The Bay Area Real Estate Journal
Tesla Puts Palo Alto Motor in Gear
Submitted February 11, 2010, 10:56 PM
Tesla Motors Inc. is pulling its first construction permit from the city of Palo Alto to initiate the remake of a former Agilent Technologies building in the famed Stanford Research Park as details of its lease emerge.
Larry Perlin, chief building official for the city, said the electric carmaker is expected to start nearly $500,000 in improvements to a portion of the 350,000 square-foot facility. “This initial phase is on one floor of one of the buildings, and they are setting up a motor assembly line, a battery assembly line and testing facility,” he said.
“We expect improvements to be continual” at the 3500 Deer Creek Road site, said spokesman Ricardo Reyes. “We will be in a start-up mode here for some time and will be making improvements as we grow and as needed.”
Tesla created a spark of economic hope in August when it announced that it would lease and improve the 25-acre Palo Alto site using $101.2 million made available through a U.S. Department of Energy loan facility. The funding is to develop Tesla’s electric power-train component and systems business and to finance the building improvements, Reyes said.
The loan was part of a $465 million loan package from the federal government to Tesla. The remaining money was to be used to continue development of its Model S sedan and to build a manufacturing plant for it.
The federal money can be accessed only over the course of three years and only as Tesla meets progress milestones, according to documents filed by the car maker with the federal government. In the case of the money intended to support the Palo Alto facility, Tesla must show advances in the development of its manufacturing and successfully develop third-party agreements as a supplier of power-train components.
The company also expects to do research and development work in Palo Alto including cell and component testing and prototyping.
Before now, Tesla had plants in Taiwan to assemble motors and San Carlos to assemble its battery pack. Both operations are moving to Palo Alto, which is also to be the company’s corporate headquarters. The relocation is to be complete by midyear, according to Tesla.
Under the terms of its 78-month lease with Stanford, Tesla receives 18 months of free rent. Monthly rent rises to $165,000 thereafter, then to $175,000 a month for two years and $185,000 a month in the final two years.
The lease provides for two, two-year extension options exercisable at Tesla’s discretion. Rental rates rise during both extension periods, ending at $210,000 a month. Tesla is responsible for property taxes, insurance and utilities. It also forwarded a $330,000 security deposit.
The text of the 54-page lease and its multiple exhibits are included as part of Tesla’s S-1 filing with the U.S. Securities and Exchange Commission. The filing is a necessary step for companies seeking to sell ownership to the public.
As of December 31, Tesla had 514 employees, 340 in San Carlos, 49 in Los Angeles and 35 in the United Kingdom.
The Research Park lease was in fact the second that Tesla signed with Stanford. The university is also the landlord at the car company’s Menlo Park showroom and repair shop. That five-year lease was signed in 2007. Monthly rent began at $5,000 but escalates to $13,750 a month in the last two years.
As of December 31, Tesla had 10 company-owned stores. Besides Menlo Park, they are in Boulder, Colo., Chicago, Los Angeles, Miami, New York, Seattle, London, Monaco and Munich. The company plans to double its shop count by year’s end.
Since inception through Sept. 30, Tesla had net losses of approximately $236.4 million and approximately $108.2 million in revenue.
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