In 2010, the City Council and voters approved the 941,000-square-foot office-hotel complex, which would be built on two properties: 100 to 190 Independence Drive and 101 to 155 Constitution Drive.
Under the terms of the development agreement signed with the city, most of the hotel space must be built before anyone can lease office space.
Developer David Bohannon told the commission in a letter that tenants are interested in the office space. "Unfortunately we have had to advise them that because the office component cannot proceed without the hotel, and the timing of the hotel component remains problematic, we are not able to proceed with the office at this time," he said.
While Marriott International remains excited about opening a hotel on the site, he said, financing construction during this recession remains "a very challenging prospect."
Meanwhile, Facebook hopes the hotel happens sooner rather than later. An economic study commissioned by the social networking giant predicted that the company will need at least 14,000 hotel room nights per year to accommodate visitors, generating $1.95 million a year in Menlo Park, including $300,000 in annual transient occupancy tax revenues for the city.
Those figures may be on the low side since the analysis didn't include vendors and potential advertisers who travel to Facebook headquarters. If Menlo Park can't accommodate Facebook's guests, that revenue shifts to other cities.
Planning Commission chair Vince Bressler appeared to question Mr. Bohannon's willingness to build the hotel. "We're talking about being right next door to Facebook headquarters," he commented during the review. "That seems like a place you could build a hotel."
Mr. Bohannon responded that the current economy simply doesn't support constructing a new hotel outside Washington, D.C., or New York City, even though existing facilities are doing well.
"We're just not there yet," he said. "At the same time, I don't want to leave you with the impression that we're not trying to bring investors to the hotel."
Asked to elaborate on his dealings with Facebook, the developer said he's had several meetings with their real estate staff, who introduced him to an architect from New York City who could design the hotel.
"They clearly understand that their business will benefit from having the hotel there, no question about it," Mr. Bohannon said. "I don't think it's enough to persuade, at least so far it hasn't been enough, to persuade investors." And so far Facebook hasn't offered to help with financing.
In the end, the commission voted 7-0 that the developer was upholding his end of the agreement by making a good faith effort to move the site forward.