Tesla Trains Coming to Stanford Research Park

Last fall, Tesla Motors said it would lease 89 acres of city-owned land in San Jose for a combined headquarters, R&D and manufacturing campus and that construction would begin this summer. It reversed course several months later, announcing in February, that it was looking for a quicker way to market for its next vehicle than ground-up development and to help make it happen would seek funding from a federal program that gives priority to reuse projects.

In June, one month after Mercedes maker Daimler AG of Germany acquired a 10% equity stake in the company, Tesla gained approval for approximately $465 million in low-interest loans from the US Department of Energy's $25-billion Advanced Technology Vehicle Manufacturing Program. It said approximately $100 million would be used to develop the power train manufacturing facility somewhere in the Bay Area that would run not only it owns vehicles but other electric automakers' cars as well.

Stanford had been planning to tear down 3500 Deer Creek in favor of office space before the recession began, then opted to try to lease it up instead. Tesla will begin renovating the Stanford Research Park complex this fall, with the goal being LEED certification from the US Green Building Council. As part of the lease deal with Tesla, Sanford and Tesla are reportedly sharing the cost of the internal demolition necessary to make room for Tesla's power train manufacturing line.

John Yandle, Jack Lewis and Shawn Kellenberger of C&C's Santa Clara office represented Tesla in its site search, which began in December, and also negotiated the lease terms, which are being held close to the vest due to non-disclosure agreements. Kellenberger tells GlobeSt.com that he, Yandle and Lewis looked at properties from the East Bay all the way through the South Bay, with the key requirement being that it had to be within 15 minutes of San Jose International Airport.

"Even though you would imagine there is a lot of inventory out there—given a building of this size with the type of clear height that Tesla needed---the actual candidates were fewer than you'd think," Kellenberger says. "Stanford did a great job structuring a deal; their creativity and enthusiasm put them in the lead."

Tesla is utilizing the rest of the $465 million in federal funds for production engineering and assembly of its Model S, an all-electric family sedan that will seat seven and travel up to 300 miles per charge. Tesla wants to start Model S production in late 2011 in a 500,000 square-foot facility somewhere in California, outside of the Bay Area. The anticipated base price for the vehicle is $57,400. Purchasers will be eligible for a $7,500 US federal tax credit.

"We are absolutely committed to getting the Model S started in 2011," Tesla spokeswoman Rachel Konrad tells GlobeSt.com. "We determined that trying to [build a facility it from the ground up] would not have been the most cost effective and expedient way of meeting that goal."

The company closed on a $40-million funding round late last year that it said would get it to this summer, by which time it expected to be cash-flow positive on its current revenue streams, the Roadster and power train sales to other companies. The company reportedly achieved corporate profitability in July.

The Model S will be Tesla's third vehicle. The company is already producing the Roadster; it has delivered more than 500 Roadsters to customers to date. Deliveries of the Roadster Sport begin this month. Until this summer Tesla had only two showrooms in California. Now it has showrooms in London, New York City, Seattle, and Miami. Stores are also slated for Washington DC and Toronto.

The location of the Model S plant will be located outside of the Silicon Valley, Konrad told GlobeSt.com earlier this year. "We only have about 300 employees currently but a disproportionate number of them are engineers, and Silicon Valley remains an amazing talent pool in that regard," she says, explaining why the company would locate the R&D and power train assembly in the San Jose area. "The Model S assembly plant will have a different workforce; it will need people who actually assemble the car so we are definitely looking outside of the Silicon Valley for existing facilities for the Models S assembly plant."