Developer Rick Caruso wants to build one of his signature lifestyle centers, but first he has to take on a big mall owner right next door.
Sounds like his long and brutal fight with Glendale Galleria owner as he was gearing up to build his Americana at Brand in Glendale?
Yes, but this time it’s Santa Anita Park, where Caruso Affiliated Holdings Inc. is locked in a years-long battle with Westfield Group to build his latest project, Shops at Santa Anita.
Last year, the Sydney, Australia, company, which owns an adjacent Arcadia mall, won a round in the battle when a judge ruled parts of Caruso’s environmental report on Shops needed to be redone.
So the billionaire developer has struck back.
Santa Anita Associates LLC, the legal entity developing Shops, filed a lawsuit Aug. 20 in Los Angeles Superior Court. It alleged the city of Arcadia erred in allowing Westfield to open more restaurants at its Westfield Santa Anita mall without its own environmental impact report.
The lawsuit might raise a few eyebrows considering Westfield wants to open restaurants in what is just 13,000 square feet of vacant shop space in a recently opened addition. By contrast, the Shops at Santa Anita is planned for more than 800,000 square feet.
“Let’s cut through it – this is another classic example of a developer versus developer using the (California Environmental Quality Act) as a hammer,” said Larry Kosmont, an L.A. economic development consultant. “This is not what CEQA was intended for.”
However, Caruso is the guy who doggedly fought General Growth Properties for years before winning $48 million in damages for unfair business practices and finally getting Americana at Brand built across the street from General Growth’s Glendale Galleria. He isn’t giving an inch this time either.
“Any third-grader knows a restaurant has different impacts than retail space,” said Caruso, who is mostly known as the developer of the very successful Grove in the Fairfax District. “All we are saying is play by the same rules that everybody else plays by and follow the law.”
Katy Dickey, a Westfield spokeswoman, declined comment, saying the company does not discuss ongoing legal matters.
However, Arcadia City Attorney Stephen P. Deitsch said that the restaurant expansion approval process was perfectly legal.
“We felt no additional environmental review was required or reasonable under the facts,” he said.
The troubles with the Arcadia project started almost as soon as Caruso first publicly spoke of the idea – in an April 2004 article in the Business Journal – to build a mixed-use project on the horse track’s parking lot.
The $500 million project sustained an initial blow when an initiative on the November 2004 state ballot that would have allowed the struggling Santa Anita track to install slot machines failed.
Then there was the wrangling with Westfield and its supporters in Arcadia, who – fearing congestion – didn’t want any housing at the project. That prompted Caruso to withdraw planned residences. In 2006, Westfield sponsored successful ballot measures that also blocked paid parking and large Vegas-style signs at the planned development.
Caruso admits that the steadfast opposition has delayed the project by years, preventing him from opening it in 2010 as he first envisioned. Now, at the earliest, the project will break ground in 2011.
“The irony is Westfield did me a favor,” he said. “Had we started this project when we originally intended, we’d be building and then opening right in the middle of the worst economy since the Great Depression.”
Indeed, the Americana at Brand has struggled a bit since opening last year, with closure of some shops and slow sales of the project’s luxury condominiums. Still, Caruso said he is committed to seeing his newest project through.
He said that his company continues to analyze the development and believes “stronger than ever” that Shops at Santa Anita will be successful. Of course, first he will have to overcome the legal and financial hurdles.
The July 2008 court ruling on Caruso’s EIR was a serious setback. A judge ruled that 11 points in the report needed to be revised. Since then, Westfield has appealed the ruling seeking to have several other elements revised.
One big reason the matter has not been resolved is that the legal matter is on hold, but not for any reason that favors Caruso. In March, Magna Entertainment Corp., the Aurora, Canada, company that owns Santa Anita, declared bankruptcy in U.S. and Canadian courts and is seeking to reorganize. One of the biggest track owners in the country, the company got in trouble after spending hundreds of millions improving its tracks.
Magna also is Caruso’s partner in Santa Anita Associates, the entity developing Shops at Santa Anita. Because of the bankruptcy filing, the Arcadia track has been put up for sale and the Westfield legal action stayed.
Earlier this year, Caruso said that he was considering making a bid for the park, but he said this week that he is considering buying it with a partner. However, no final decision has been made and there are other “solid bidders” for the track.
In the meantime, the delays have allowed Westfield to get a leg up on Caruso with its own $120 million outdoor expansion of Westfield Santa Anita. The 115,000-square-foot Promenade opened in May and includes 30 shops and restaurants, such as Banana Republic, Williams-Sonoma and Ruby Tuesday. To the casual observer, the expansion somewhat resembles Caruso’s style.
While the project opened with approvals for 10,000 square feet of restaurant space, Westfield asked the city for permission to convert an additional 13,500 square feet of vacant retail shops into restaurant space. On July 21, the Arcadia City Council voted 3-2 to approve Westfield’s request and allowed the change in use to occur without the completion of an EIR by giving it an exemption.
City Manager Don Penman said the city believes that the expansion was “insignificant from a CEQA standpoint” and that the lawsuit indicates that Caruso is “taking a more aggressive posture” as he battles Westfield.
Kosmont, who also believes the delay in building the Shops at Santa Anita could be advantageous to Caruso, said he nevertheless believes Westfield’s tactics have gotten to Caruso.
“I’ve got to believe Rick would have rather have had his EIR approved and maybe made his own decision to delay certain components of his project. I’d rather make the decision myself, but the reality is they did him a favor,” he said.
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