Redlands Mall development future uncertain

This is a developing story.

UPDATE 4/28/25: The public auction for the property, set for May 1 2025, was canceled at the beneficiary's request on April 28. Read more here.

(Correction: This update originally indicated the auction was set for May 1, but it was canceled not postponed.)

UPDATE 3/20/25: The property was scheduled for public auction on March 20 but has been postponed to April 4 at the beneficiary's request. This is a developing story and additional information will be posted here.

UPDATE 2/20/25: The sale of the property has been postponed to March 20, 2025 at the beneficiary's request. This is a developing story and additional information will be posted here.

UPDATE 2/14/25: After being cried at auction on Feb. 13 the sale has been postponed to Feb. 20 at the beneficiary's request. This is a developing story and additional information will be posted here.

REDLANDS, Calif. 02/12/25 – The Redlands Mall property is set to go to public auction on Thursday, Feb. 13, however, the developer says it’s working with its lender to resolve the loan default and avoid a sale. 

Why it matters: The State Street Village redevelopment was approved in May 2022 as a mixed-use project featuring 700 housing units in downtown Redlands. The developer - given five years to begin construction - was expected to break ground in the fall 2023. However, financial and economic challenges have delayed the project and now are expected to cause changes to the development plans. 

What happened: Public records show that VPV State Street Village LLC received a foreclosure notice on Sept. 9, 2024, after falling behind on a $17 million loan. A Notice of Trustee’s Sale was later issued, with an auction initially scheduled for Jan. 23, 2025, and delayed to Feb. 13.

Kaitlin Morris, director of development for Village Partners Inc., said by phone on Feb. 11 that the auction is canceled. Despite the Notice of Trustee Sale received Dec. 26, 2024, Morris says that Village Partners remains in control of the property and is working with its lender to renegotiate terms. 

“We are working together with our lender to move the property forward toward the redevelopment that we have been planning,” Morris said.

The property is still set for auction on Feb. 13 but will likely be postponed to a later date, according to two individuals from the default resolution department at Chicago Title who answered questions about the default by phone Feb. 11 and 12, but declined to go on record. The future auction date, if any, will not be posted until the property is cried at the auction on Thursday.   

High interest rates and rising costs have made large-scale development in Southern California more difficult in recent years, especially for a project like Redlands Mall’s transformation, Morris said

Morris said some minor refinements are being made to the plan, which will be shared publicly in the coming months. When asked about the scope of the refinements, Morris said they include some minor reductions in scale but do not alter the overall vision of the development.

The development plans presented by Village Partners LLC were unanimously approved by the Redlands City Council and Planning Commission in May 2022. In addition to the high-density housing, the approved plan included about 65,000 square feet of retail, commercial and restaurant space. Development plans also included a multi-block pedestrian plaza.

“We had originally hoped to be under construction by this point, but there are a lot of factors outside of our control,” Morris said. “We are making sure the plan is attuned to the live market feedback we are receiving so that we can take the project vertical sooner rather than later.”

She did not provide a new construction timeline but said Village Partners is focused on adjusting the project to current market conditions and moving forward as soon as feasible.

“Redlands needs housing. It needs walkable housing. That’s our priority, and that’s our focus,” Morris said.

The institutional capital market—the external investors and equity partners that fund large developments—is playing a role in shaping these adjustments, she added.

Zoom out: During the first half of 2024, total commercial property sales in the region dropped by 20% compared to the same period in 2023. At the same time, the region saw a 9.2% decline in construction of multifamily housing from Q2 of 2023. Multifamily developments face the challenges of high interest rates, rising construction costs, a slowing economy, and lower rent growth, according to a report from NAI Capital Commercial.

Local developer David Friedman of Realicore Real Estate Group attributes some recent commercial property defaults to rising interest rates outpacing expected returns, making deals financially unfeasible.

“If you expect to get a 5% return, but interest rates are higher than that—or if you don’t have enough cash to avoid using a loan—then the deal doesn’t pencil out, and you have to wait for a better interest rate environment.”

Another challenge, Friedman noted, is that some developers rely on partners to fund projects but may struggle to secure the necessary backing.

History of Redlands Mall

The Redlands Mall, shrouded with controversy, has historically posed significant challenges for developers.

The site originally spanned six downtown blocks, featuring various commercial and mixed-use buildings. Among them was the historic La Posada Hotel, which was demolished in 1977 to make way for the mall. Over the next four decades, the mall changed hands five times, yet remained untouched.

A timeline of the mall's history can be viewed below:

What’s next?: Village Partners will announce project refinements in the coming months. It is unclear whether these changes will require City Council approval, but Morris said the updates will be shared publicly throughout the process.

“We have been very focused on transparency with the community and making sure that folks are educated and aware of what’s being discussed,” Morris said.

This is a developing story and will be updated as more information becomes available.

This article was originally published Feb. 12 at 21:58. It was updated Feb. 14 at 9:43 and Feb. 20 at 12:13.