SUNNYVALE DOWNTOWN DEVELOPER SEEKS PROPERTY TRANSFER

SUNNYVALE, Calif. – Fourth Quarter Properties, the developer of the Sunnyvale Town Center Mall redevelopment project, has asked the City of Sunnyvale for approval to transfer the property. If approved by the City Council sitting as the Redevelopment Agency (RDA), it would mean a new developer would restart the project that will recreate a traditional downtown on the 34-acre site.

The current developer has identified the proposed buyer as RREEF, a major worldwide financial organization. Peter Pau, principal in Sand Hill Properties, a local developer with many completed projects in the region, has been named as one of RREEF’s partners in the project.

Fourth Quarter Properties began work on the project in 2005, tearing down a parking structure on the west side of the property adjacent to Mathilda Avenue. When the developer failed to restart the project in January 2006, Sunnyvale City Council became increasingly impatient with the delays and missed deadlines. In March, the RDA notified Fourth Quarter they were in breach of the DDOPA – the Disposition and Development and Owner Participation Agreement. The developer then had the option of curing the breach, transferring the property to a new developer or working with the RDA to allow the RDA to purchase the property.

Following the developer’s continued failure to cure the breach of the DDOPA, the RDA issued a notice of their intent to directly acquire the property in order to be able to select a new developer.

On Thursday (October 26), the RDA received formal notice from Fourth Quarter that they want to transfer the property. Under terms of the DDOPA, the City must approve any such transfer before it can take place. The approval will be based, in part, on a due diligence process conducted by City staff to examine the proposed buyer’s track record of performance, such as the quality of work they have done in the past, whether previous projects were completed on schedule, how well they worked with other government agencies, their financial ability to complete the project and how they make decisions. Staff will also explore the proposed new developer’s commitment to the City of Sunnyvale and their capability and commitment to completing the project on schedule.

There are several advantages to a transfer of the property as compared to a City purchase. Chief among them is the ability to finish the redevelopment more quickly. The City’s due diligence review will take about 45 days. Staff will then provide a report to the RDA and the RDA will decide – in a public meeting – whether they will grant approval to the transfer. If approved, it is expected that construction work could begin within about nine months after the approval is given. Actual construction – razing the old mall building while retaining the Macys and Target stores and then constructing the new traditional downtown – should be completed within 18 – 24 months of construction time.

A major element of the transfer is that the DDOPA will transfer with the property, meaning a new DDOPA will not need to be negotiated. The DDOPA, among other things, establishes the relationship between the RDA and the developer and sets the City’s control over the project as well as the real estate tax advantages granted to the developer.  

If the transfer is approved, the City will hold at least one additional public meeting to allow for comments on the project. The expectation is the redevelopment project will remain substantially the same as the existing plan, resulting in about 1 million square feet of retail space, 250,000 square feet of commercial office space and 292 ownership housing units. If the transfer is not approved, the requirements in the DDOPA would still stand and the City could then pursue directly acquiring the property.

The City will continue to update the community on the progress of the redevelopment project on its Web site at downtown.inSunnyvale.com and through the news media.