History of Vallco - Westfield Owned Vallco and it Still Failed?
Vallco Park started as a business park in the 1960s, formed from land owned by 25 Cupertino property owners. It was named for the primary developers: Varian Associates, and the Leonard, Lester, Craft, and Orlando families.
The original builders of Vallco, an entity called “Vallco Park, Ltd.”, built and operated Vallco starting in 1974 until 1990.
In 1990, Westfield became the second owner of Vallco, taking control of the mall through the operator name of "Westland" and operating it through 1994. The Westfield Corporation is a large multinational shopping center operator whose holdings include Valley Fair, Oakridge Mall, and other malls in the area including San Francisco Centre. Most of the publicly available information about Westfield’s Ownership of Vallco is in “Westland Development Agreement 1991”. This is the approved Development Agreement with the City of Cupertino, which is the contract under which the Owner operates the mall.
There has been significant conjecture from retail-only proponents that Vallco has suffered from a history of bad ownership and poor management. That’s not borne out in this record. Valley Fair was “resurrected” around 1986 and started to become a significant force immediately after it was launched, but Westfield didn’t buy Valley Fair until 1999, five years AFTER Westfield’s Ownership of Vallco. It was clear from the 1991 plans that Westfield had strong intentions for a Vallco Redevelopment including the addition of a cinema multiplex, 50 units of affordable housing, and a large Ross discount store between Sears and Bullocks which later became the Macy's space. There were items that continued from the original Vallco agreement including a requirement to keep the ice rink open at no cost to the City and to build a public transit stop including a dedicated Park-and-Ride parking lot.
By the time Westfield sold Vallco to Heitman/Vallco LLC in 1995, it was already in significant decline. It’s also interesting to note that by this point, Westfield had been unable to implement any of the ambitious additions such as the cinema multi-plex, Ross, or parking lot expansion.
The next two follow-on Owners, Vallco LLC and then Cupertino Square LLC seemed to be following the Westfield development plan, but it still took 10 years before the AMC theaters actually appeared along with the other two expansions from that Owner – Alexander’s and Bowlmor. The record shows that Vallco had a very competent Owner / Operator for the critical period of time when Valley Fair and Stanford were beginning to pull ahead as destination shopping. It’s hard to say whether powerful competition or lack of capital led to Vallco’s demise. The Cupertino Vision CV2040 included a Retail Strategy report which includes a number of interviews about the kinds of forces that were hurting Vallco. One of the big factors was that the anchor stores had to all agree on site-wide improvements and it looks like Sears repeatedly exercised its veto. By the time Valley Fair was a significant force, they were exercising geographic exclusivity rights to prevent stores from locating in Vallco (“they had a vested interest in keeping Vallco a third-rate mall”). There was grousing about short-sighted tenant policies including the significant discount on their lease that AMC received if the mall fell below a certain level of occupancy, which became an incentive for poor occupancy. Unfortunately, there are those who stubbornly wants to lock down the Vallco area to its unsuccessful retail-only, super-block mall configuration in the hopes that some future operator will turn it into the next Valley Fair.
For that to happen, you would have to attract a aggressive, well capitalized operator who would be willing to accept terms that prohibit reducing the retail space, even if it was necessary for their success. These restrictions, which fly in the face of all the current market reports and the history of the center itself, dooms Vallco to continue as a dead mall.
The only rational way to rehabilitate the area is to allow flexibility to find a successful future use. By imposing permanent restrictions on this crucial piece of property in Cupertino, these folks want to make it completely undesirable for any potential developer.