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SUNNYVALE, CA-The city council here has signed off on the sale of its empty Downtown mall to a new developer. Sand Hill Property Co. of San Mateo and equity partner Rreef were given the green light this week to acquire the 36.5-acre site from its current owner, Atlanta-based Forum Properties, which decided to sell shortly after it got started on the redevelopment.

As approved, the revised redevelopment plan calls for one million sf of retail, 282,000 sf of offices and 292 condominiums. The plan includes a possible grocery store and more space dedicated to restaurants, two elements not in the original plan.

Sand Hill Property principal Peter Pau also is exploring the possibility of adding a 200-room hotel and an additional 40,000 sf of office space to the plan. The council has said it would consider such an expansion. Pau was unavailable Thursday for comment.

The redevelopment calls for most of the existing Town Center mall to be razed. The demolition includes the 150,000-sf Target and all in-line space. In its place will go a new 180,000-sf Target that will sit atop grade-level parking. The Macy’s store will remain. Only Macy’s and the Target, which own their sites, are currently open on the site.

With a hotel in the mix, the development would more closely match recent successful developments such as Santana Row and Campbell’s Pruneyard. Cupertino’s Vallco shopping center also is planned for a similar transformation.

Sand Hill owns Sunnyvale Town & Country, which sits adjacent to the much larger Town Center mall. For that site, Pau plans a redevelopment that includes 400 homes and 50,000 sf of retail in several mid-rise towers.

Previously, Pau redeveloped San Mateo’s Fashion Island, a one-million-sf enclosed mall. The 75-acre property now holds a 600,000-sf power center, 460,000 sf of offices, 400 apartments and a 154-room Hilton hotel.

The redevelopment of Sunnyvale Town Center came to a halt in early 2006, shortly after Forum Properties demolished a parking garage on the site. Local industry sources say Forum could not come to agreement with Macy’s and Target with regard to the mall’s redevelopment. Toward the end of the year, the city found Forum in breach of contract and made moves to take over the project. That’s when Forum began talking with Sand Hill Property about a sale.

The transfer of ownership received preliminary approvals late December. This week’s vote approved changes that were made to the redevelopment plans. The council also signed off on a general plan amendment that would allow for a hotel on the property, though Sand Hill still must make a formal request to further amend its plan.

With hope of not having a similar development delay, the revised disposition and development agreement includes penalties ranging from $1,000 to $11,000 per day for missed construction milestones.

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