SAN BERNARDINO—The San Bernardino City Council this week gave approval to yet another aggressive step toward rejuvenation of the county seat, entering into an exclusive negotiation agreement with AECOM, The Fransen Company and KB Homes to redevelop the Carousel Mall commercially, simultaneously intensifying the adjacent Theater Square and capping the effort with town homes/condominiums to be intersticed with the shopping opportunities.
Located as it is in the very heart of San Bernardino, the Carousel Mall, as it is now known, has become something of a metaphor for the entire city.
Herman Harris, Philip Harris, Arthur Harris and Leopold Harris opened the Harris Department Store in San Bernardino in 1905. For two-thirds of the 20th Century it was the principal emporium of that city, remaining under Harris family ownership and management well into the 1970s.
In 1972, what was then known as the Central City Mall, was built around the grand old Harris building. J.C. Penney, and Montgomery Ward joined it as major tenants, and the mall boasted 49 other stores or shops of varying sizes.
It was for a time a grand shopping location, temporarily besting its major rival in town, the Inland Center, which opened in 1966. At its peak in the mid 1980s it boasted more than 100 tenants. In the late 1980s it was renovated, and a carousel was installed in the bottom floor, at which point it was rechristened the Carousel Mall. But its fortunes waned with those of the rest of San Bernardino over the years, and by the late 1990s, it began to decline. The first major blow came when Gottschalks, which had bought out Harris, elected to close at that location in 1998 and relocated in the Inland Center. Three years later, in 2001, Montgomery Ward went out of business. At that point, J.C. Penney was the sole anchor. In 2003, J.C. Penney closed. The mall was sold in 2006. Two years later, in 2008, Lynwood-based developer Placo San Bernardino LLC, purchased a major portion of the mall for $23.5 million, with serious designs on reinvigorating it and obtaining short term financing to undertake improvements, signaling it was on a crash schedule to do just that. But that same year, Cinema Star shuttered its theater on the mall’s grounds.
Placo remained committed, however, refinancing its early short-term financing, with a $16.5 million loan from Center Bank.
In May 2010, with its plan stalled, Placo was failing to make its payments to Center Bank. The City of San Bernardino’s economic development agency swooped in and bought the property’s note and deed trust from Center Bank for slightly over $13.1 million. At that point, the city, based on backroom discussions with county officials, had visions of filling large portions of the mall with county offices.
Relations between Placo and the city had entirely broken down by that point. Placo, which claimed it was still intent on making a go of revitalizing the mall, said it was being undercut by the city which was militating to tenantize it with county government offices. The city pressed Placo to pay it the $5 million difference between the amount it had paid for the mall and the amount of money loaned it by Center Bank with interest.
In 2011, there were 33 shops in the mall. But the State of California’s move in dismantling all of the redevelopment agencies in the state seriously crippled San Bernardino’s ability to bring to bear the rerouting of future sales tax revenue, known as tax increment, to finance needed improvements on the 42.6 acres of struggling and unactuated potential in the city’s midst, within walking distance of City Hall and the county’s main administrative building and its historic courthouse and its newly completed 11-story Law and Justice Center.
The Harris building, which was later transformed into Gottschalks, was acquired in 1981 by Spanish retailer El Corte Inglés, S.A., which closed the Gottschalks in San Bernardino in 1998. El Corte Inglés, S.A , despite encouragement by San Bernardino has made no real progress in returning the landmark to its former grandeur. The J.C. Penny’s Store was acquired by the San Manuel Band of Mission Indians. The city holds title to practically all of the rest of the center.
In 2012, the city hit rock bottom, filing for Chapter 9 bankruptcy protection. By late 2014, there were only 17 businesses at the Carousel Mall including four restaurants. Whatever prospect the city once felt it had of luring the county into locating its offices there have long since faded. In April 2014, the only county office there, county of San Bernardino’s Children and Family Services Division, which had entered into a ten year lease for 28,892 square feet of office space at 128 Carousel Mall, Building G, pulled up its stakes and departed.
Bowing to the obvious, San Bernardino gave up on the prospect of becoming the county’s landlord at the mall.
In November 2014, San Bernardino Mayor Carey Davis and San Bernardino City Manager Allen Parker, who were then on speaking terms with one another, sent a letter to more than 80 “development concerns” soliciting return letters of interest to the city relating to the mall. Those letters sought the developers’ vision of what could be done with the mall. Purposefully, city officials avoided providing any description of its own dictates or limitations with regard to the property, wanting to see what the development community’s conception of the potential of the property was. Fourteen developers responded to the proposal, all of whom presented ideas which deputy city manager Bil Manis said “had legs and could really run with this project.” Further evaluation continued and Manis said three of those, AECOM/Fransen, Tishman and Hunt and were deemed serious enough for him and community development director Mark Persico to engage them in substantial dialogue. Ultimately, city staff settled on a proposal by AECOM, The Fransen Company and KB Homes.
“The team that rose to the top that we are very excited to have involved with us as we actually negotiate toward a development agreement is the AECON Team in partnership with the Fransen Company and KB Homes,” Manis said on November 2. Manis said his office is working with AECOM and Fransen toward drafting a “development agreement to drill down what the phasing will be, what the time line will be, how it works financially.” Manis said the deal closed that night is a “six month agreement and a six month option to extend.”
The seriousness with which AECOM and Fransen are approaching the undertaking, Manis said, is demonstrated by a $10,000 per month non-refundable deposit that the city can use “to hire experts to get the city to get the deal. “Manis said AECOM and Fransen/KB are a “very strong team.” He said AECOM is an “international developer” and he pointed out that Fransen has already successfully worked in the city Regal Theaters. by t e
Von Davies of AECOM noted his company had worked with Fransen in the past. He said the tree entities – AECOM, Fransen and KB intended to “build on good work you have done at the Regal theaters, the transit center, and enlivening the city and make it a first class urban environment.” In describing his company, Davies said it had “global reach but we have all the professional entities we can bring to this project all the way from conceptual design through construction through management and with John’s team [i.e. Fransen], the ability to tenant these stores and with KB Homes to bring rooftops to the downtown. This is a unique opportunity and we think we are in a unique position to make that happen.” Davies said an early part of the project at reclaiming the Carousel Mall will involve expanding the existing “nighttime entertainment district to add to the Regal and Historic California Theater.”
Von Davies said the “theater square” will be the hub around which the redevelopment of downtown will take place.
Referencing other projects elsewhere that are similar to what is envisioned in San Bernardino, Davies said he foresaw “Main street with retail shops, cafes, restaurants jazz shops on the lower level and … boutique hotels smaller residential buildings, larger residential buildings, a small urban square they share. There is a general understanding that this community will work as a whole but be a partnership of many different entities. That is the vitality we hope to have in downtown San Bernardino, one that that compliments the civic functions already here, the historic court and the buildings on court street.”
Davies said the approach would be to build the mall gradually, one user and one store at a time, rather than drawing out a comprehensive plan that will not start until all of the pieces are master-planned and committed. “We will break it into bite size pieces with multiple players and multiple stakeholders.”
John Fransen echoed Davies’ comments, saying that the mall was being redeveloped to accommodate a multiplicity of users who will be able to flourish there and that the city cannot simply dictate or will stores, shops and restaurants into place.
“You have a great plan but need to be market driven to support that plan,” Fransen said. “It is important to note that Regal sitting there today, along with the California theatre creates a great opportunity to leverage the success and prior investment by the city The Regal portion of that theater draws over half of a million customers per year. I think we would all agree we are a little bit shy of restaurants when it comes to downtown. So, we think that step one is to take the existing success and leverage off of that. Lining the entrance are six former star cinema locations. There were 20 originally and Regal came in with 14 and does much more business than those 20 ever did. Those high floor to ceiling operations offer a great opportunity for a restaurant to sit next to a large generator of customers . There is parking already there so those locations along with several restaurant locations that can be built into the grassy area out front present an opportunity to be one of two catalyst projects to start the project. “
Fransen emphasized again that the city has to capitalize on the enthusiasm of private sector investment to make the mall redevelopment plan work.
“This has to be market driven and cannot be speculative,” he said. “We are not going to sit and wait. We are going to go into the marketplace and listen to the marketplace and draw users. The Theater Square is one of the engines that can drive the Carousel Mall site it provides capital to drive the project. It provides success and further success on further success and that will lead to other retailers.”