued that owning the property would give the district substantially more flexibility going forward, and said that signing the ground lease was necessary in the interim.

Ana Reed, who opposed the housing project while running for the board, said that while she didn’t want to be in the current situation, the best path forward was to approve the lease so that staff could begin moving in.

“A lot of people brought up a lot of great points, a lot of things I agree with, but the decision has to be made based on the cards that we have in front of us,” Reed said.  “There are people that want to move in (and) some of them are extremely excited for this opportunity.”