Santa Barbara city officials have confirmed that Rick Caruso, the billionaire mall developer from Los Angeles and owner of Montecito’s much-bedraggled Miramar Hotel, has taken over management of the downtown Paseo Nuevo shopping mall.
While Caruso took control of the day-to-day leasing and management of the property about three weeks ago, the mall property remains “owned” by J.P. Morgan Chase, which holds a 50 year-lease with the City of Santa Barbara. What difference, if any, Caruso’s management will make in tenant selection and the personality of the downtown mall remains to be seen, but Caruso has specialized in aggressively programming his retail centers, like the Americana at Brand, as premier destination spots, mixing family-friendly outdoor enticements with high-end retailers.
Caruso took over management of the mall from the Macerich real estate investment company, which owns 57 regional malls throughout the United States. Macerich also owns and operates the La Cumbre Plaza mall on outer State Street. Typically, Macerich only manages properties it owns, so the Paseo Nuevo was an anomaly. City officials say Macerich did a good job with the mall, and were responsive to city concerns.
When the company installed a highly phallic decorative poll in the mall’s public common space, it was greeted with considerable public comment. In response, the company capped the column with a crown, making it, in the words of one high-ranking city official “less fallacky.” Macerich continues to own and operate the La Cumbre center, which has struggled to establish or maintain much of a thriving identity during the recent recession.
While City Hall has no financial investment in La Cumbre — unlike Paseo Nuevo — city officials have made no secret that they’d love to see Target move there. For that to happen, however, Sears would have to move out and it has about 15 years left on its lease. And any effort to move Target into La Cumbre would no doubt inflame relations between the City of Santa Barbara and the City of Goleta, which is currently hoping to see a Target open up at the intersection of Los Carneros Road and Hollister Avenue.
Adding yet another wrinkle to the Caruso transaction is Paseo Nuevo’s genesis as a creature of the city’s Redevelopment Agency (RDA). Like redevelopment agencies throughout the entire state, the city’s agency was forcibly put out of business two years ago by a combination of legislative action coupled with adverse court rulings. That has left the fate of the downtown mall — like all properties owned by the RDA — somewhat up for grabs.
Many agency properties have been sold off at forced auctions so that the proceeds could be split by all the government agencies that might otherwise have enjoyed in their escalation of property tax values and revenues. Those government agencies have formed a special committee, and initially that committee was interested in forcing a sale of Paseo Nuevo on the theory that the property was worth millions. But it turns out that City Hall received only nominal rent for the mall, deriving most of the value from increased sales taxes and the generalized boost in retail traffic the mall creates. City officials are confident — at least for the time being — that the mall property won’t be sold off anytime soon, though the theoretical possibility does exist.
While Caruso enjoys considerable cachet throughout the state and the world of mall management, in Santa Barbara County his profile remains decidedly mixed. There’s considerable resentment that he has yet to rebuild the Miramar Hotel, which he purchased from Ty Warner some time ago, and even more that he’s sought to secure a major break on his property taxes as a pre-condition for pursuing his development rights.