NEWS STORY OF INTERESTA Story by June D JohnsonNorthgate MarketFiles Lawsuit Seeking to Block Workforce Multifamily Housing Developmentin The City of Riverside in the Midst of a Housing CrisisRecent legal action filed by family-owned Hispanic supermarket Northgate Market seeks to prevent development of multifamily workforce housing in the City of Riversidedespite the City of Riverside’s and State of California’sdesperateneed for more housing The Court of Appeal, Fourth Appellate District, will
hear an appeal from a lower court’s ruling enjoining a 450-apartment unit
project known as Magnolia Flats, located adjacent to Northgate Market in
Riverside, California. Northgate Market
filed a lawsuit seeking to prevent the housing from being built because it
would (allegedly) interfere with its delivery trucks which currently drive through
an easement-protected drive aisle between Northgate and the housing site sought
to be developed. The Magnolia Flats
developer has stated thatthe project has accommodated Northgate’s desire to
drive their delivery trucks across the Magnolia Flats development site with
multiple ingress and egress options. Magnolia Partnership LLC (“Magnolia”) is the owner
of 16 acres of mixed-use zoned property at 10481 Magnolia Avenue, Riverside,
California (the “Magnolia Property”). Magnolia purchased the Magnolia Property toconstruct
an attractive mixed-use commercial development consisting of desperately needed
workforce multifamily housing (450 apartments) and 9,000 square feet of retail
space (the “Magnolia Project”). Magnolia’s goal in developing the Magnolia
Project is to provide much-neededworkforce housing for hundreds of middle- and
lower-incomefamilies in the Riverside community. This new multifamily housing
development would also greatly help the City of Riverside achieve compliance
with the State of California’s Regional Housing Needs Allocation (“RHNA”)
requirements. The City of Riverside is required to provide a minimum of 18,415
new housing units for the 2021-2029 Housing Element Cycle. An added benefit of
the Magnolia Project would be additional customers frequenting the businesses
surrounding the Magnolia Property, businesses which include the proposed Northgate
Market grocery store. However, Northgate seeks to block the development of the
Magnolia Project because of purported easement andaccess concerns. Magnolia went through an arduous two-year process
designing and entitling the Magnolia Project which culminated with the Magnolia
Project recently being approved by the City of Riverside. The City’s approval
incorporated review of noise and drive aisle design considerations, which are
governed by State of California CEQA and City of Riverside code. At the time the Magnolia Project was
approved, it was the largest multifamily housing community recently approved by
the City of Riverside. Unfortunately, on September 14, 2021, Northgate
Gonzalez, LLC (“Northgate Market”) blocked the development of the MagnoliaProject
byfiling a lawsuit against Magnolia and Realm Real Estate, LLC (“Realm”) (Northgate
Gonzalez, LLC v. Realm Real Estate, LLC; Magnolia Partnership, LLC, Case
No. CVRI2104149). The Complaint filed by Northgate Market also named Wilson
Holdings, L.P. (“Wilson”), a real estate entity owned by Scott Bell of ICI
Development Company, Inc., and Los Altos XXVII, L.P. (“Los Altos”), a real
estate entity owned by Northgate Gonzalez RE, LLC, of whom Oscar Gonzalez, Co-President,
Chief Operating Officer, and Owner at Northgate Marketand Carl Middleton are members,as
plaintiffs. According to the Complaint, Wilson and Los Altos own the property
where the Northgate Market is located (the “Northgate Property”). In its Complaint, Northgate Market alleges a
technicality that development of the Magnolia Project violates a 1979 easement
agreement between the Northgate Market and Magnolia Project properties.Northgate
Market alleges that the land must be used for shopping center and commercial
purposes. Previously, a Toys-R-Us was
operated on the Northgate Property and a GEMCO was located on the Magnolia
Property (both Toys-R-Us and GEMCO closed their stores leaving the vacant site
a blighted and underutilized eyesore). Concurrently with the filing of its Complaint,
Northgate Market also applied for and was granted a preliminary injunction
enjoining (blocking or prohibiting) the Magnolia Project, the largest
multifamily housing community recently approved in the City of Riverside. Thus,
pending the outcome of the ongoing litigation, development of the Magnolia
Project is on hold. In the interim, Magnolia
and Realm have appealed the preliminary injunction on the basis the easement
agreement's purpose is for ingress, egress and parking, and contains no use
restrictions, maintaining the mixed-use commercial multifamily Magnolia Project
is definitionally in compliance with the commercial language of the easement
agreement. Northgate Market has not yet
responded to Magnolia’s appellant brief. Additionally, Magnolia has filed a
Cross-Complaint against Northgate Market. Shockingly, in their Cross-Complaint, Magnolia
alleges that prior to the lawsuit being filed by Northgate Market,
representatives of Northgate Market, Wilson, and Los Altos made demands for substantial
money from Magnolia. The Cross-Complaint alleges, “On or about January 29,
2019, representatives of Plaintiffs and Cross-Complainant [Magnolia] met in
Newport Beach to discuss Cross-Complainants’ project. Plaintiffs’
representative Scott Bell opened the meeting by stating ‘This is going to cost
iStar a lot of money!’” According to the Cross-Complaint, at the time Mr. Bell
made these comments, iStar was the owner of the Magnolia Property. Tellingly,
it appears that based on the timeline of events as described in the
Cross-Complaint, the monetary demand made to Magnolia precedes the filing of
Northgate Market’s Complaint to enjoin, or block, development of the Magnolia
Project. This begs the question, was the lawsuit filed simply to use
obstruction of the approved Project to “exact” a substantial monetary payment? Darrin Olson, a representative for Magnolia, says “Northgate
Market’s decision to file suit to oppose the City approved development of 450 housing
units is unfortunate given that housing is desperately needed in the State of
California and the City of Riverside.From the inception of the Magnolia Project
and through today, the development team has taken great efforts in designing
the mixed-use commercial and multifamily development to be harmonious with the
easement and integrated with its neighbors such as Northgate Market, while going
above and beyond in designing the Magnolia Project in a manner that addresses
and alleviates those concerns voiced by Northgate Market, including delivery
truck circulation.” Mr. Olson further
states: “Words cannot describe how disappointed we are in Northgate Market’s
opposition to a muchneeded 450-unit multifamily workforce housing development
project.These same residents of our proposed apartment development are likely
customers of Northgate Market. Magnolia just wants to improve our community by
providingdesperately needed workforce housing in the area.” Mr. Olson continues, “The City of Riverside
describes its vision of Riverside as ‘the place where the American Dream is
realized. A place where regardless of income level, people are able to find
distinctive, special places to live.’ TheMagnolia Projectis designed with the
goal of providingsuchhousing in order for the City to realize that vision and
furnish that dream. Sadly, Northgate Market does not share the same dream or
vision and is hell-bent on stopping the development of more workforce housing.” Notably, the developer behind Magnolia
Flats hassuccessfully developed other architecturally appealing multifamily
projects in the Inland Empire that provide significant housing enhancements to
communities. For example, “Mission
Lofts” is an attractive 212-unit apartment community located in Riverside’s
Eastside, a Hispanic neighborhood, whereby a blighted, Metrolink adjacent,
commercial site was redeveloped into workforce housing. Additionally, “Monterey
Station” is a 349-unit apartment community that was developed by the owners of
Magnolia and completed in downtown Pomona.
Similar to the Magnolia Flats and Mission Lofts developments, theMonterey
Station project site was a blighted commercial area near downtown Pomona and
next to the Metrolink station, before being developed into new workforce
housing for hundreds of families. Similar to Mission Lofts and Monterey Station, the owners of
Magnolia are seeking to enhance and provide the much needed 450-unit workforce multifamily
housing in Riverside on a blighted site.
About Magnolia Partnership and Its
Investors:
They have completed over
$20.7B in multifamily value-added transactions since 1996, including 350
multifamily community acquisitions and 90,000 units as well as numerous
developments. © 2022 June D JohnsonReviews
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