Winding its way through the channels of commissions, public reviews and city processes, the Paseo Nuevo redevelopment plans will go before Santa Barbara’s Planning Commission on Thursday for a conceptual review.
The review reflects the project’s quick momentum as city staff work to finalize plan details before early December, when the City Council will vote on entering a formal Disposition and Development Agreement (DDA) with AB Commercial, owner of the mall’s ground lease.
This project marks one of the most dramatic city government trades proposed in recent memory. Presently, the city of Santa Barbara plans to give away Paseo Nuevo’s land to AB Commercial in exchange for the global investment firm developing 233 market- rate apartments in a 75-foot apartment complex at the former Macy’s site, as well as 85 affordable housing units in a new, 70-foot affordable housing building on top of Parking Lot 2.
While no exact numbers on total cost or projected benefits are available, it is reported that the land swap agreement amounts $32 million to $39 million in value.
Community members will get their first chance to voice comments, concerns and questions about the revised redevelopment project when the city hosts open house sessions at 707 Paseo Nuevo from 6 to 7:30 p.m. on Oct. 15 and noon to 1:30 p.m. on Oct. 16.
“I don’t want to see this development agreement too far advanced to the point where public input is no longer able to be taken into consideration,” City Councilmember Wendy Santamaria said during city staff’s Aug. 5presentation.
The Planning Commission Conceptual Review arrives after the Historic Landmarks Commission (HLC) voiced disapproval of the plans to construct two buildings that dramatically exceed Santa Barbara’s downtown height restrictions. Typically, a downtown building cannot be more than 48 feet tall, or 60 feet if it is community benefit housing.
However, since the Paseo Nuevo project focuses on increasing downtown housing, including affordable units, the development can use the City’s Average Unit-Size Density Incentive Program and the State Density Bonus Law. This means that the city can approve the development of two new apartment buildings with the proposed maximum heights of 75 and 70 feet, respectively.
“It is just out of scale and inappropriate to Santa Barbara,” Commissioner Sheila Lodge said of the proposed plan during the Sept. 24 HLC meeting.
In addition to the 233 market-rate units in Paseo Nuevo, AB Commercial’s proposal outlines the addition of a specialty grocery store and new retail that will support the company’s more high-end vision.
“This design needs some soul,” HLC Commissioner Keith Butler said. “Color or stonework … this will set a precedent for work to come.”
Eighty-five affordable units are proposed to be constructed on top of Parking Lot 2, next to the Kimpton Canary Hotel. With a play area and community room slated for the first floor, the building’s apartment types will be almost evenly split between 21 studios, 23 one-bedroom, 21 two-bedroo, and 20 three-bedroom apartments.
City staff have said they hope the varied apartment layouts will attract a range of tenants, from individuals to families. The Housing Authority of Santa Barbara received a presentation on the proposal on Sept. 10 and is now a part of the planning process.
Proposed changes to downtown parking include adding 28 additional spaces to Lot 1 to offer a total of 600 parking spaces. To accommodate the affordable housing construction on top of Lot 2, the parking lot will be reduced from 569 to 383 spaces.
Construction on both the market-rate and affordable housing building will be contracted to take place simultaneously. City staff have confirmed it will fall to AB Commercial to support existing retailers during construction.
The city’s move to give away $32 million to $39 million in land value, as well as 20 years of property tax concessions, to AB Commercial in exchange for housing has turned heads. Yet, as AB Commercial owns the mall’s ground lease for the next 40 years, the city maintains that transferring ownership of Paseo Nuevo’s land is a necessary incentive to ensure that housing is developed in the foreseeable future.
As it stands, City Administrator Kelly McAdoo has confirmed that AB Commercial projects a 6% return on investment. It is her stance, along with that of city staff, that finding another developer willing to take on such a low-return project would be highly unlikely.
AB Commercial — formally Alliance Bernstein — is a global investment company with $676 billion in assets headquartered in Nashville, Tennessee. AB Commercial took over the Paseo Nuevo ground lease after the prior lease-holder defaulted on their loan.
While the Paseo Nuevo redevelopment is not part of the State Street Master Plan, which is still in development, the project is leading the charge for the call for more housing. Many community members and representatives have expressed excitement at the prospect of new housing downtown, while others have raised concerns over what the addition of well over 300 tenants would mean for traffic and circulation as well as local school populations.
Still others have raised the question of accessibility and demographics, particularly when it comes to the luxury-styled apartments at the Macy’s site. The HLC recommended in its draft meeting minutes that the city should ensure that the affordable housing building has “equal dignity and character to the market-rate building.”
No further approval from the Planning Commission is needed for city staff to move plans forward. Thursday’s Conceptual Review hearing will serve only as an opportunity to generate additional suggestions and input before plans are finalized and presented to the City Council as part of the DDA this December.
If the DDA is approved, the project will progress with a land use entitlement application and review, returning to the HLC for approval in spring 2026.
The final part of the Paseo Nuevo redevelopment puzzle is the future of the former Nordstrom’s, which also sits vacant. Because Shopoff, the owner of the Nordstrom lease, is part of the three-way reciprocal easement agreement that controls Paseo Nuevo, the company must also sign off on the redevelopment plans. While approval has not yet been secured, city staff confirmed to local media this week that Shopoff has an application ready for about 100 housing units to be constructed at the Nordstrom site, indicating that even more housing — and renters — may be headed downtown in the coming years.
For more information about the Paseo Nuevo Redevelopment Project, see the city’s projects page on its website.
Daisy Scott is the City Desk editor and Arts writer for VOICE magazine. She has reported on Santa Barbara news and arts and culture for over five years. An award-winning journalist, she holds an MA in English from San Diego State University and a BA in Literature & Writing from UC San Diego, where she was editor-in-chief of The UCSD Guardian. Daisy enjoys teaching and working with students, and celebrating all opportunities to connect with others through writing.