Sand Hill Tops Cupertino in Battle Over Development Fees

Sand Hill Property has won a battle with the City of Cupertino over tens of millions in development fees after approval of its retail village for nearly 2,700 homes.

The Palo Alto-based developer led by Peter Pau has reached an agreement with the city, which agreed to waive $77 million in fees tied to The Rise, a 51-acre project at 10123 North Wolfe Road, the Silicon Valley Business Journal reported.

In February, the City Council approved a revision of the $4 billion project to replace the former Vallco Mall at North Wolfe Road and Stevens Creek Boulevard, not far from Interstate 280.

The Rise will include 2,699 homes, 226,400 square feet of shops and restaurants and 1.9 million square feet of offices in Downtown Cupertino. Initial plans, fought by residents, had called 240-foot tall residential towers and a 29-acre “green roof,” touted as the world’s largest.

But the developer and the city had reached an impasse over development impact fees.

The disputed fees were imposed by the city to defray the cost of public facilities associated with the project. The developer, an affiliate of the Sand Hill Property, debated the validity of the fees.

The city finally agreed to waive a “below market rate housing mitigation fee” and “long-range planning fees” because Sand Hill had planned to build 890 affordable homes. The full amount of the planning fees was found to be “disproportionate” to the impact of the project, the agreement said.

The city agreed to waive $77 million in fees paid over the life of the project in exchange for Sand Hill agreeing to pay $10.3 million in transportation impact fees plus $32 million in “other payments” through building permits or certificates of occupancy for specific buildings.

It appears that, when it came to the fee dispute, Sand Hill came ahead by $34.7 million on the deal.

The agreement also stipulates The Rise must dedicate part of the village for a public park. Sand Hill, approved by the city to redevelop the abandoned mall in 2018, is expected to break ground this fall.

The Rise will satisfy about half of Cupertino’s state-mandated housing goal in the next seven years.

The state requires Cupertino plan for 4,588 homes by 2031, including 1,193 units for very low-income households, and 687 for low-income households.

Sand Hill Property, founded in 1988 by Peter Pau and his wife, Susanna, has developed and invested in more than 65 commercial and residential projects encompassing 20 million square feet across Silicon Valley, according to its website.

This month, the developer filed preliminary plans to build a seven-story, 100-unit apartment complex at 830 East Charleston Road and 4015 Fabian Way in Palo Alto, not far from Google’s headquarters.

— Dana Bartholomew