The California Supreme Court’s action in August 2015 ended the litigation that has stalled the Town Center project for years. This cleared the way for the previous owner, Wells Fargo Bank, to market and sell this highly desirable property to a new developer. The Town Center’s new developer is a joint venture called STC Venture LLC, formed by J.P. Morgan Asset Management, Hunter Properties, Inc., and Sares Regis Group of Northern California. Last December, after the City Council reviewed and approved STC Venture’s qualifications, the development team entered into a purchase agreement with Wells Fargo. Since then, the City has worked to update key project documents that define the terms for completing the remaining portions of the project. In early September, the project received all of the required agency approvals, including from the California Department of Finance, which was necessary due to the site’s location in a former redevelopment area. A tremendous amount of work went into achieving these important milestones. At the end of September 2016, the sale of the project was completed. STC Venture LLC plans to resume construction of the project in the upcoming months starting with demolition of the steel framing in the central Redwood Square block.
What is planned for the project?
The City’s current land use approval (Special Development Permit) continues to reflect the project as it was originally approved in 2007. In addition to the existing Macy’s and Target stores and two office buildings, the project includes more retail, office and restaurant uses; a multi-screen movie theater with up to 2,950 seats; a hotel with up to 200 rooms; 292 residential units; several parking garages; and a central plaza (Redwood Square). Street improvements will also be made such as extending Murphy Avenue through the project site. The City collaborated with STC Venture LLC to update the land use approval and development agreement, which were completed in June 2016. While updated approvals do not change the amount of retail, office and residential uses that were approved in 2007, significant amendments were enacted that will enhance the overall site and ensure the project will meet current standards that were not in place when the original project was approved.
What is happening next?
With the necessary approvals are in place and the sale of the property completed, STC Venture LLC will begin work at the site in the upcoming months. One of the most visible projects will be to reopen the Redwood Square plaza which has been closed off to the public; the developer plans to demolish the existing two-story steel framing this fall and construct temporary parking and landscaping improvements to reopen the area to the public next year. They also intend to re-study the development plan for this block to submit a new proposal for the City’s consideration. The developer is also actively marketing the ground floor retail and restaurant spaces, including a planned multi-screen movie theater. More construction activity is expected in Spring 2017 when repainting the residential buildings and completing the interiors are scheduled. Public street, landscaping and traffic signal improvements are also planned. Depending on the leasing progress, initial storefront and other retail improvements may occur at the same time as well. The developer is committed to keeping residents and businesses informed on the status of construction activity and minimizing any inconveniences.
What are the amendments to the land use approval?
One of the most important amendments relates to affordable housing with STC Venture LLC agreeing to reserve 12.5 percent of all housing units (36 units) to be affordable to low-income households. The City also agreed to allow the option of rental housing within the project. Additionally, in consideration of new environmental standards, the developer will comply with the City’s Green Building Program and Climate Action Plan requirements to the extent feasible. From a technology standpoint, the developer is already required to install an electronic system that monitors and provides real-time information on available spaces in parking garages. Beyond that, they have agreed to work with the City to introduce smart city technology or infrastructure into the project such as smartphone apps, kiosks, signage and Wi-Fi that provide convenient information for downtown customers and workers. Incorporating technology into the required public art program is also a possible opportunity. Combined with the environmental benefits, the project will achieve a higher level of sustainability and innovation than previously required. These enhancements also will distinguish Sunnyvale’s downtown from other shopping and entertainment districts and respond to the public’s growing demand for technology conveniences.
Presentations to the Planning Commission on the proposed land use amendments were provided on May 9 and May 23, 2016, and the amended Special Development Permit was approved by the Planning Commission on May 23, 2016. The option of rental housing was appealed to the City Council, and on June 21, 2016, the Council denied the appeal and upheld the decision of the Planning Commission.
What are the amendments to the development agreement?
Along with the City’s land use approval, the project was also governed by a development agreement (2010 Amended Disposition and Development and Owner Participation Agreement). This agreement was between the former Sunnyvale Redevelopment Agency and the court-appointed receiver for Wells Fargo Bank. It outlined additional project requirements including completing a defined “Minimum Project” within a specified timeframe, constructing, operating and maintaining public improvements, sharing the costs for environmental site remediation, and other developer obligations. With California dissolving redevelopment agencies in 2011, updates to this agreement were necessary. The amended development agreement (2016 Modified and Restated Amended Disposition and Development and Owner Participation Agreement) is between the Successor Agency for the Sunnyvale Redevelopment Agency and STC Venture LLC, and includes the following revisions:
- Eliminates the potential payment of “tax increment funds” (TIF) to the developer from project property tax revenues;
- Revises the “Minimum Project” and construction schedule, and requires completion by December 31, 2020, with potential liquidated damages for non-performance;
- Requires the developer to assume a greater share of environmental site remediation costs in the future; and
- Continues the developer’s obligation to construct and maintain the public parking structures and public streets within the project.
The amended development agreement required approval from three agencies. The City Council, acting as the Successor Agency to the former Sunnyvale Redevelopment Agency, approved the amended agreement on June 28, 2016. The Oversight Board for the Successor Agency, which represents the various taxing agencies that receive property tax revenues from the Town Center property (e.g. County of Santa Clara and local school districts), approved the amended agreement on July 21, 2016. The final approval from the California Department of Finance was received on September 2, 2016.
What is the retail market potential for the downtown?
The amount of commercial retail uses that are economically viable for downtown Sunnyvale and the Town Center project specifically, has been the subject of much discussion. To better understand the market potential, including changing retail trends, the City obtained a real estate market expert in 2015 to assess the capacity for shopping, restaurant and entertainment uses in the Town Center project. The Retail Market Assessment was presented to the City Council at a study session on December 10, 2015. It will assist the City and STC Venture LLC, in creating a vibrant downtown and a premiere destination for the community.
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