$400M mall brawl: Simon Property Group, Macerich sue city of Carson
Retail developers claim city mismanaged project, inflated cost of environmental cleanup by $53M
Plans for a $400 million, 566,000-square-foot outlet mall in the city of Carson have fallen apart, with project developers Simon Property Group and Macerich suing the city for negligence and breach of contract.
A lawsuit filed April 30 by Cam-Carson limited liability company, a joint venture of Simon Property Group and Macerich, said the city of Carson broke its pledge to spend $27 million in order to clean up the site, a former toxic landfill.
Instead, the lawsuit filed in Los Angeles County Superior Court contends that the city ballooned its clean-up cost estimate to $80 million, and told developers it lacked the money for clean-up. This “shocking revelation,” was attributable to the city’s “staggeringly deficient” project management, according to the complaint.
Indianapolis-headquartered Simon Property Group, the biggest retail real estate investment trust in the country, and Macerich, a Santa Monica-real estate investment trust, want back from the city the $80 million they’ve already spent on the project, plus damages.
Messages left Monday with the city of Carson including Mayor Albert Robles were not immediately returned.
The lawsuit is a sharp rebuke to Robles who viewed the project, dubbed Los Angeles Premium Outlets, as an economic shot in the arm for the working class, South Bay city of 91,000 people. However, this is not the first stumbling block for the 157-acre site, which lies just west of the 405 freeway and alongside Del Amo Boulevard.
Long one of the largest undeveloped pieces of land in Los Angeles County, the site served as a landfill during the 50s and 60s, earning Carson the moniker, “the garbage can of Los Angeles county.”
As far back as 1968, city officials floated plans for an environmental clean-up, and subsequent development of a prime economic attraction. Indeed, ambitious plans for the site have exceeded the number of Spinal Tap drummers, including two separate, nixed developments for a National Football League stadium to lure the Rams back to Los Angeles.
According to the lawsuit, Macerich spent two years between 2016 and 2018 in “intensive negotiations” with Carson officials to develop, “a state-of-the-art, first class, regional fashion outlet and retail mall to be known as the Los Angeles Premium Outlets.”
By 2018, Simon Property Group entered into the negotiations and the two publicly-traded investment trusts agreed to spend over $400 million on the project. In exchange, the city would complete initial environmental clean-up and infrastructure work, according to the suit.
City officials commenced a ceremonial groundbreaking of the project last August. But according to the lawsuit, the city told developers in October they had blown through their project money.
“Defendants failed to employ a project management and financial control process sufficient for a project of this magnitude (or any magnitude), and to ensure that that they would have the sufficient funds to complete the required remediation and infrastructure work,” the lawsuit reads.
Messages left Monday with Macerich and Simon Property Group were not immediately returned.
The financial mismanagement the companies allege came before the coronavirus-induced economic downturn. However, both companies appear hard hit at a time when most U.S. physical retail is ordered closed.
Macerich closed May 1 trading at $6.84 per share on the New York Stock Exchange, compared to $41.60, one year earlier.
Simon Property Group, meanwhile, last closed at $63.20 on NYSE. It traded at $175.21 per share one year earlier.