The owners of the Nordstrom building in downtown Santa Barbara have an application to build 112 units of housing in the Paseo Nuevo mall, but the proposal is threatened by the city’s potential deal to redevelop the shopping center.

The Nordstrom project includes 60 one-bedrooms, 23 two-bedrooms, 22 microunits and seven studios. The plan calls for 11 affordable housing units, the amount required by the city’s inclusionary housing ordinance.

“We are excited to be moving forward with our adaptive reuse project of 112 rental apartments at Paseo Nuevo in the former Nordstrom building,” said Stephen Logan, senior vice president of Shopoff Realty Investments. “The exterior design fits beautifully in Santa Barbara, adding more windows, balconies and an atrium.”

The Shopoff developers submitted an application for the project under the city’s new Adaptive Reuse Ordinance on Oct. 22. It was a resubmittal from a 2024 application.

The Nordstrom building proposal, however, has gotten lost in the public discussion about the controversial Paseo Nuevo redevelopment because the city is keeping it separate from its negotiations with the owners of Paseo Nuevo.

The city wants to give away the land underneath the mall, valued somewhere between $32 and $39 million, to incentivize AB Commercial, the investment firm that owns the mall’s lease, to build housing at the site of the former Macy’s building on West Ortega Street.

But giving away land under the Nordstorm building would force Shopoff Realty Investments to negotiate directly with AB Commercial for its housing project, a move that Shopoff says could kill the deal.

The City Council is set to consider the land giveaway as part of a disposition and development agreement at its Dec. 2 meeting.

AB Commercial and the Georgetown Company want to build 209 market-rate apartments and 24 affordable housing units at the site of the former Macy’s building, and have said that the only way they could make the project financially viable is if they receive the land as part of the development, according to Kelly McAdoo, Santa Barbara city administrator.

McAdoo said the deal would result in new housing downtown, which could spark a revitalization of the area.

But the housing plan keeps shrinking. Initially AB Commercial had proposed 500 units, then it was lowered to 233 market-rate and 80 affordable on City Parking Lot 2.

The city, however, negotiated behind the scenes to allow AB Commercial the option not to build the 80 affordable units, and instead only build 24.

AB Commercial met with some members of the City Council individually last week ahead of the Dec. 2 vote to pressure them to approve the project, or “risk putting the mall into caretaker status,” according to councilmembers who spoke with Noozhawk.

Shopoff Realty Investments told Noozhawk that if the city’s true goal is more housing, why are they not giving Shopoff a seat at the table now to be included in the redevelopment plan for the mall.

Further tangling matters is that a “reciprocal easement agreement” exists that requires both AB Commercial and Shopoff to agree to the others’ project before any development can begin.

“The applicant’s [Shopoff] current interest in the property is its ground leasehold interest, so they can go through the application process with the city, but they will need to resolve the Reciprocal Easement Agreement to implement the housing project that they are proposing,” McAdoo said.

The original mall was built in 1990 and was a community collaboration of local architects, business, developers and community organizations. So far, the talks to redevelop Paseo Nuevo have existed between the city and AB Commercial and The Georgetown Company alone.

The former Nordstrom building project is proposed to be three stories. The parking will remain underground in the mall.

The first level will include new apartments, a new leasing office and a small amount of commercial retail space, according to the application. The first level will also include a courtyard.

Levels 2 and 3 will also include apartments and be built inside the existing shell of the building, to comply with the city’s adaptive re-use ordinance. The plans call for the addition of new windows and balconies to the façade for the new apartments.

“The project will maximize livability and vibrancy to the downtown,” Logan said.