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In the latest sign of a possible legal showdown, Menlo Park forcefully rejected the state Attorney General’s July 29 allegations that the city violated state housing law in processing the application for a controversial high-rise development at 80 Willow Road, according to an Oct. 1 letter.
“It is apparent from your letter that your office did not have the benefit of the entire project chronology, “ states Menlo Park’s letter, signed by City Manager Justin Murphy. In it, Murphy notes that he’s confident the city processed the application “in accordance with all applicable state laws,” and adds that no one in the city was approached for information before the Attorney General’s office sent its letter.
The city’s 65-page rebuttal lays out detailed arguments for Menlo Park’s looming legal battle with the state, and comes days after a Mayor Betsy Nash and her council colleagues vowed to fight the massive development at the 6.7-acre campus on the Palo Alto border that was the longtime home of Sunset Magazine. Legal representatives for the developer, San Francisco-based N17, have threatened to sue the city if its “Willow Park” development is not approved by Oct. 27, and the state Attorney General’s office warned of steep fines.
The Willow Park application calls for a 130-room hotel, over 300,000 square feet of office space, 665 housing units, a preschool and some retail space, in buildings as high as 39 stories, or 458 feet tall.
The city’s rebuttal comes a little over two months after California Attorney General Rob Bonta’s office sent the city a letter alleging that Menlo Park violated the Affordable Housing and High Road Jobs Act of 2022 — known as Assembly Bill 2011. The law creates a streamlined, by-right approval process for affordable and mixed-income housing developments on commercially-zoned land, allowing developers to bypass the discretionary local review and exempting qualifying developments from environment review if specific criteria are met.
The July 29 letter also accuses Menlo Park of failing to provide builder’s remedy protections to the developer, which the Attorney General’s office says is required under the Housing Accountability Act, and of unlawfully requiring the applicant to pay for the city’s legal counsel.
In his letter, Murphy said that Menlo Park rejects all of the allegations and expressed concern that the Attorney General’s office did not ask the city for any information or context before sending its July 29 letter. According to Murphy, N17’s development plan “grossly exceeded the density and development standards” needed to qualify for AB 2011 at the time.
In response to the alleged Housing Accountability Act (HAA) violations, the city said the project does not qualify for the law’s “builder’s remedy” protections because the development application submitted by N17 on May 24, 2024, did not include the required amount of residential space — 53.3% of the Willow Park project’s total square footage was designated residential, below the HAA’s 66.7% threshold for residential space in a mixed-use development.
“With the exception of the 100 required units of affordable housing, it is primarily a commercial project with luxury housing,” the letter states, adding that, due to the steep cost of high-rise development, the projected rents for a market-rate two-bedroom apartment at Willow Park would be $9,542 per month. “There is no doubt that the vast majority of the housing in this project would be affordable only to the very wealthiest residents of the Bay Area.”
Additionally, the city stated that HAA “does not prohibit the city from passing the cost of application review to the project applicant.”
In his letter, Murphy says the development’s ownership “raises alarm” for the city. The property is reportedly owned by Vitaly Yusufov, a Russian businessman with alleged ties to top Russian government officials, including former president and prime minister Dmitry Medvedev. Medvedev has been sanctioned by the U.S. government.
Last week, Rep. Sam Liccardo sent a letter to U.S. Treasury Secretary Scott Bessent urging an investigation into the development’s ownership and financing, and to consider Yusufov for economic sanctions.
On Wednesday, Sept. 30, Councilmember Drew Combs said in his newsletter that a “serious” potential new buyer for the property has emerged and is willing to pay more than the property’s 2018 sale price of $72 million. The buyer has not been named, but is “very familiar with the property and values its historical significance” and, if purchased, intends to make only “minimal interior modifications” to the existing campus.
