Business & Real Estate

Rival landowner sues over Elk Grove outlet mall

Complaining of unfair competition, an Elk Grove landowner has sued to block a neighboring property owner from building an outlet mall off Highway 99.

The lawsuit by M&H Realty Partners fulfills a promise the company made a month ago, when the Elk Grove City Council approved development plans for the new Outlet Collection at Elk Grove, which is being developed by Howard Hughes Corp.

Elk Grove city leaders have been awaiting development of the property for years. It will be built on the half-built shell of the Elk Grove Promenade shopping mall, which has sat idle since the economy faltered in late 2008. Hughes hasn’t set a timetable for opening the outlet mall.

M&H Realty, however, said the development agreement violates its property rights because it allowed the Hughes company to build the same sort of big box stores that M&H had intended for its property. Among other things, the M&H lawsuit says the city violated the California Environmental Quality Act when it made the development agreement with Hughes.

A city spokeswoman wouldn’t comment on the lawsuit, instead referring a reporter back to comments members of the City Council made when they approved the project. “Most of us have waited for some time to see this go ahead,” Councilman Robert Trigg said that night. “It’s important to the community and to the business climate.”

In a prepared statement, a Hughes executive reiterated the company’s plan to go ahead with the outlet mall. “We are grateful to the Elk Grove City Council for unanimously voting to move The Outlet Collection at Elk Grove forward. Not only will the development be a desirable dining and shopping destination for the community, we also believe it will be a catalyst for future economic growth in the area,” said Mark Putney, vice president for development.

The lawsuit, filed in late October in Sacramento Superior Court, revolves around the city’s original approval of the land surrounding the mall in 2001.

M&H once owned all the land in question but says that in 2001 it sold the Promenade property “at a discount to fair market value” because the original developer was going to build a traditional regional mall with a handful of anchor tenants. That original vision left the door open for M&H to build “complementary, synergistic” retail developments on the remaining land.

The original developer of the Promenade, General Growth Properties of Chicago, halted construction in 2008 and wound up losing the property in bankruptcy. Hughes took over, and its plan for an outlet mall “conflicts with M&H Realty’s intended development,” the lawsuit says. M&H wants to build similar “big box” stores on its land.

Call The Bee’s Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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