Director's Report
CITY OF CUPERTINO
10300 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014
DEPARTMENT OF COMMUNITY DEVELOPMENT
Subject: Report of the Community Development Direc~
Planning Commission Agenda Date: Tuesday, November 27, 2007
The City Council met on November 20, 2007, and discussed the following items of interest
to the Planning Commission:
1. Six -month review of Peet's Coffee Temporary Use Permit: The City Council
approved the use permit modification allowing the continued opening time of 5:30
a.m. for the Peet's Coffee at 20807 Stevens Creek Blvd. (see attached report)
2. Appeals of Applications (R-2007-01 and RM-2007-29); 21410 Vai Avenue: The
City Council:
o Upheld the appeal of the Planning Commission's decision to approve a
Residential Design Review (R-2007-01) for a new two-Story 6,677 square foot
residence. The appeal regarded the issues of front yard setback, building
material, building height, building size and privacy mitigation measures.
Council remanded back to the Planning Commission all design decisions,
with a requirement that the maximum house size is 35% FAR.
o Denied the appeal of the Planning Commission's decision to approve a
Minor Residential Permit (RM-2007-29) to construct front and rear second-
story decks on the new residence. The appeal regarded the issues of front
yard setback and entry-living room plate height. (see attached report)
3. Adoption of Green Building Program Incentives: The City Council approved the
following incentives for participation in a green building program:
o New City Government Building projects will meet a Silver Leed minimum
o Expedited Plan Checking for Green Building Design components
o Green Building Award for Green Building projects
o Develop a construction and demolition waste ordinance of 60%
o Payment for Rater Fee or development of a Green Point Rate Fee Rebate, up
to the $50,000 budget item
o Staff to provide alternatives to consider FAR incentives (see attached
report)
4. Planning Commission Vacancy: The City Council directed staff to advertise the
unscheduled vacancy created by Planning Commissioner Gilbert Wong's election
to the City Council during the annual commission recruitment in January,
contingent upon Commissioner Wong being sworn in to the City Council.
t>rz, I .
10300 Torre Avenue
Cupertino, CA 95014
(408) 777-3308
FAX (408) 777-3333
CUPERTINO
Community Development Department
SUMMARY
AGENDA NO.
AGENDA DATE November 20. 2007
SUBJECT:
Consider a six-month review of the temporary Use Permit (U-2004-04) to allow an
opening time of 5:30 a.m. for Application No. M-2006-07, Laura Thomas (Peet's Coffee),
20807 Stevens Creek Blvd. APN 326-32-051.
RECOMMENDATION:
The City Council may take one of the following actions:
1. Uphold renewal of the Modification to the previous Use Permit, allowing Peet's
Coffee to continue opening at 5:30 a.m., if the Stevens Creek Office Center
provides a letter of intent to install a future pedestrian connection; or
2. Deny renewal of the Modification to the previous Use Permit, requiring Peet's
Coffee to revert to opening no earlier than 7:00 a.m., if Stevens Creek Office
Center does not provide a letter of intent to install a future pedestrian
connection.
BACKGROUND:
On November 5, 2007, the City Council conducted a six-month review of the
Modification application and continued the review on a 4-0 vote to the November 20th
meeting. The Council expressed the importance of the pedestrian connection between
the Stevens Creek Office Center that includes Peet's Coffee and the adjacent pedestrian
connection that has already been constructed on the adjacent Whole Foods site to the
west. The Council stated that the Stevens Creek Office Center should be encouraged to
install the pedestrian connection to provide walkability between the office center and
the Whole Foods and to provide pedestrians a more direct route to the Quinlan Center.
As a result, the Council requested that the Stevens Creek Office Center provide a letter
of intent stating that they would install the future pedestrian connection at the office
center adjacent to the Whole Foods pedestrian connection at such time in the future
redevelopment or remodeling occurs on any portion or parcel of the office center. With
this letter of intent, the Council indicated it would support upholding the renewal of the
Modification application to allow Peet's Coffee to continue opening at 5:30 a.m.
De"--3
Six month review ofM-2006-07
Page 2
November 20, 2007
DISCUSSION:
Staff drafted a letter of intent (See Exhibit A) for John Volkmann to review and sign on
behalf of the Stevens Creek Office Center in accordance with the Council's
recommendation. The letter clarifies the intent of the Stevens Creek Office Center to
install the pedestrian connection when future redevelopment or remodeling occurs on
any portion of the office center. Redevelopment and remodeling would entail exterior
building renovations or the construction of new buildings or additions. Repainting or
repair work on buildings would not be considered redevelopment or remodeling of the
center.
According to the property manager of the Stevens Creek Office Center, Mr. Volkmann
is in the process of reviewing the letter of intent drafted by staff and intends to provide
the letter prior to the November 20th Council meeting.
Enclosures:
Exhibit A: Letter of Intent
Exhibit B: Minutes to the November 5,2007 City Council meeting
Exhibit C: City Council report of November 5, 2007 w / attachments
Prepared by: Aki Honda Snelling, Senior Planner
Submitted by:
Approved by:
Steve Piasecki
Director of Community Development
David W. Knapp
City Manager
G:planningjpdreportj appealsjM-2006-07, 6 month review, Nov 20 07 continued
Pt2.,Lf
City of Cupertino
10300 Torre Avenue
Cupertino, CA 95014
(408) 777-3308
Fax: (408) 777-3333
CUPERTINO
Community Development
Department
Summary
Agenda Item No. _
Agenda Date: November 20, 2007
Application: R-2007-01, RM-2007-29
Applicant: Chia-Lun Ferng
Property Location: 21410 Vai Avenue
APPLICATION SUMMARY
Consider two appeals of the Planning Commission's decision to approve a Residential
Design Review for a new two-story 6,677 square foot residence and a Minor Residential
Permit to construct front and rear second story decks on the new residence, Planning
Commission Resolution No. 6488:
A) The appellants are numerous neighbors appealing the following issues: front yard
setback, building material, building height, building size, and privacy mitigation
measures (appellants are requesting a continuance to the next Council meeting-
see attached email request).
B) The appellants are the applicants and residents, Chia-Lun & Hsiao-Chen Ferng,
appealing the following issues: front yard setback and entry jliving room plate
height
RECOMMENDATION
The City Council has the following options:
1. Uphold the Planning Commission's decision and deny both appeals; or
2. Uphold appeal A and deny appeal B; or
3. Uphold appeal B and deny appeal A; or
4. Uphold both appeals with modifications.
BACKGROUND
Generally two-story permits are approved by the Community Development Director.
However, the project was forwarded to Planning Commission due to the number of
concerns received during the public review period. On August 28, 2007, the Planning
Commission considered this project and directed the applicant to revise the plans in
p~s
R-2007-01, RM-2007-29
Page 2
November 20,2007
order to reduce the visual impacts of the proposed house and be more compatible with
the immediate neighborhood. On October 9, 2007, the Planning Commission reviewed
the revised plans and approved the project with conditions. Both the neighbors
(Appellants A) and the applicant (Appellants B) are appealing the Commission's
decision (see Exhibit A & B) for different reasons. Please refer to the attached Planning
Commission staff reports for a detailed project background and issues.
DISCUSSION
Planning Commission
In response to the neighborhood input, the Planning Commission focused on measures
that will help reduce the visual mass and height of the proposed house, de-emphasize
architectural elements that are different from the predominate neighborhood and
enhance the privacy protection to the adjoining neighbors. The Planning Commission
approved the project (2-1-1 vote; Wong/Miller voted yes - Giefer voted no - Kaneda
abstained) with the following key conditions:
.:. Delete the second floor rear facing bakony.
.:. The entry canopy and adjacent living room plate shall be lowered by I-foot.
.:. The front yard setback shall be pushed back an additional five feet so that the
minimum setback is 30 feet (measured from the property line to the entry canopy
feature).
.:. The rear yard privacy protection plan shall be revised to reflect the request of the
neighbor to the rear.
It should be noted that prior to the October 9, 2007 Planning Commission approval,
numerous other changes have already been made to the project by the applicant in
response to the Commission's prior directions. Please refer to the attached October 9,
2007 and August 28, 2007 Planning Commission staff reports for the detailed report
(Exhibit C)
Two of the Planning Commissioners recognized that the house is significantly larger
than the rest of the neighborhood. However, the same Commissioners also
acknowledged that the project is located in a neighborhood with relatively larger lots,
therefore the potential for larger homes exist for everyone with similar lot sizes. The
majority of the Commission felt that with the changes made in conjunction with the
added conditions, the visual impacts from the project will be minimized to a reasonable
level. Commissioner Giefer could not support the project because of concerns on
neighborhood compatibility.
Appeal from the Neighbors (Appellant A)
14 neighbors signed a petition to appeal the Planning Commission decision to approve
the project. A summary of the appellant's concerns are as follows:
t>,e~
R-2007-01, RM-2007-29
Page 3
November 20, 2007
.:. The Vai/Columbus neighborhood has a distinct rural feel.
.:. The look and feel of the neighbor is under assault with the approval of the
project.
.:. The project does not fully comply with the spirit of the Rl Ordinance.
.:. A proposed house is too large.
.:. The proposed house is out of character with the rest of the neighborhood.
.:. The project will decimate the sense of privacy, light and air that currently exist.
.:. The proposed house is not appropriate for the neighborhood.
.:. The project does not preserve nor does it enhance the area suitable for detached
dwellings.
The appellants also recommended several specific changes to the front setback, house
size, roof material, siding material, height, privacy planting timing and appropriate
window sizes of the proposed house (see Exhibit A) to address their concerns. The
Council should evaluate these suggestions and decide if additional changes should be
made to the proposed house. The appellants also submitted additional letters with
signatures from the neighborhood (see Exhibit A)
An email was received from Linda Gohl, representing the concerned neighbors
requesting a continuance of this item to the Council's next meeting. The reason is that
some of the neighbors will not be able to make it to the November 20, 2007 Council
hearing.
Appeal from the Property Owners (Appellants B)
The property owners are also appealing the Planning Commission's decision. A
summary of the specific items that the property owners are requesting further
consideration are as follows:
1. Front yard setback.
2. Entry canopy and living room plate height.
Appellants B would like to request that the proposed front yard setback be maintained
at 25 feet (measured from the front property line to the front entry feature) as oppose to
30 feet required by the Planning Commission to retain their size of their rear yard.
Also, the appellants would like to maintain the proposed entry canopy and living room
plate height for aesthetic and interior functional reasons. The appellants believe that
they have worked with the City and Planning Commission and have already made
significant changes to the project beyond the requirements of the R1 Ordinance.
CONCLUSION
The Council should evaluate and weight each of the appellant's concerns and
suggestions and decide if additional changes should be made to the project. Staff
supports the Planning Commission's decision.
D/2 "7
City of Cupertino
10300 Torre Avenue
Cupertino, CA 95014
(408) 777-3308
Fax: (408) 777-3333
CUPERTINO
Community Development Department
Summary
Agenda Item No._
Agenda Date: November 20, 2007
APPLICATION SUMMARY:
Consider adopting incentives for participation in a green building program.
Application No. CP-2007-01, City of Cupertino, Citywide.
RECOMMENDATION:
Staff recommends that the City Council
. Decide which incentives to offer residents to encourage sustainable and green
building techniques.
. Staff recommends that:
o Applicants be given a choice between getting either the Building Permit
Rebate or the Green Point Rater Fee Rebate for the duration of the
voluntary green building program.
o Considered FAR as a potential incentive.
o No changes be made to the solar permit fee.
o A Construction and Demolition Waste Recycling Ordinance be prepared
and adopted.
o Green Building Awards be awarded to projects that exceed the green
building thresholds.
o Expedited Plan Check for green buildings.
BACKGROUND:
The 2007 Work Program approved by the City Council includes implementation of the
sustainability policies in the General Plan. The Planning Commission recommended
that staff implement a Green Building program at their meeting in July 2007, and the
City Council heard this item on September 19, 2007 and October 18, 2007.
The City Council directed staff to provide the following:
. options for a financial incentive program,
. more information on green building programs,
. the status of solar permits from other cities, and
. information from Build It Green.
~
Application: Cupertino's Sustainability Program
Page 2.
November 20, 2007
DISCUSSION:
GREEN BUILDING PROGRAM INCENTIVE OPTIONS:
There are several options for providing Green Building incentives. Attached is a matrix
outlining the different possibilities for implementing an incentive based voluntary
Green Building program (Exhibit A). The six categories of incentives are:
1. Building Permit Rebates
2. Green Point Rater Fee Rebates
3. Permanent Reduction of Permit Fees
4. Floor Area Ratio
5. Green Building Awards/Certificates
6. Expedited Plan Check
1-3. Building Permit Rebates/Green Point Rater Fee RebatesjPermanent Reduction of
Permit Fees
Staff has researched other cities to determine if they provide financial incentives to
build green buildings. None of the cities that we contacted provide such incentives.
Typically, City-owned utility companies and Pacific Gas & Electric Company (PG&E)
provide financial incentives for green building. These are in the form of financial
rebates for appliances and fixtures or grants for building LEED standard buildings.
None of the cities that were contacted provide rebates for certification of green
buildings in the form of rebates for Green Point Raters. A green point rating for new
single-family homes requires at least 50 points (see Exhibit B). This is a fairly significant
hurdle and it is unclear if a rebate will be significant enough to entice builders to be
Green Point Rated. If Council decides to offer these rebates, then staff recommends that
they not be continued past the pilot phase of the Green Building program or the
expenditure of the $50,000 that Council set aside for the program, whichever comes
first.
No cities offer a permanent reduction of building permit fees. The budget implications
of such a reduction need to be studied in further detail, if Council wants to pursue this
option. Instead of a reduction in building permit fees, the City of Berkeley assesses a
6% green building fee on all building permit applications, regardless of whether the
project is a green or not, to fund their green building program expenses.
4. Tiered Floor Area Ratio
A tiered Floor Area Ratio (FAR) could be considered to motivate residents and builders
to incorporate sustainable practices and materials. This policy change would involve
changing the Single Family Residential (R1) Ordinance and citywide public noticing.
The maximum FAR would only be granted to homes incorporating green materials and
sustainability principles otherwise applicants using conventional building practices
would be restricted to lower building area. An example of this is where the base FAR
allowance for a property zoned single family could be set at 35% with up to 10%
allowance for people building using green building practices.
Dt<4D
Application: Cupertino's Sustainability Program
Page 3
November 20,2007
5-6. Green Building Awards/Certificates & Expedited Plan Check
Green Building A wards including certificates and plaques could be given to buildings
achieving a certain number of points. Staff recommends that the Council offer Green
Building Awards to projects that exceed the green thresholds identified in the checklist
that is applicable to that project.
Expedited plan check is used by several cities to motivate applicants to incorporate
sustainable building practices in their projects. However, it is important to note that the
normal turnaround for plan checks in the communities where this is offered is
significantly more than Cupertino's. Berkeley, San Francisco and Santa Cruz's normal
turnaround for a building plan check is 4 weeks while Cupertino's is only two weeks.
Staff recommends that this be offered as an incentive only through the pilot voluntary
program.
SOLAR PERMIT FEE REBATES
At the last meeting, Council asked staff to compare Cupertino's solar permit fees with
other cities. Staff reviewed the solar permit fees for five other cities; Atherton, South San
Francisco, Burlingame, Palo Alto and San Jose. Cupertino's fees are comparable to the
fees for Atherton, Burlingame and South San Francisco. Palo Alto and San Jose charge
reinspection fees for failed inspections or if a job requires more than one inspection,
they charge fees for the additional inspections. The City of Cupertino charges a flat fee
up to a certain size of solar systems and does not charge for additional inspections. Staff
does not recommend any changes to the fee structure at this time.
CONSTRUCfION & DEMOLITION WASTE RECYCLING REQUIREMENTS
The City of Cupertino currently does not have any demolition waste recycling
requirements. Discretionary projects that have a public hearing at Planning
Commission or City Council typically have a condition of approval reqUIrIng
demolition waste recycling to the maximum extent possible (See Exhibit C). Another
option that the Council has is to' adopt an ordinance that requires all projects to recycle
a set percentage of demolition waste. Staff recommends that Council adopt such an
ordinance. The Environmental Programs Manager from the Public Works Department
can present such an ordinance to the Council at a later date.
ASK AN EXPERT HOTLINE
This is an information hotline run by Build It Green funded by PG&E. Every PG&E
customer pays for this service and is encouraged to use this facility for information on
green building checklists, practices and materials. Staff will advertise this on handouts
related to green buildings and on the website and other printed material related to
sustainability.
CURRENT STATUS OF VOLUNTARY GREEN BUILDING PROGRAM
Staff is currently incorporating the Green Building Checklists into the building
department handouts and brochures. Additionally, Planning Staff is handing these
checklists to all applicants who want to apply for discretionary permits, such as Use
Permits and impressing upon them the Council's interest in being green. As such, staff
f)~-, /I
Application: Cupertino's Sustainability Program
Page 4
November 20, 2007
recommends that the Council endorse the minimum thresholds for each checklist as the
baseline for being green for discretionary projects. These thresholds are listed in the
matrix in Exhibit A.
At the end of six months, in May 2008, staff will report on the status of the voluntary
program. If the Council feels that a mandatory program will be more effective at that
time, staff can retain a consultant to help prepare a mandatory green building program.
Enclosures:
Exhibit A: Green Building Matrix outlining incentive options
Exhibit B: Green Building New Construction Checklist
Exhibit C: Demolition Waste Recycling Requirements in larger projects since 2004
Prepared by: Piu Ghosh, Assistant Planner
Submitted by:
Approved by:
Steve Piasecki
Director, Community Development
David W. Knapp
City Manager
G:\ Planning \ PDREPORT\ CC\2007\Green Building Program-Options 11-20.doc
'j) ~,..,J ;)
CITY OF
City of Cupertino
10300 T orre Avenue
Cupertino, CA 95014
(408) 777-3308
Fax: (408) 777-3333
Community Development
Department
CUPERTINO
Summary
Agenda Item No. _
Agenda Date: November 20, 2007
Application: Z-2006-06, EA-2006-20
Applicant: Olivia Jang
Owner: Eric Huang & Carolyn Armanini
Location: 20916 & 20956 Homestead Road, APN 326-09-052, -0061
Application Summary:
. REZONING of a 2.2-gross acre site from Planned Development (Recreation,
Entertainment, Limited Commercial) to CG (General Commercial).
. ENVIRONMENTAL DETERMINATION: Negative Declaration adopted.
The project will have no significant, adverse environmental impacts.
Project Data:
General Plan Designation: Commercial/Residential
Existing Zoning Designation: P(REC, ENTER, L TD COM)
Proposed Zoning Designation: CG
Gross Acres: 2.2
Net Acres: 1.86
Existing Building Area: 19,060 square feet
BACKGROUND
At its June 5, 2007 meeting, the City Council conducted the first reading of the rezoning
ordinance. The rezoning will allow the property owners to attract a greater range of
commercial and office tenants than the current zoning allows.
The purpose for the delay in the second reading of the zoning ordinance was to give the
property owners of this shopping center an opportunity to demonstrate their
willingness to maintain and improve the shopping center prior to receiving approval of
a rezoning to CG (General Commercial). The second reading of the ordinance was
scheduled for September 4th and postponed to October 16, 2007 and then November 20,
2007 at the request of the applicant.
Dt<-'t 0
File Nos.: Z-2006-06, EA-2006-20
Page 2
November 20,2007
The applicant, Olivia Jang, had previously submitted the attached letter stating the
property owners' intentions to improve the property (Exhibit A). It includes:
. Graffiti removal and repainting the buildings with a brighter color
. Increasing maintenance of grounds
. Fixing and repaving rear parking lot
. Repaving the rear pedestrian path transition
. Repairing the concrete in the garbage bin area
. Resealing, recoating and restriping the front parking lot
. Enhancing the landscaping
. Increasing or updating the parking lot lighting.
The improvements do not include the involvement of the Homestead Lanes property
owner who owns most of the parking lot fronting on Stelling Road (80%) and half of the
building facade, whose maintenance has a significant impact on the appearance of the
entire recreation and entertainment center.
DISCUSSION
The improvement work will substantially be completed by Saturday November 17th as
described in the table below. "H" stands for the Huang property; II A" stands for the
Armanini property. Photographs will be available at the hearing:
Graffiti removal and repainting the
buildin s with a bri hter color
Increasing maintenance of grounds
Fixing and repaving rear parking lot
Repaving the rear pedestrian path
transition
Repairing the concrete in the garbage
bin area
Resealing, recoating and restriping the
front parking lot
Enhancing the landscaping
Increasing or updating the parking lot
lihtin
A & H: Completed with repainting of both
buildin s.
H only: Lot swept clean for repaving. Dead
landsca in removed.
H: Completed.
A: Access drivewa
H: Completed
A: not a licable
H: Completed
A: not a licable
H: Work in progress and will be completed by
Friday.
A: Not started
H: Rear landscaping will be completed by
Friday
A: Three trees lanted alon Homestead Rd.
A & H: Property owners have not evaluated
extra li htin needs et.
D~-'J4'
File Nos.: Z-2006-06, EA-2006-20
Page 3
November 20,2007
By the time of the hearing, a substantial amount of improvement work will have been
completed with the exception of extra or brighter lighting in the shopping center, and
the repaving and re-striping of the Armanini property. The Armanini property is
owned by a family trust with multiple out-of-state decisionmakers, which made work
progress much more cumbersome.
Staff believes a significant portion of the improvement work has been completed and
the City Council should complete the second reading of the zoning ordinance to rezone
these properties to CG.
ENCLOSURES
Draft Zoning Ordinance 07-1994
Exhibit A-I: Letter from applicants dated May 30, 2007
Prepared by: Colin Jung, Senior Planner
Submitted by:
Approved by:
Steve Piasecki
Director, Community Development
David W. Knapp
City Manager
G:\Planning\PDREPORT\ CC\Z-2006-06c.doc
D fl-VS
ORDINANCE NO. 07-1994
AN ORDINANCE OF THE CUPERTINO CITY COUNCIL
AMENDING SECTION 1 OF ORDINANCE NO.2 BY REZONING
APPROXIMATELY 2.2 GROSS ACRES FROM P(REC, ENTER, LTD COM) TO CG
LOCATED AT 20916 and 20956 HOMESTEAD ROAD
APPLICATION Z-2006-06
WHEREAS, an application was filed (Application Z-2006-06, Erik Huang and Carolyn
Armanini) for the rezoning of property from P(REC, ENTER, LTD COM) (planned
Development Zoning with Recreation, Entertainment and Limited Commercial Intent) to CG
(General Commercial); and
WHEREAS, upon due notice and after one public hearing the Planning Commission
recommended to the City Council that the Rezoning be granted; and
WHEREAS, the property to be rezoned is presently zoned P(REC, ENTER, L TD COM)
designation; and
WHEREAS, a map of the subject property is attached hereto as Exhibit "A" as a
proposed amendment to the Master Zoning Map of the City of Cupertino.
NOW, THEREFORE, BE IT ORDAINED AS FOLLOWS:
Section 1. That the properties described in attached Exhibit "B" be and hereby are
rezoned to CG, General Commercial Zoning, and that Exhibit "A" attached hereto is made part
of the Master Zoning Map of the City of Cupertino.
Section 2. This ordinance shall take effect and be in force thirty (30) days after its
passage.
INTRODUCED at a regular meeting of the City Council of the City of Cupertino this 5th
day of June 2007, and ENACTED at a regular meeting of the City Council of the City of
Cupertino this 16th day of October, 2007, by the following vote:
Vote
Members of the City Council
AYES:
NOES:
ABSENT:
ABSTAIN
Wang, Sandoval, Lowenthal, Mahoney
None
None
None
ATTEST:
APPROVED:
IslKimberly Smith
Is/Kris Wang
City Clerk
Mayor
Dte"-J ~
International turnaround expert sees 'gold mine' in Cupertino Square - Silicon Valley / San Jose Business... Page 1 of 2
Silicon Valley / San Jose Business Journal- November 12, 2007
http://saniose.bizjournals.comlsanioselstories/2007/111121storv5.html
SILICON VALLEY I SAN .lOSE
BusilessJournal
Friday, November 9,2007
International turnaround expert sees Igold minel in
Cupertino Square
Silicon Valley / San Jose Business Journal - by SharonJ;)jrn9D1>QO
The chief executive officer for an international turnaround firm says he has big plans for the troubled
Cupertino Square mall, which he describes as a "gold mine" whose full potential has yet to be exploited.
Phil Liao of OrbitResources Inc., a private investment holding company with offices in Silicon Valley,
Munich and Shanghai, says he is not discouraged by his firm's lack of deep retail and real-estate experience.
Rather, he sees only business opportunity in Cupertino demographics and the base of successful businesses
already in and around the mall, including a new 16-screen theater and several restaurants.
"The other malls in a la-mile radius, Valley Fair and Stanford, have no space (available to lease). This mall
isn't busy. (Yet) it's close to ~pp!~: Apple is putting up a new campus, and they've just bought two buildings
(nearby) that will generate a lot of new traffic," he says.
"If we bring in the right tenants and the right tenant mix, this mall will be a success," he says.
On its Web site, Orbit touts its expertise in global marketing and finance as one element to its success.
For Cupertino Square, Laio says, his company also has secured the services of international leasing, property
management and real estate consultant ~~!!.~~..~~.!!:g):~~~~.~..!.!!:~.~. to help to operate the mall, formerly
known as Vallco Fashion Park. (The Vallco sign facing Interstate 280 remains standing but is coming down.)
He is in the process of hiring a new leasing agent with exposure to national and international tenants and
has retained the services of Chicago-based .~~..~.Q.!!!.!!!.~!..~!.~..!.!!:~.~. to set up a new internal leasing operation
and to advise him in selecting the external leasing firm, he says.
"The area eventually is a gold mine," he says. "We need to brand this mall and we need to position this mall,
and it's very important what type of tenants we bring in. This mall is for locals, and we want it to be different
from both Santana Rowand Valley Fair."
Liao declines to say how much he paid to buy his majority stake in the center, which was previously
controlled by a local investment group headed by Alan Wong and Emily Chen. However, he believes the
property's current value to be in excess of $300 million, Liao says.
He also says he is working closely with the Evershine Group, an existing real estate firm with substantial
holdings throughout Silicon Valley, including Marketplace Shopping Center, which is across the street from
Cupertino Square and home to the well-known Elephant Bar Restaurant. Evershine paid approximately $50
million to buy three development sites on the mall's periphery from Orbit immediately after Orbit acquired
them, Liao says. The money will be used to capitalize his property's redevelopment. Pt<--t 1
http://sanjose.bizjournals.comlsanjose/stories/2007/11/12/story5.htm1?t=printable 11/19/2007
International turnaround expert sees 'gold mine' in Cupertino Square - Silicon Valley / San Jose Business... Page 2 of 2
Evershine plans a four-star hotel on one site and condominiums, offices and retail on the others, Liao says.
Evershine did not return calls for comment.
"We have meetings with Evershine almost every week. We need to make sure we are not competing. We are
working very close," Liao says.
Liao's enthusiasm, while contagious, cannot change Cupertino Square's difficult history. Wong, Chen and
their investment partners, including John Nguyen, a largely silent partner, bought the property out of
foreclosure for a reported $80 million in 2003. They, too, had high hopes to transform the property, which
had had three owners in the decade before Wong and Chen acquired it.
To their credit, Wong and Chen brought in Alexander's Steakhouse, an upscale restaurant; Strike Cupertino,
a bowling alley, bar and restaurant; and successfully navigated the notoriously difficult Cupertino political
process to attain development rights for housing. They also build two new parking garages, whose price tags
can climb to $40,000 a parking space.
But by nearly any measure, they failed miserably to crack the tough leasing nut in the mall's interior. With
the exception of three anchor retail tenants -- Macy's, JC Penney and Sears, all long-timers at the 1.4 million
square-foot property -- the mall's interior is largely empty and has been for years.
One obvious reason is the center's proximity to the Santana Row-Westfield Shoppingtown Valley Fair retail
juggernaut. As the crow flies, the two, which sit side-by-side, are less than five miles away.
There is every indication that Wong, Chen and Nguyen sold their majority stake at Cupertino Square to Liao
under duress. A commercial real estate broker and developer in the valley say the duo had spent much of the
last several months trying to raise additional equity capital. Their general contractor on the theater project,
.P~.~..~.Q.!!~~~!!~!!'..!!!'~.~., filed a mechanics lien for a $9.9 million unpaid claim in late July. DPR had
sought payment for at least four months.
DPR released that lien in mid-September, not too many days removed from the announcement that the mall
had been sold.
Liao says he had no business ties to Wong, Chen, Nguyen or Evershine before he acquired the mall.
Wong and Nguyen also are co-investors in the troubled Vietnam Town project in East San Jose.
Construction there stopped roughly two months ago when lender United Commercial Bank began to raise
questions about its progress and stopped paying contractors.
In late 2005, United Commercial also lent at least $15 million to Chen, Wong and Nguyen's respective
investment companies for work at Cupertino Square, public record shows.
According to several sources, the group was also able to attain a much larger loan from a New York-based,
public real estate investment trust, Q!:':~.!!!.~~.~..~.~P.!!~..~.~.!'P.~., on which a large principal payment was due
in October. However, no public records could be found to reflect such a loan, and neither Gramercy nor
Wong nor Chen returned calls.
SHARON SIMONSON covers real estatefor the Business Journal. Reach her at (408) 299-1853.
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11/19/2007