Santa Clara elected leaders Tuesday unanimously approved delaying plans for a massive hotel and requiring more affordable housing on the Gateway Crossings project, a plan approved nearly a year ago.
Located along Coleman Avenue near the city’s Caltrain station and an anticipated South Bay BART extension, construction of a 225-room hotel within the 24.4-acre mixed-use project is now delayed after the developer cited challenges with the hospitality industry due to COVID-19.
Work on Buildings 1 and 2, which feature 725 residential units – 73 of which deemed affordable – 11,200 square-feet of retail space, park land and space leased to the Police Activities League, will instead be brought forward in the project’s timeline.
Part of the decision Tuesday includes designating 15% of homes in Phase 2 – 126 out of 840 total units – as affordable, an increase from the previous 10% commitment.
The changes were proposed by principal developer Deke Hunter, following dozens of public comments, hours of presentations and a critical push for more affordable housing in the first phase of construction.
“We’ll give that up as an accommodation to try to show that we are working with the community,” Hunter said. “I don’t want to compound the fragility of Phase 1, (but) I want to show my commitment.”
The construction industry was one of the first to reopen in early May amid coronavirus shutdowns, but ongoing struggles of the hospitality industry – including a frozen capital market and starkly negative projections through 2025 – led Cupertino-based developer Hunter Storm to ask for the change of plans.
Josh Rupert, director of development for Hunter Storm, told the city’s Planning Commission in June that the hospitality industry has lost $31 billion in room revenue since February and 7.7 million lost jobs in April.
“Unfortunately, here locally we have not been immune to the effect of COVID in the hospitality and travel industry,” Rupert said. “In some regards we’ve actually been feeling it much worse … Experts don’t project revenue per available room will return to pre-COVID levels until 2025.”
Hunter said the market’s capital is essentially frozen.
Principal developer Deke Hunter said he’s still monitoring market conditions and reaching out to previous relationships for hotel financing.
“My motivation has not changed to get this going sooner, I just don’t want to forgo the other opportunities," he said.
— Katie Lauer (@_katielauer) July 8, 2020
Tuesday’s vote means the hotel will now be constructed before Building 3, but will come sooner if and when funding becomes available, Hunter said.
Demonstrating a dedication to getting the hotel up and running, Hunter initially promised to increase the amount of affordable housing in Phase 2 to 12%, but only if shovels didn’t hit the hotel’s parcel by 2025. He eventually removed the construction timeline trigger and increased the commitment to 15% – Santa Clara’s current Affordable Housing Ordinance for new developments.
Originally slated for the San Jose side of the project, the hotel’s tax revenue from occupants is considered a boon for Santa Clara. The city is preparing to ask voters to increase hotel taxes in November.
Residents and councilmembers alike were concerned about lost revenues if the hotel plans were delayed.
Mayor Lisa Gillmor, however, said said she’s confident work on the hotel will start as soon as Hunter Storm acquired the funds, especially because of the location’s value near the Major League Soccer Earthquakes Stadium, Santa Clara University and Mineta San Jose International Airport.
Councilmember Teresa O’Neill echoed the sentiment that the delay was out of the developer’s hands, and less about cost savings that will be generated by completing Buildings 1 and 2 concurrently.
“That was very daunting to have that dramatic falloff,” O’Neill said about pulled hotel proposals. “It’s easy for any of us to say ‘build it and they will come,’ but if you don’t have the money to build it, there’s nothing for people to come to.”
This isn’t the first time the developer has made changes to the plan to meet the community’s needs, previously adding more retail space and residential units. After final approval in 2019, Hunter Storm leaders highlighted their willingness to work with the city and residents.
“I’ve earned a seat at the table that I’m someone who is committed to this project and to the city,” Hunter Storm President Deke Hunter told councilmembers in July. “If things change — whether it’s market forces, or your goals change or the VTA’s goals change — I think that we’ve shown ourselves as a company a decade ago, today and tomorrow that we will participate in that process.”
Santa Clara resident Adam Thompson, who sits on the Old Quad Residents Association and has been involved with conversations about the development, said that engagement didn’t happen with the recent changes prior to the meeting.
He said if the development agreement is changed due to COVID-19 impacts on the hospitality industry, then changes should also be made to help residents hit hard by the pandemic – efforts later applauded by Hunter.
“I don’t think we’re being greedy or anything, but we’re seriously concerned,” Thompson said. “All we’re saying is if you’re making an adjustment to the schedule, we want to make an adjustment to the affordable housing quantity – that’s it, it’s a fair trade.
“If somebody doesn’t do it, then all (the developer) is doing is profiteering, and we’re going to be in the same position we’ve been in for the last 20 to 30 years – not enough affordable housing and nowhere to go.”