San Bernardino Development Company LLC, the joint venture between Renaissance Downtowns USA and ICO Real Estate Group chosen by San Bernardino officials to undertake a makeover of the Carousel Mall in 2021, has sued the city over its cancellation of that contract.
After years of deterioration at the mall, which first opened in 1972 as the Central City Mall by incorporating the 1927 Harris Department Store at its east end, city officials in earnest about two decades ago undertook, through its redevelopment and economic development agencies, to revive it as a commercial center. This involved several entities, including the Spanish company El Corte Inglés, S.A.; LNR Corporation; the San Manuel Band of Mission Indians; AECOM; the Fransen Company; KB Homes; Lynwood-based developer Placo, functioning as Placo San Bernardino LLC; Tishman Construction Corporation and Hunt Development Group. None of those efforts panned out.
City officials in 2020 resolved to hold a competition to find a contract redeveloper of the property and perhaps see it regain the glory of its heyday in the 1980s when it was host to Montgomery Ward, JC Penney, Harris’ and 114 other tenants. Bidding for that opportunity were SCG America, an American affiliate of a Chinese-owned company; Los Angeles-based BLVD Communities, Calabasas-based Alliant Strategic Development, Renaissance Downtowns USA and ICO Real Estate Group. Along the way, Huntington Station, New York-based Renaissance Downtowns USA and Los Angeles-based ICO Real Estate Group, which had initially entered competing bids but which had cooperated on projects previously, elected to combine their efforts.
Ultimately, despite then-Mayor John Valdivia, because SCG had slipped him a lot of money, and then-City Manager Bob Field militating heavily on behalf of SCG America, Renaissance Downtowns USA and ICO Real Estate Group, functioning under the collective name San Bernardino Development Company LLC, on March 3, 2021,captured the right to develop the mall property when a majority of the San Bernardino City Council consisting of Councilman Theodore Sanchez, Councilwoman Sandra Ibarra, Councilman Fred Shorett, Councilman Ben Reynoso, Councilwoman Kimberly Calvin and Councilman Damon Alexander voted in favor of accepting the San Bernardino Development Company LLC proposal to serve as the mall’s combined master redeveloper.
Things proceeded apace, but on March 16, 2023, David Zisser, the assistant deputy director for the California Department of Housing and Community Development’s accountability unit, stated in a publicly-released letter that the City of San Bernardino had violated four state laws or policies with its action in approving the arrangement with Renaissance Downtowns USA and ICO Real Estate Group and its subsequent facilitating of that deal.
According to Zisser, the city violated the Surplus Land Act in its disposition of the entire mall property by having submitted to the California Department of Housing and Community Development documentation on August 5, 2021 that was inaccurate and incomplete, to wit, that no affordable housing developers had expressed interest in the Carousel Mall property. While the California Department of Housing and Community Development initially accepted that documentation and issued a letter to the city on September 2, 2021 approving the disposition based on the information and documentation, subsequently, according to Zisser, the department learned of the inaccuracies in the August 5, 2021 letter and rescinded its approval and referred the matter to California Attorney General Rob Bonta for possible criminal or civil action against the city and its officials.
In August 2021, according to Zisser, San Bernardino city officials dissembled by representing that the city had been provided with no qualified notices of interest in developing/redeveloping the Carousel Mall property by low-income housing developers. In actuality, Zisser said, two entities, BLVD Communities and Alliant Strategic Development – both of which have divisions concentrating on building affordable residential units – responded to the city’s notice of availability.
The city did not meet its obligation of holding a round of “good faith” negotiations with BLVD and Alliant, according to the State of California. In recent years, the California Department of Housing and Community Development has been stressing the need for local governmental jurisdictions, both cities and counties, to develop affordable housing in response to what is widely considered a housing crisis in the Golden State.
According to Zisser, the city issued a preliminary exclusive negotiating agreement with Renaissance Downtowns USA/ICO Real Estate Group on May 26, 2021, less than a week after the notice of availability was issued and during the subsequent 60-day notice period.
“Based on publicly available documents on the city’s website, it is evident that the city negotiated with at least one prospective developer before the city declared the property surplus or issued a notice of availability,” according to Zisser.
Since the city did not negotiate with BLVD Communities or Alliant Strategic Development while negotiating with Renaissance Downtowns USA/ICO Real Estate Group, which did not respond to the notice of availability, the city further violated California law in that it “failed to properly prioritize affordable housing,” according to Zisser.
The city was given until May 15, 2023 to cure the violations.
On May 3, 2023 a five-sevenths majority of the city council voted to abrogate its agreement with the Renaissance Downtowns USA and ICO Real Estate Group consortium. To head off any legal action that Rennaissance/ICO might pursue for having been crossed up after spending two years preparing to make good on its proposal, the city council voted to pay the partnership $100,000 for its trouble. The vote officially terminated the city’s exclusive negotiating agreement with the two entities, or so the city thought.
As it turns out, lawyers for Renaissance Downtowns USA and ICO Real Estate Group say that is not good enough.
In a complaint for open-ended damages filed in San Bernardino Superior Court on March 28 that does not delineate precisely what Renaissance Downtowns USA and ICO Real Estate Group are owed, attorneys Anthony Barron, Carlos Becerra and Adriana Levendowski of the Los Angeles-based law firm Nixon Peabody maintain that “[San Bernardino City officials controlled and manipulated the process in bad faith for their own ends by systematically misleading the state housing authority, obstructing the negotiations, delaying key milestones, refusing to provide exclusive negotiating agreement-mandated progress reports to the city council and the community (including exclusive negotiating agreement-mandated prepared by the San Bernardino Development Company which were purposefully withheld from elected officials), hiding material information from the San Bernardino Development Company and publicly disparaging the project and the San Bernardino Development Company. If that were not enough, city officials engaged with other developers relative to the project while the exclusive negotiating agreement remained in effect.”
This amounted to a “web of deceit,” according to Barron, Becerra and Levendowski, that led Renaissance Downtowns USA and ICO Real Estate Group down the garden path. The city used the state complaint to back out of the deal with the San Bernardino Development Company.
“After the San Bernardino Development Company spent years and millions of dollars for services and intellectual property contributions upholding its end of the bargain, the city unilaterally terminated the exclusive negotiating agreement on May 3, 2023, without warning and in breach of the exclusive negotiating agreement,” according to Barron, Becerra and Levendowski. “As a result of the city’s and its staff’s misconduct, the San Bernardino Development Company has suffered millions of dollars in damages.”
According to Barron, Becerra and Levendowski, the city simply pulled the plug on the deal it had going with Renaissance Downtowns USA and ICO Real Estate Group instead of endeavoring to incorporate an affordable housing component into the mall redevelopment project as the California Department of Community Development and Housing was seeking and which Renaissance Downtowns USA and ICO Real Estate Group.
City officials, who are still rocking back on their heels two weeks after the suit was filed, have given no public response to the suit.