Lest you think
all my business ventures were successful, let me tell you about one
monumental bust, the Morgan Hill Business Park. If you look at the
total out-of-pocket money lost on the deal it amounted to about $10.6
million, including the shopping center. But the monumental portion
of the loss was the come-down from expectations. To use one of Daddys
favorite quotes, The saddest thing eer writ by pen, the
saddest is, what mightve been.
We acquired 387 acres or about 16.8 million square feet. If we had
made $4 a square foot, which any real estate person at that time would
have told you was a cinch, we would have cleared $67.2 million. But
instead we wound up with a loss. The main offsetting factor was that
we provided a new home for WILTRON, which contributed to WILTRONs
success and to its merger price.
The loss was mainly due to timing; the timing for getting new industrial
clients other than WILTRON was delayed by a slow period where Silicon
Valley momentarily consolidated without overall expansion. During
this period WILTRON had become the largest employer in Morgan Hill
so the town with its limited housing initiative was not ready to accommodate
more industry at that time anyway. What the town did need was more
commercial stores to service the community and provide a sales tax
base for the City, plus it needed residential housing in the Business
Park for the workers of the Business Park
One individual, David Bischoff, self-made czar of the Morgan Hill
Planning Department, killed every initiative we proposed for commercial
or residential development. He decreed that such a large park bordering
the small Morgan Hill downtown could only be used for industrial development
even though that would mean ten times the amount of industry that
the small town could absorb. It was perfectly logical to develop some
commercial and some residential along with the industrial, but Bischoff
had personal ties to other developers and other land owners and was
flagrant in his exercise of power against our project. Even when we
came up with a commercial plan including Mervyns (a department
store badly wanted by the city), Bischoff vetoed it. A citizens
committee had to circulate a petition, call a special election and
vote on it to get it permitted. The two-year delay that Bischoff caused
this shopping center project was largely responsible for a $3 million
dollar loss. The shopping center exists todayattractive buildings
beautifully laid out, mature trees and landscaping serviced by convenient
boulevardsa huge success for the city.
So it was timing that ruined us. One thing Bischoff was
a master at was delaying projects, in fact he was condemned for this
as well as for corruption by a Grand Jury but somehow survived in
When we started the Business Park, Morgan Hill was a little line of
strip stores, which had been bypassed by Highway 101, and had very
little future. I provided the economic engine, the planning, the architectural
inspiration and vitality to make it into the thriving city it is today.
From four different property owners, I amassed 387 acres of land spanning
from the entrance of the city to the downtown. I wanted enough land
to control all the environs of WILTRON our R&D and manufacturing
company, which we were relocating. As a part of the Business Park
I planned for a lovely entrance to town with tree-lined boulevards
created a beautiful architectural theme for the initial 150,000 square-feet
of buildings of WILTRON, solved the citys water problem by locating
water substrata east of town and producing nitrate-free water for
the community, built an elegant suburban shopping center bringing
Mervyns and Target department stores to town.
Being realistic, I never expected reward or praise. I certainly never
got it. No more than a few dozen people ever knew that I was responsible
for their lovely prosperous city.
I had the idea for an RDA to recapture county tax money for the city
infrastructure. After it was put in place a half dozen local property
owners and builders made their fortunes on the RDA (one local developer
has cleared more than $6 million from the RDA). The local developers
and their pals at City Hall stopped my projects in the city core area
and took advantage of the economic engine I had created in order to
develop their peripheral properties. So the city got developed from
the outside in. The City Planning Director and his City Manager partner
squandered tens of millions of dollars of RDA money among their local
land owner buddies; it was so flagrant the city voted against the
second round of RDA extension.
To curb the devious city officials my people worked long and hard
to get three reformist people on to the City Council on the platform
of cleaning up City Hall. To my astonishment, within three months,
they were seduced by David Bischoff, Planning Director, and that was
the end of the reformist City Council. That Bischoff was more than
a grand chiseler; he was indeed Machiavellian.
Of course, it was an uneven match: I was preoccupied with building
an international company and exercised honest concern for the betterment
of the city; these local people were 100% involved with their shady
schemes. After I sold my interests in Morgan Hill, Bischoff even made
an attempt to rename Jarvis Drive, one of the handsome boulevards
in the Business Park. (It shows that I didnt leave Bischoff
without scars.) My friend Linda Stuckey aired his scheme and with
the help of some friends stopped him.
In their greed and disregard for legality Bischoff and Biggs lost
an auto mall and its subsequent revenue for the city. It was all set
to go for the Business Park in the south end of Cochrane. Their clumsy
attempts to entice dealers to their optioned land on North Cochrane
lost the deal altogether.
Overall I feel good about my Morgan Hill experience because I would
rather lose money on a very beautiful, successful project than profit
on a shoddy project. I really have a feeling of pride in my Morgan
Hill legacy, and that is what counts to me, the reality of a beautiful,
nicely planned business community where my old company is well ensconced.
The company workers for the most part live and work in this suburban
setting full of natural beauty; the company is close to the educational
and technical resources of Silicon Valley, but without being caught
up in its traffic congestion. Proximity to San Jose Airport and San
Francisco Airport provides access to our widening international sales
and overseas manufacturing affiliate companies.
When it was clear that the Business Park was a financial bust the
three major partners, Duane Dunwoodie, Pete Lacy and myself bought
the interests of the forty some other smaller partners most all of
whom were employees at WILTRON. We paid them their cost so they did
not have to share in our loss, something over which they had no control.
We were all three tired of the project so we put the Business Park
up for auction. Grubb and Ellis, a very respected real estate firm,
handled the auction. We received one seemingly low ball bid of about
20 million dollars which we immediately accepted. The buyer finally
reneged on the deal.
The real estate market kept dropping and our enthusiasm for the Business
Park dwindled further as we had to keep putting more money to keep
it afloat. As a matter of pride I would not let it go bankrupt, so
we tried a second auction, no bids at all this time.
Finally Pete and Duane decided not to put any more money in, took
their losses as a tax deduction, and gave their interests to me. The
business-like thing for me to do at that time was to declare the Business
Park entity bankrupt and take no further losses. I couldnt go
that route. I didnt want such a black mark upon WILTRON or upon
me and my children. So I put in several more million and finally,
with a bit of luck, found a real estate developer along with a Malaysian
investor who paid me 7 million dollars for all my remaining interest.
Two years thereafter the Silicon Valley real estate market turned
around. The new developer will likely make a tidy sum for himself
and his investors.