News - February 9, 2011

Facebook moves headquarters to Menlo Park

by Sandy Brundage

Facebook's plan to shift headquarters from Palo Alto to Menlo Park has possibly been the worst-kept secret of the past month. Now the social networking giant has confirmed that the former Sun/Oracle campus will be its new home.

In an Almanac interview, John Tenanes, Facebook's real estate director, said the company leased back the 1-million-square-foot, 11-building campus from real estate investment management firm RREEF. About a third of the campus will continue to host Oracle employees for up to a year, according to Mr. Tenanes. Sources familiar with the deal said RREEF paid about $100 million.

"It's a great (lease) structure, in terms of rent," Mr. Tenanes said. "We don't have to write one big check." He cited Menlo Park's central location and proximity to Palo Alto, where many of its employees live, as two factors that set it apart from other sites Facebook considered along the Peninsula.

Recently valued at $50 billion, thanks to investments by Goldman Sachs and others in anticipation of a public stock offering, Facebook has exploded since founder Mark Zuckerberg started the company in 2004. Its assessed business personal property value skyrocketed to $63.4 million by the end of 2009, according to Santa Clara County tax records, and there are more active users on Facebook than there are people in the United States.

The Facebook explosion explains why the company also bought two lots on Constitution Drive near the Sun campus in December. It was too good a deal to pass up, according to Mr. Tenanes, who described the buildings as a "safety valve" if the company needs even more elbow room before its new 15-year lease on the Sun campus expires.

Those lots, along with the 57-acre Sun campus, give Facebook enough space for 6,100 employees. The company said it currently has about 2,000 worldwide.

But there's more than space behind Facebook's buying spree: A tunnel under the Bayfront Expressway already links the 22-acre Constitution Drive lots to the Sun campus, Mayor Rich Cline explained.

Those three parcels originally belonged to Raychem, which planned to open adjoining east and west Menlo Park campuses. Facebook has now resurrected that vision, according to city staff.

What's in it for Menlo Park?

Critics decried Facebook's lack of sales tax and property tax revenue, but proponents suggest the potential benefits outweigh instant cash prospects.

Comparing Facebook to Cisco in San Jose and Apple in Cupertino, Mayor Cline said, "Facebook's level of brand brings immediate marketability, and that brings investment. The potential for the Belle Haven neighborhood should not be overlooked. We've been waiting forever for those opportunities."

The company might face community opposition on two fronts: traffic and housing. According to Mayor Cline, Facebook is scouting other sites to potentially build homes for its employees.

As for traffic, Mr. Tenanes said about 42 percent of Facebook's employees don't drive to work, instead relying on shuttles, car pools and public transit, and they want to increase that number.

The company also hopes to work with Menlo Park to open businesses such as dry cleaning or coffee shops on campus, although it will keep the two employee cafeterias already located there. "We're excited to work with Menlo Park, they're excited about it. I think it's going to be a great partnership," said Mr. Tenanes.

Going forward

On March 5 the city will host a design charette so residents can share their visions of what could be done with the remaining space on the Facebook properties.

"(Facebook) may see a need for more growth, they may need more offices. There's potential housing and potential retail. It would be nice to have retail that services the whole community," Mayor Cline said. "Belle Haven needs their own services that they can walk to."

He found the timing of Facebook's move interesting in light of the governor's proposal to shut down redevelopment agencies across the state, since the Belle Haven neighborhood lies within the city's redevelopment boundary.

"This goes to the heart of helping people that aren't in the upper economic classes. They need support," said the mayor. "This is an opportunity perhaps for us to do this, or be able to have other ways to think about the area."

There remain walls to knock down <0x0214> Facebook intends to keep its 'no cubicle' work environment <0x0214> and permits to sign, but if all goes smoothly, the company plans to move the first 500 employees to Menlo Park by mid-June. The rest should arrive by the end of the year.


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