San Bernardino denies it violated law on Carousel Mall redevelopment

San Bernardino has told state housing regulators who accused the city of failing to negotiate with affordable housing developers for its Carousel Mall redevelopment that it’s not guilty.

City officials say they operated within the law in pursuing an exclusive negotiating agreement with a developer interested in overhauling the shuttered shopping center at 295 Carousel Mall, the San Bernardino Sun reported.

David Zisser, assistant deputy director for the state Department of Housing and Community Development, alleged in a letter last month the city had failed to negotiate with affordable housing developers who had expressed interest in acquiring the land.

The city therefore failed to prioritize affordable housing, according to the state. Zisser said the city erred in negotiating with prospective developers before declaring the Downtown mall property surplus land.

Zisser also alleged city officials withheld pertinent information in paperwork submitted to the state agency as part of the redevelopment process.

The state department rescinded its previous approval of the city’s plans and gave officials until May 15 to cure all violations – or be assessed penalties on any proceeds from the sale of the Carousel Mall property.

San Bernardino officials now contend the city did negotiate with a pair of affordable housing developers who expressed interest in the Carousel Mall property two years ago, but failed to include any description of those discussions in documents submitted to the state.

Nathan Freeman, the city’s director of Community, Housing and Economic Development, contends there are emails from previous city staff that show there were negotiations with BLVD Capital and Alliant Strategic Development during the period the Downtown mall property was made available, in accordance with the Surplus Land Act.

“Neither entity was prepared to take on the entire development,” Freeman wrote in a staff report, “and both entities expressed an interest in re-engaging after the conclusion of the (Surplus Land Act) process and in concert with the selected developer.”

These emails were included in the staff report, and Freeman said they show the city did its part in negotiating with interested firms and prioritizing affordable housing.

Next, Freeman added, the classification of the Carousel Mall property as a lot planned for future development allowed city officials to pursue an Exclusive Negotiating Agreement with a preferred developer, which city officials did five months after choosing Renaissance Downtowns USA and ICO Real Estate Group to lead the project in March 2021.

As such, the only violation San Bernardino committed was failing to include any description of the negotiations with BLVD or Alliant in the documents filed with the state in August 2021, Freeman wrote.

“This was an administrative error by prior staff,” he added.

The two-story mall, which opened as the Central City Mall in 1972 with 53 stores, including three anchors, closed in August 2017. The 43-acre shopping center is owned by M&D Properties, based in Buena Park. The land is owned by the city.

In December, the City Council voted to spend $8 million to demolish the fire-damaged mall.

In March 2021, Renaissance Downtowns USA and ICO Real Estate Group, both based in Los Angeles, were chosen by the city to redevelop the mall into a mixed-use residential, entertainment, commercial and office development.

The developers proposed replacing it with a Downtown urban village, with 3,500 homes inside an urban-retail complex with river paths and thousands of trees. Lincoln Property, based in Dallas, was added last August to the redevelopment team.

But in October, Lincoln withdrew from the revamp project, citing “economic” reasons.

— Dana Bartholomew