Vallco developer proposing major downsizing of Cupertino project

A woman walks through the Vallco shopping mall in Cupertino, Calif. on Wednesday, Feb. 14, 2018. Few tenants remain at the mall in the western Santa Clara Valley, including an AMC Theater and a couple of restaurants, but it is largely abandoned. (Pho

A Silicon Valley developer is scaling back its plans for a massive and controversial development of offices, housing, retail, dining and park spaces on the site of the former Vallco Mall in Cupertino.

Representatives with Palo Alto-based Sand Hill Property Company said high interest rates, rising costs and project delays have forced a cut back and redesign of major elements for The Rise, long planned for a vacant 50-acre site at the corner of Wolfe Road and Stevens Creek Boulevard where Vallco used to sit.

"Within the industry, no one is immune to what the market is imposing on any of us right now," Reed Moulds, managing director for Sand Hill, told San José Spotlight. "The pressure is coming on both ends, both in terms of costs, and declining values and the growth prospects are down. In order to continue to move forward, you need to make, in certain cases, drastic changes."

The company submitted materials to request a project modification to Cupertino planning officials late Monday and on Tuesday. Sand Hill expects to have the planned changes approved through a city review process.

Major changes Sand Hill is proposing include cutting back the planned retail space across the development from nearly 430,000 square feet to about 230,000 square feet. Moulds said the company plans to slightly increase the total footprint of storefronts, but overall reduce retail space significantly and focus on smaller, "experience-based" retailers and dining operations.

"This will still be a robust retail offering, a mixed-use environment that is dynamic, walkable, with vibrant day and nighttime energy," Moulds said. "The 429,000 square feet of retail was a considerable weight on the performance of the project."

The total housing included in the project will increase to help the financial viability of the project, from a previously planned 2,402 apartments and homes, now up to 2,669, and the number of affordable homes will be significantly reduced.

Previously, plans called for about 50% of the homes to be below market-rate, but now that will be reduced to about a third, at 890 homes total.

While the housing was previously planned to be concentrated in seven residential towers at 240 feet in height, Sand Hill is reducing the tower count to three, all shorter than 240 feet, and the rest of the homes will be in buildings 85 feet or lower.

The plans represent the largest single housing project in Cupertino’s history, a city that has bristled and at times outright fought back against mandates from the state to increase housing stock, drawing the ire of California officials and housing advocates.

"To be in a scenario where costs are so high, we need to continue to be creative to find a way to move projects forward, the alternative being that they don’t move forward at all," Moulds said.

The prior development proposal also included plans for nearly 1.9 million square feet of office space, and that has been reduced slightly to about 1.54 million sqaure feet in the latest plans.

This digital rendering shows what a portion of the dining and retail spaces could look like at The Rise, a 50-acre planned development on the former site of Vallco Mall. Image courtesy Sand Hill Property Company.

The developer is also ditching a planned rooftop park, a major undertaking and premier feature of the prior project. Instead, Sand Hill will offer more than seven acres of public park and gathering spaces at street level, one of several changes Moulds said help to make this revised proposal line up with some past requests from residents. The park was intended to be interconnected across larger buildings with mixes of rental and for-sale homes, but the project will now include smaller buildings with fewer uses in each, to decrease costs.

Mayor Hung Wei said Tuesday she needed more time to absorb the details of the latest redesign proposal, but said overall she is happy to see an increase in the number of homes with reduced building heights, though she is a bit disappointed to see a reduction in the number of affordable ones.

"Nobody, including me, liked the seven 20-story buildings," Wei told San José Spotlight. "I am an advocate for using airspace in a reasonable way to accommodate more housing, but up to 20 stories, it’s a little high for the west side of Silicon Valley."

In 2018, the Cupertino City Council approved a version of the development plans that complied with SB 35, a then-fresh state law intended to streamline approvals for housing projects that fit in with city zoning and planning rules and meet certain criteria. The proposal included a massive package of community benefits, such as a new city hall building. But legal challenges delayed and threatened the project, and a redesigned project without those benefits was proposed and approved by planning officials in March 2022.

Since Sand Hill took over the property roughly nine years ago, the fate of the site has been the subject of contentious debate, sparking multiple lawsuits, ballot referenda and division between factions of residents and city leaders who supported or opposed it.

"We’ve been at this a long time. There’s never been a dull or quiet moment in the nine plus years we’ve owned this real estate," Moulds said.

If the revised project still complies with SB 35, city planning officials will be able to approve the changes, without input from the Cupertino Planning Commission or city council, city officials said.

"State law provides for a 60-day review period, and city staff will be fully engaged in the review process," Deputy City Manager Tina Kapoor told San José Spotlight. "This is a promising step to move the project forward, toward the redevelopment of the Vallco site and the production of much-needed housing."

Sand Hill has razed all the former mall buildings on the site, removed contaminated soil and has performed some utility work. If the new version of the project is approved, Moulds said he expects work to resume in 2024 on more utility and site preparation, known as "horizontal" work. If all goes well, the first buildings could begin going vertical in 2025, he said.

Contact Joseph Geha at joseph@sanjosespotlight.com or @josephgeha16 on Twitter.