A developer has filed a lawsuit against the City of Solvang, alleging that staff assured him that the plan to convert a retail building into a hotel remained valid but later said it had expired, leading him to claim $24 million in damages.
South Coast Property Co. 13-B, represented by Los Angeles-based attorney Stephanie Goldstein, filed the lawsuit in Santa Barbara County Superior Court naming the city and up to 25 unnamed individuals as defendants.
The lawsuit, focused on what’s known informally as the “Water Wheel Building,” claimed civil rights violation and a promissory estoppel, essentially claiming that city staff approvals and assurances kept the developer from proceeding.
The property now appears closer to blight than a boutique hotel.
For the property at 425, 431 and 435 First St. in Solvang, the developer proposed to demolish an existing 2,727-square-foot café/museum building (“Building A”) and construct a new three-story building with a restaurant, a banquet hall, a hotel lobby with retail space, and a rooftop pool deck.
South Coast also proposed renovating the two other existing buildings and modifying the parking, with the city’s planning commission approving the project in 2014.
Over the years, the proposal underwent several revisions, such as changing the number of rooms to 25 and dropping the rooftop pool.
Building plans were approved by the city and South Coast worked to obtain funding.
Before submitting the final plan, the developer contacted city planning staff asking for an extension after believing the plan approval would expire in 2017, but was assured otherwise.
Based on city staff email, South Coast “reasonably believed that its development plan would not expire as long as he commenced construction on the property. Indeed, by approving South Coast’s application for substantial conformity, the city’s planning department conveyed to South Coast and its development team that the development plan was active for three more years from the date the city approve the substantial conformity application.”
The lawsuit contends that a city representative insisted South Coast move forward with demolition, implying the final plan remained active, according to the civil complaint, and issued permits keeping the project moving forward.
In 2019, the developer requested a pre-construction meeting, but didn’t hear back from city staff for a time, with the lawsuit noting “ongoing internal upheaval” at the city.
The same year, a new council hired a city manager and asked him to leave five months later. The city planning director also departed.
On Dec. 10, 2019, city building staff, City Manager Xenia Bradford and City Attorney Chip Wullbrandt met with South Coast’s principal, Brian Raschiatore, his assistant and South Coast’s team, including its designer, architect and contractor.
“During that meeting, South Coast was shocked and devastated to learn, for the first time, that the city contended South Coast’s development plan for the property had expired based on the June 2014 Plan and that, therefore, its building permits were invalid.”
“Thereafter, Bradford sent a letter erroneously claiming that the relevant plans that the City approved in June 2, 2014 had expired, which completely ignored the fact that the city had approved two revisions to the June 2014 Plan in July 2014 and July 2017. The City also claimed that as a result, South Coast would need to completely restart the planning approval process.”
In February 2020, the developer sought to return the building to its prior use as a retail mall, but the city rejected the proposal because South Coast had completed substantial construction work.
“South Coast is informed and believes and based thereon alleges that it was harmed in an amount in excess of $24,000,000,” the claim stated, ticking off damages in the form of development costs, carrying costs, construction costs to demolish the interior of the property, lost rental income, lost profits, loss of property value, damage to business and personal reputations, emotional distress, and more.
The lawsuit claimed South Coast “had no choice but to sell the property in its as is condition because the City refused to allow South Coast to convert the Property back to its original use.”
A civil lawsuit tells one side of the story, and the city is expected to file its response to the allegations in the coming weeks.
The property appears to have changed owners in 2020.
A case management conference has been scheduled for May 25 before Santa Maria Judge Jed Beebe.
— Noozhawk North County editor Janene Scully can be reached at jscully@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.