New Paseo Nuevo Plan a Slam Dunk at Santa Barbara City Council

The new two-piece proposal to transform Paseo Nuevo shopping mall in downtown Santa Barbara earned a glowing review from the City Council Tuesday, with councilmembers hailing this latest proposal as a “win-win-win” for all sides involved.

The new plan — which emerged as an alternative option for Paseo Nuevo after the previous proposal stalled back in December 2025 — would bring Santa Barbara–based software company Yardi System’s corporate headquarters into the long-vacant Macy’s building at the same time as a residential housing overhaul of the Nordstrom building with up to 112 units on the other side of the mall.

“The bottom line is that these two concepts present a generational opportunity to revitalize our downtown core — to jump-start this vision that we’ve all been fighting for on State Street, and to do it now,” said Councilmember Meagan Harmon, one of the most vocal supporters of the proposal.

City Administrator Kelly McAdoo outlined the plan, which requires the cooperation of all parties in the complicated ownership structure, including the city, which owns the ground under the mall; DSP (a partnership between Dune, Shopoff Realty Investments, and Praelium), which owns the Nordstrom parcel; AllianceBernstein, which owns rights to the Macy’s building, the mall parking lot, and the inline retail spaces; and Yardi Systems, which is looking to acquire AllianceBernstein’s combined interests.

The complex ownership created challenges during previous negotiations, as the city and AllianceBernstein balanced competing interests and the project took on many ambitious iterations, eventually ending with a 233-unit proposal that could have required partial demolition and major renovations of city parking lots and the Macy’s building.

When the last proposal was denied by the City Council, Yardi Systems approached the city and AllianceBernstein to express an interest in taking over the vacant Macy’s space. The real estate software company had spent more than four decades building up a reputation as a trusted local business, growing from a handful of employees to a workforce of more than 600, all the while silently supporting nonprofit and philanthropic efforts without much fanfare.

The addition of Yardi Systems proved to make negotiations much smoother, and McAdoo said the city and the rest of the ownership parties were soon all on board to rework the Paseo Nuevo plan with a renewed focus on adaptive reuse. The group that owns Nordstrom already had an application for a retail-to-residential project, and the projects were folded together to be presented as a joint venture that would benefit the owners, the city, and the public.

Under the terms of the proposed development agreement, Yardi Systems would buy all of AllianceBernstein’s interests in the mall. The city would transfer the underlying land to Yardi Systems, and in return the company would make a donation of $5 million to the city’s Local Housing Trust Fund and an additional $700,000 toward the downtown parking fund. The city would also agree to allow the change in use for the Nordstrom project, and DSP would make a $1 million public benefit contribution and a $700,000 donation to the housing trust fund.

If approved, AllianceBernstein’s ownership would be fully extinguished, leaving Yardi Systems as the majority stakeholder in Paseo Nuevo mall.

“With Yardi Systems, we are getting a partner of the highest caliber, and hundreds of employees into the heart of our downtown every weekday, during the exact hours that State Street struggles most,” Councilmember Harmon said.

State Street Master Planner Tess Harris said the new Paseo Nuevo deal marks a major milestone for the revitalization of downtown, and while the city would be giving up its piece of ownership, the resulting project could bring in a steady stream of revenues years into the future.

The city’s current ownership over the ground leases has never brought in annual revenue. But if the city agrees to the terms of the deal, Harris estimates the added benefit to the city’s budget could be upward of $700,000 a year in extra revenues. Yardi System’s 600 employees and the company’s regular visitors could result in $5 million in additional spending downtown, boosting business overall and bringing in hundreds of thousands of dollars in taxes.

“It’s not a giveaway, by any means,” said Councilmember Kristen Sneddon. “We are not contributing nearly as much as the private sector is contributing to this project, and the benefits are very, very real.”

The new proposal received a wave of support from community members, downtown business owners, and nonprofit representatives who spoke during public comment. Many expressed gratitude to Yardi Systems for being willing to invest in the future of downtown Santa Barbara, in a deal that also infused much needed funding into the city’s housing fund.

Kevin Yardi, senior vice president of global solutions at Yardi Systems, made a rare public appearance to speak about the proposal and history of his family’s company, which was founded by his father, Anant, in 1982.

The couple had moved to Santa Barbara from Detroit a decade earlier and started a family with three young children. When they both lost their jobs in 1982, they took a chance and started their own software company out of their family home. Over the past 45 years, the company has evolved and expanded to several office spaces in Santa Barbara, eventually landing in its current location in Goleta.

Kevin Yardi said the company has made it a guiding principle to support the community and grow in responsible ways, always taking care of employees and notably never resorting to layoffs. Yardi Systems has quietly donated a couple million dollars a year to nonprofits and covers tuition for more than 400 college students through the Yardi Scholars program.

“We always felt that doing right by our community is kind of one of our ethos, our North Star,” Yardi said.

The other piece of the puzzle would be a revamped Nordstrom building with anywhere from 80 to 112 units of residential housing. The adaptive reuse project would keep the structure but remove a portion of the roof to create a central courtyard. At least 10 percent of the units would be required to be set aside for moderate-income renters (80-120 percent of AMI). DSP and Yardi Systems would pay for all of the renovation and construction costs, estimated to be more than $100 million.

The entire council supported the joint proposal and unanimously approved the plan to return with an official development agreement on June 16. During that hearing, the council would officially approve the terms and conditions of the transfer, allowing the companies to submit official project applications that would go through the review boards. If all works out, the project could both begin construction as soon as 2027.

Councilmember Sneddon said she was looking forward to seeing the details of the agreement, and advocated for the city to include guardrails to ensure that the city was covered should any unexpected challenges arise. She wanted to make it clear that the museum and community spaces would remain intact, and asked that the agreement be made available to the public before returning for final approval.

“It is really a day to celebrate, and this project really checks all the boxes,” said Councilmember Eric Friedman.