The Sunnyvale Sun

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City removes developer from Town Center Mall project

Fourth Quarter in contract breach, Vaughan no longer project manager

By JASON GOLDMAN-HALL

After almost six months of waiting since notifying Fourth Quarter Properties, LLC, that the company was in breach of contract, the city of Sunnyvale has decided to move ahead on the downtown redevelopment on its own.

According to communications officer John Pilger, the city is no longer going to wait for Fourth Quarter to cure its breach of contract, which includes failing to submit construction plans and failing to start construction by January of this year.

As part of the Disposition and Developer and Owner Participation Agreement signed between Fourth Quarter and the Sunnyvale Redevelopment Agency, the city has--and is exercising--the right to buy the property at fair market value and seek a new developer.

"We've been waiting and hoping that Fourth Quarter would cure the breach, but council has gotten to the point that we've worked hard with them and we've yet to receive anything," Pilger said.

The decision came after an Aug. 8 closed session meeting, and a notice was issued to the former developers Aug. 11.

"It's long overdue," Mayor Ron Swegles said. "We tried to work them as long as we could, and we finally had to take that drastic step that I hoped we wouldn't have to."

Ron Pfohl, a principal partner with Forum Development Group, a sister company to Fourth Quarter that did much of the initial planning and work, said Fourth Quarter still wants to work with the city to finish the project.

While Pilger said it was not impossible for Fourth Quarter to finish the project, council members have made it clear they want to move in another direction.

"I don't know if we can work with them because of all that has happened," Swegles said. "A lot of deadlines were missed and a lot of promises were broken."

According to Fourth Quarter's plans approved by the city two years ago, the Town Center Mall redevelopment would include 275,000 square feet of office space, 292 housing units and a million square feet of retail space, including a movie theater.

In May, former project manager Jane Vaughan--no longer with the project according to Pfohl--said Fourth Quarter was hoping to add to the project. At the time, she suggested more housing and a grocery store be added to the project, but the city rejected any additions to the plan in favor of trying to get the original approved project under way.

When further negotiations failed, the city decided to exercise the right to buy the land and move on without the Atlanta-based developers.

Under the DDOPA, the redevelopment agency and Fourth Quarter will first work together to try to come to an agreement on a price for the property.

The project area is roughly 36.5 acres of land, and even though the city already owns a small portion of that, and Target and Macy's both own portions, Pilger said the city could be buying as much as 30 acres. With land values in Sunnyvale between $2 million and $3 million an acre, the purchase could cost in upwards of $75 million.

"The city has an investment portfolio that is more than enough to cover whatever the land would cost," Pilger said.

If the two parties don't agree, each will hire an outside appraiser to judge the value of the land. If the prices from the two appraisers are within 20 percent of one another, they will be averaged and that final price will be used. If the numbers differ by more than 20 percent, the two appraisers will hire a third appraiser to set a price no higher or lower than the numbers from the original two appraisers.

And although the city intends to buy the land in order to find a new developer, Pilger emphasized Sunnyvale has no plans to develop the project alone.

This turn of events, while significant, is not unexpected, and many in the community say they saw it coming months ago.

Chamber of Commerce President and CEO Suzi Blackman said she believed this was coming, and is now waiting to see if this is a good or bad move for the city.

"I think that's the thousand dollar question now, but there is a part of me that wants to think it's a good move," Blackman said. "To have that mall sit there in its current state is terrible for business."

Pilger said appraisals could be completed within 60 days from when they begin. If all goes as planned, he said a new project could be in the works by the end of the year.

"I've been here 12 years, and for 10 of those years, we've been waiting on the undeveloped mall," Blackman said. "Ten years is a hell of a long time."