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MILPITAS, CA-Lap Tang Development Co., a San Jose-based developer, has paid $43.9 million for Serra Center, a 16.4-acre mixed-use center here that it plans to partially raze and redevelop with 375 luxury condos and 135,000 sf of for-sale retail shops. The seller was the Piedmont-based Donovan Trust.

Serra Center sits at the confluence of Interstate 880 and Highway 237 in the heart of the Silicon Valley. The center consists of a retail strip center; two free-standing restaurants including a Chili’s; two hotels (Days Inn, Travelodge); a Walgreens; and three undeveloped parcels. Other tenants include Denny’s and Big Lots.

The redevelopment will occur on the easterly 10 acres of the site, which was rezoned from the office overlay of the Redevelopment Agency Midtown Specific Plan to a mixed-use approach. The area can support several hundred thousand square feet of development, says Mike Federle with Grubb & Ellis in San Francisco, who had the disposition assignment for the Trust along with fellow G&E brokers Nicholas Bicardo and Colin Federle. Brian Phumg of AMB Commercial Brokerage represented the buyer.

“The ownership has not been actively leasing the center in order to keep its options open with regard to redevelopment,” Federle told GlobeSt.com in October , when the property came to market. “The center is 60% vacant but could be leased up very quickly because there is no vacancy in the market.”

Because the property is listed as a “gateway site” in the Midtown Specific Plan, Federle says the new owner should have no problem getting its development approvals. “The City of Milpitas is very interested in seeing the Serra Shopping Center,” Federle said in October. “It will work closely with the sponsors to attain a viable result.”

Located at 200 Serra Way, the land had been owned by the Donovan Trust for over 117 years and is known as the site where Father Junipero Serra held penance for his priests in 1778. Today the intersection of Highways 880 and 237 has a daily car count of 700,000 cars. Cisco Systems’ corporate headquarters campus is directly across the freeway with 10 million sf of office and R&D space.

“The key to maximizing the value of this property was our ability to get the existing zoning changed from the office overlay of the Redevelopment Agency Midtown Specific Plan to a mixed-use approach,” says Federle. “The property had appraised for $22 million before the usage change.”

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