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CUPERTINO, CA-Sand Hill Property Co. has acquired a 17.5-acre infill site here that it plans to entitle for a mixed-use project. The San Mateo-based company acquired the property from Hewlett Packard with $65 million in debt and equity from Bank of America and a client of Principal Real Estate Investors, respectively, according to CB Richard Ellis, which arranged the financing.

Located on Stevens Creek Boulevard at Finch Avenue, between Cupertino Square Mall (formerly Vallco Fashion Park) and Interstate 280, the property is considered of the largest undeveloped infill sites in Cupertino. “It’s one of those undisputed, hole-in-the-doughnut kind of sites,” CBRE senior vice president Donald Polishuk, who arranged the financing with CBRE Capital markets EVP John Nelson, tells GlobeSt.com.

Without that kind of site and without the reputation of the operating partner (Sand Hill) and the co-investor (PREI), closing the financing on the property would have proven much more difficult in the prevailing real estate credit markets, Polishuk says. “Banks are being very conservative while they try to get a handle on any potential losses and the direction of the commercial mortgage backed security (CMBS) market,” he says. “The uncertainty in the secondary loan market has resulted in significantly higher loan spreads and more conservative underwriting, including requiring not only that developers and buyers put more equity into their deals but also that the developers and buyers themselves have an extremely solid track record. With strong sponsors and projects with solid fundamentals we are continuing to get deals done despite the turbulence in the credit markets”

Prior to Sand Hill, Pennsylvania home builder Toll Brothers Inc. and local partner Keenan & Bariteau had sought to build 380 condominiums and 113,000 sf of new retail shop space on the site, which totaled 25 acres at the time. The Cupertino City Council approved the project in March 2006 but folks against the project obtained enough signatures to put the necessary rezone on the ballet and voters shot it down in November of that year.

By law, the Cupertino city council was prohibited from entertaining a project like Toll’s for the same site for the past year. Sand Hill Property put the property under contract when the moratorium was up this past November. By that time, however, HP had sold eight acres to Apple, leaving 17.5 acres for Sand Hill currently zoned for retail, offices, light industrial and hotels but not housing.

According to published reports, the people behind the successful effort to stop the project were concerned about too much new housing overcrowding the city’s schools, which may help explain why Sand Hill and company may consider senior housing as the project’s residential component. Pending City approvals, construction of the project is scheduled to start as soon as the end of 2008 with completion scheduled for late 2009.

Sand Hill has a strong reputation in the area. Last year on Stevens Creek Boulevard, Sand Hill developed a new Whole Foods grocery store. In the late 1990s, it acquired Cupertino Village at Wolfe and Homestead roads and turned it into a strong mixed-use property. Sand Hill carved out a portion of the site for a hotel, repositioned the remaining 114,000-sf center and sold it in early 2006 for $65 million. Currently, the company is redeveloping Sunnyvale Town Center.

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