Campus El Segundo

1. What was the state of the local real estate market when TPG bought the option from FedEx? What led to the failure of the FedEx entitlement? 


• In 1992, the City of El Segundo updated its General Plan and introduced the “Urban Mixed-Use North” (MU-N) zoning district with pedestrian friendly mixed-use commercial development. Campus El Segundo (CES) site comprised c. 17% of the MU-N zoning district.

• FedEx bought CES in 1997, after the introduction of the new zoning requirement, with the intent to build a distribution center. El Segundo Planning Commission rejected this project as “it would have had one primary use, and no street level features related to pedestrian activity” (Richard Zilman Center for Real Estate 2011).

• In 2000, TPG entered in an SPA with FedEx to acquire CES.

2. Who is opposed to Campus El Segundo? What do they claim are their objectives? What are their actual objections? 


The key opponents were:

• John Kilroy Jr. & Kilroy Realty, the largest office landlord in the city and direct competitor of TPG. Kilroy’s formal reason for the opposition was the environmental and traffic impact of the proposed development. Kilroy also formed a single- purpose opposition group Citizens Against Gridlock in El Segundo.

• Brian Crowley, Planning Commissioner from 1992 to mid-2001, an enemy of Mayor Mike Gordon (supporter of the project), formally opposed the project on the basis of what he perceived as poor city planning and corrupt politics. 



3. Describe the potential impact of the Campus El Segundo project on all impacted parties.

Impacted Party Impact

FedEx • Exiting with significant delay in 2005 FedEx still earned an attractive 25% IRR on this deal ($5m investment in 1997 / $30m proceeds in 2005)

• However, FedEx didn’t achieve its strategic goal to build a distribution center

TPG • For selling two parts of the plot in 2006 for $29.5m in total, TPG almost covered the initial investment of $30m; Moreover, Kilroy covered all litigation costs

• However, TPG faced an enormous delay of 700 days, stressful and resource consuming entitlement process with various indirect costs: public campaigning, $50k donation to Mike Gordon’s State Assembly campaign, etc.

• The remaining 27.5 acres of land were to be developed and generate additional