Lawsuit won’t stop Atascadero Walmart, officials say

The developer proposing to build a shopping center next to Atascadero’s controversial Walmart project has defaulted with its lender, but officials say the dispute isn’t expected to hold up city hearings on either project.

Montecito Bank and Trust is suing Santa Barbara-based Rottman Group for defaulting on $6.2 million in loans for several assets, according to an Oct. 18 filing at Santa Barbara County Superior Court.

But officials from Rottman and the city of Atascadero say the lawsuit won’t affect the developer’s intentions to build The Annex, which proposes more than 120,000 square feet of commercial space plus the option for residences next to the proposed Walmart store on Del Rio Road.

Officials from Rottman and the bank said they are working out a deal, and the developer doesn’t expect to lose the land.

The bank alleges default payments in Rottman assets, including roughly 12 acres for The Annex site under the name Atascadero North LLC for nearly $3.9 million; 10 acres for a housing tract in Atascadero under the name Halcon Partners LLC for $500,000; and a loan for an undisclosed business named Olive Hill Properties LLC in San Luis Obispo County for nearly $690,000.

Other properties involved in the lawsuit are outside the county.

“We’re committed to the Walmart project,” Rottman’s Senior Vice President Keith Mathias, said. “We’d love to see the Walmart built there and see The Annex built there, and for the city to enjoy the benefits.”

Wal-Mart Stores Inc. is going forward with a scaled-back plan of 123,000 square feet of retail and grocery space, plus about 6,500 square feet of outdoor garden services.

But the retailer’s multiple design changes to its plan since 2007 have brought delays.

“We’ve waited for them for five years,” Mathias said, “and we’ve been making interest payments on that land.”

The Annex and Wal-Mart Stores are separate entities with separate project applications in Atascadero. But they entered jointly into an environmental review that outlines what they need to do to address the projects’ potential effects on the surrounding area before they can build.

Those hearings have been at a standstill after a preliminary environmental report was released in June because the city hired a consultant to look at how Wal-Mart Stores and Rottman should divvy up the cost of a $3 million to $4.5 million Del Rio Road freeway interchange.

The initial environmental review said traffic improvement is needed if the retail projects are added to the north side of town.

In the original deal, Wal-Mart officials said they would pay for the traffic improvements recommended, Mathias said. But now the retailer is asking to split those costs because its proposed store is smaller than originally planned.

Consultants are also in the last stages of developing a final version of the environmental review report.

These issues are slated to come before the public early next year, Community Development Director Warren Frace said.

Wal-Mart Stores’ parcel includes about 10,000 square feet for two commercial lots and space for a 44-unit multifamily residential development.