Town Center Overview
The City’s Role
Contrary to prevailing thought, the redevelopment of the old Town Center Mall is not a City-owned project. Most of the property that was once the Town Center Mall is now owned by Wells Fargo Bank, with the exception of Macy’s and Target. Because the City does not own the property, it has little say in how or when development will occur. While the City has provided tax incentives to the property owner to proceed expeditiously, multiple factors outside the City’s control affect the property owner’s business decisions. The City does have a role in determining who the property owner might select to develop the property. But the City must base any concern it has on specific grounds (such as insufficient financing on the part of the developer to complete the job). The City cannot simply refuse to allow a certain developer to be involved, or require a City-preferred developer be used. The City does also review and approve related building permits and ensure compliance with City building codes, but this is no different than the City’s role regarding any other private development project.
Because so much time has elapsed since the project’s entitlements were granted, the City has initiated a market analysis for the Town Center to review whether current market conditions still support the original proposal and plans. This will help ensure the project is ready to move forward as quickly as possible once development resumes
Wells Fargo’s Role
Wells Fargo is not in the business of developing shopping centers. The only reason it owns the property is because it was the major lender to the previous owners of the Town Center Mall (RREEF and Sand Hill Properties/Peter Pau). When the previous owners defaulted on a loan from Wells Fargo, the bank took possession of the property and, working with a Court-appointed receiver responsible for managing the asset, put more than $100 million of its own money into project enhancements such as upgrading streets, completing the façade on housing units, and building parking structures. Like the City, Wells Fargo, would like to move forward as swiftly as possible with redevelopment of the downtown shopping center. It is unable to do so at this time, however, due to a stream of lawsuits filed by Sand Hill Properties/Peter Pau.
Sand Hill Properties
Sand Hill Properties believes it is legally entitled to play a continuing role in the development of the property, and has filed several lawsuits against Wells Fargo and RREEF in an effort to reclaim some control over the project. This litigation has been unsuccessful to date, but has resulted in stalling the project for years, and tying the hands of Wells Fargo Bank with regard to future progress.
Earlier this year, Sand Hill Property Company (part of the Town Center’s DSMU development team) purchased the Macy's parcel in the Town Center under an agreement that leases the store back to Macy's to operate for the next five years. As a result, Sand Hill is now one of four property owners in the Town Center, joining Wells Fargo, Target and the Successor Agency to the former Redevelopment Agency.
The former Town Center Mall is only a portion of Sunnyvale’s downtown area. Despite the legal challenges mentioned above, the City’s downtown continues to thrive because of major private and public investments completed after the developer defaulted on the bank loan for the former mall. Below is a summary of public and private improvements that have been completed and/or started with the sole purpose of making Sunnyvale’s downtown the entertainment center of the community, complemented by employment, housing and transit opportunities.
In January 2009, Target began renovation of their store on Iowa Avenue. This project saw the construction of a new 173,000 square-foot store which opened on schedule on November 15, 2009. As part of the Target store renovation, the bank invested about $8 million to finish roadways, curbs and gutters, and install lighting and landscaping along McKinley and Taaffe Avenues. These improvements allowed the City to reopen downtown streets that were closed off for more than 30 years. These streets – McKinley Avenue, Taaffe Street and a portion of Murphy Avenue – provide access to Macy’s, the new Target, and a new parking garage. They also serve shoppers and diners visiting Historic Murphy Avenue.
In July of 2009, the City invested about $4.2 million dollars to improve Murphy Avenue. The project included street and sidewalk improvements, and upgrading the street lights on Murphy Avenue between Washington and Evelyn Avenues. The improved Murphy Avenue offers a pedestrian-friendly atmosphere to its visitors and allows the restaurants to use the sidewalk for outdoor dining. This project was completed with a grand opening event on May 27, 2010.
In early 2010, a possible tenant for the office building located at the corner of Washington and Mathilda Avenue was identified. Part of the building shell had been completed, but in order to finalize the building for a tenant, improvements to the interior and to Aries Avenue were needed. Wells Fargo completed that work through its receiver, and leased the building to Nokia who took possession in December 2010. Nokia now has over 400 employees at this site.
In March of 2010, the City began reconstruction of the Mathilda Avenue overpass, a $26.1 million dollar capital project designed to upgrade travel lanes, ramps and signal lights to improve both vehicular and pedestrian bridge access and safety. This project was completed in March 2012.
In January 2012, the City began major improvements on Sunnyvale Avenue between Iowa and Evelyn Avenues. The City invested nearly $2 million dollars widening sidewalks, upgrading street lights and street furniture, adding trees, and installing new curbs and gutters. This project was completed in October 2012.
In January 2012, BRE Properties, Inc. began construction of its “Solstice” project on part of the old Town & Country site, just north of the former Town Center mall. Solstice has completed the residential aspect, which includes 280 apartments and ground floor retail. New retail tenants now open are Prolific Oven; Flywheel Spin Studio, and Kabul Restaurant. Other retailers are in the process of working on tenant improvements and are tentatively scheduled to be complete by August 2015.
In April, 2012, Apple, Inc. indicated its interest in leasing office space next to the Nokia office. The bank’s receiver once again made interior and exterior building improvements; Apple moved into the new 156,000 square-foot building at the corner of Mathilda and McKinley Avenues in August 2012 and today has about 400 employees working at the site.
During the fall of 2012, Carmel Partners began constructing the Carmel Lofts project on the remainder of the old Town & Country site. This project is adjacent to Plaza Del Sol and consists of 133 apartments and ground floor retail. Two retail tenants, Philz Coffee and The Sandwich Spot, are now open.
These projects continue to add to the vibrancy of Downtown Sunnyvale with new retail, service and housing options for residents and employees who in turn support our businesses and boost our local economy.
Town Center Updates
August 2015 Update:
In May, the 6th District Court of Appeal issued a decision that found in favor of Wells Fargo Bank; appellant Downtown Sunnyvale LLC then filed a petition asking for the California Supreme Court to review the case. On August 12, the California Supreme Court denied the request to review the case which brings to close years of litigation. The decision now clears the way for Wells Fargo, the current owner of the property, to market it for sale because the title is no longer clouded with litigation. The City is already working on a market analysis for the Town Center to review whether current market conditions still support the original proposal and plans since so much time has elapsed since the City granted the project’s entitlements.
June 2015 Update:
After hearing the Downtown Sunnyvale Residential, LLC., et al. v Wells Fargo Bank (Court of Appeal No. H039332) case in April 2014, the 6th District Appellate Court issued an opinion on May 19, 2015, finding in favor of Wells Fargo (the current owner) on all counts. This outcome is significant because it should clear up the "cloud" on the property title caused by the litigation, which prevented the bank from being able to market and sell the property to a new developer to finish the project. Once questions about the title are addressed, the bank should be able to move forward in a relatively short period of time. The court of appeal’s opinion was final on June 18, 2015, however the parties had 10 days to ask the California Supreme Court to review the case, should they so desire. On June 29, 2015, Sand Hill Properties filed a petition for review with the California Supreme Court (Supreme Court Case number S227445). Generally, the Supreme Court must decide whether or not to hear the case within 60 days of the request; under some circumstances, the time can be extended.
Read the court decision
October 7, 2014 Update:
The Downtown Sunnyvale Residential, LLC., et al. v Wells Fargo Bank
(Court of Appeal No. H039332) case continues on appeal with the Sixth District Appellate Court. It was fully briefed as of April 2014, and was placed on the court’s conference list on September 3, 2014.
October 18, 2013 Update:
On October 17, 2013, the Sixth District Court of Appeal issued an opinion in the case of Downtown Sunnyvale Residential v Wachovia Bank National Association, which arose out of the lawsuit referenced below in the May 24, 2012 Update. The Court of Appeal affirmed the lower court decision, finding no merit to Pau's cross-complaint.
Both Wells Fargo and Pau have appealed from Judge Kirwan's ruling in the case discussed in the January 15, 2013 Update. That matter is pending, and will not likely be heard until 2014 once the court schedules a date for an oral argument hearing.
Read the court decision
January 15, 2013 Update
On December 31, 2012, Judge Kirwan issued his ruling in the Downtown Sunnyvale Residential, LLC vs Wells Fargo Bank case related to Wells Fargo's motion to strike an amended complaint by Peter Pau. The court ruled in part in Wells Fargo's favor and dismissed the first four causes of action (to set aside the foreclosure, to cancel the deed of trust, slander of title, and accounting errors). The court denied the motion with respect to the 5th cause of action, for breach of the deed of trust, which is the sole remaining cause of action in the matter. Further updates will be provided as more information regarding this last cause of action becomes available.
November 14, 2012 Update:
Read the news release
The Town Center project is still being delayed by lawsuits filed by Peter Pau, a representative of the former developer, against Wells Fargo, the bank that now owns the property.
In May 2012, the Santa Clara County Superior Court ruled against Pau's challenges to Wells Fargo's continued progress and investments in the project. Pau is appealing that decision; the case is now fully briefed and the parties are waiting for the appellate court to assign a date for oral argument before a 3-judge panel who may determine the outcome of the dispute.
Meanwhile, Pau has filed additional lawsuits which seem to mirror his earlier unsuccessful attempts. The Superior Court is expected to issue a ruling any day now on those claims, as well.
May 24, 2012 Update:
The Sunnyvale Town Center project has been tied up by delaying lawsuits from a former developer. On May 23, the Santa Clara County Superior Court issued a seven-page decision against the former developer.
Read the court decision
Other Downtown Development Projects Continue
Downtown Sunnyvale - New Businesses
New businesses recently opened in Downtown Sunnyvale:
The Sandwich Spot
Flywheel Spin Studio
Aloft Sunnyvale Hotel
Prolific Oven Bakery and Café
City Place Wine Bar
The following businesses are currently working on their tenant improvements and are tentatively scheduled to open summer 2015:
Beach Hut Deli
Town Center ARDDOPA Adopted by City Council
City Council approved an Amended and Restated Disposition, Development, and Owner Participation Agreement (ARDDOPA) for the Town Center redevelopment project at their May 11, 2010 meeting. The ARDDOPA is the agreement between the City and the redevelopment site developer. The ARDDOPA was between the City and Jerry Hunt of the Quattro Realty Group, the court-appointed receiver for the project. The meeting is available to view online at Webcast.inSunnyvale.com. The ARDDOPA is available at ARDDOPA.inSunnyvale.com.
Downtown Parking Map
There are no public meetings scheduled at this time.
For information on Downtown Sunnyvale projects, call the 24-hour message hotline at (408) 737-4900 or email us.