Northgate Gonzalez fights ‘workforce housing’ project

A heated, hyperbolic battle over a proposed workforce housing project in Riverside is growing louder. It’s a fight that could also offer a kind of preview of future conflicts as urban Southern California’s high building costs and rents continue to push renters — and multifamily developers — farther afield.

“In my 40 years in real estate development,” Scott Bell, a principal of Wilson Holdings, a property owner that’s opposing the project in the Inland Empire city of around 325,000, said in one press release, “I have never seen anything this bizarre.”

The dispute centers around a large apartment complex, called Magnolia Flats, planned for a site adjacent to a shopping center on Magnolia Avenue, a few miles southwest of Riverside’s downtown.

For months the project has faced stiff opposition from the Northgate Gonzalez supermarket chain, one of whose stores serves as the shopping center’s anchor. Representatives of the chain claim the housing development would violate a decades-old easement, wreak havoc by bringing traffic congestion, and ultimately threaten the market’s viability. Lately the dispute has taken on a higher profile as the developer has pushed an aggressive public relations campaign touting the project’s value amid a housing crunch.

“Words cannot describe how disappointed we are in Northgate Market’s opposition to a much needed 450-unit multifamily workforce housing development project,” Darrin Olson, a principal at Realm, the developer behind the project, said in one release earlier this month.

“The City of Riverside describes its vision of Riverside as ‘the place where the American Dream is realized,’” Olson continued. “The Magnolia Project is designed with the goal of [helping] the City to realize that vision and furnish that dream.”
The grocer has a different view.

“The other side of the story,” said Ted Stream, a lawyer representing Northgate, “is, ‘We have an easement, they’re literally going to take away our flow-moving intersection. Do you know what not having a flow-moving intersection does? … We could have to close down the store.”

Northgate leases the space from Wilson Holdings and another entity.

The dispute began in earnest last year, after Olson’s firm won approvals for the project from the Riverside Planning Commission. Realm is a Newport Beach-based investment and development company whose portfolio includes an office plaza in Anaheim, student housing in Pomona and a Downtown L.A. high rise. It had gone through “an arduous two-year process” planning and entitling the Riverside project; the approved plans called for a mixed-use build with 450 residential units and 9,000 square feet of commercial space.

Realm is classifying the apartments as workforce housing, a category intended to be affordable for typically middle-income professionals such as teachers or nurses and that analysts say is badly needed in California. It’s not clear if Realm has guaranteed that rents would be capped in ranges affordable for middle-income renters, but the developer is promoting the “workforce housing” label for the project in its public relations campaign: “The dream of so many lower income families is in peril,” began one release.

In September, months after Riverside granted approvals, Northgate — an Anaheim-based chain with over 40 stores around Southern California — fought back with a lawsuit. The complaint, a breach of contract suit, claimed that the proposed development was in violation of a 1979 land easement, signed by predecessor property owners, that assured the properties in question could only be used for the shopping center and commercial purposes.

“For over 40 years,” the suit said, “the owners of four contiguous properties located at the intersection of Tyler Street and Magnolia Avenue … have been working together to form a synergistic shopping center.”

The easement also guaranteed the shopping center’s pedestrian and vehicle traffic rights, and the apartment plan, the plaintiffs argued, would trample those rights. If the project proceeds, they argue, a parking lot entrance meant for the shopping center would be used by hundreds of residents of the development. The lot, they contend, would become a nightmare for the businesses, with residential traffic both crowding out shoppers and blocking necessary deliveries.

“And where do you think overflow parking [will go]?” said Stream. “They’re going to go and park in Northgate’s parking lot and they’re going to just sit there.”

Last fall, after a flurry of legal filings, a county judge ruled in favor of Northgate, issuing a temporary injunction to halt the development. The developer and the project’s business entity appealed. They also filed a countersuit, which alleged that in 2019, long before any project approvals, Bell had met with the development property’s previous owner and opened the meeting by declaring the development would be expensive for the then-owner.

“This begs the question,” one developer-issued release said, “was the lawsuit filed simly to use the obstruction of the approved Project to “exact” a substantial monetary payment?”

The legal battle — and public relations battle — will likely stretch on for months: An appeals court recently agreed to hear the developer’s challenge to the ruling blocking the project, with a hearing expected later this year.

Olson, the Realm principal, did not respond to an interview request.

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