DOWNTOWN LOS ANGELES - The Los Angeles Community Redevelopment Agency was formed in 1948 with the mission to alleviate blight in the city by funding new development, spurring economic growth and raising property values. After more than six decades’ worth of projects — with some of the most notable rising on Bunker Hill in Downtown — L.A.’s CRA, along with every other redevelopment agency in California, was shut down in 2012 as part of Gov. Jerry Brown’s effort to funnel funds back into the state’s depleted coffers.
While many people have focused on what the demise of the agency will mean to low-income housing and other projects, there’s another big impact: Dozens of properties that the CRA owned, including a high-profile parcel in Downtown, must be sold.
The property sales are just one element of a plan, overseen by what is referred to as the CRA successor agency, that aims to redistribute properties to buyers, the city and the county based on the various contracts and obligations the CRA had made before its demise. The Long Range Property Management Plan divides 119 properties into four categories: those that will be held for government use; held for future development; used to fulfill enforceable obligations; and sold on the open market to the highest bidder.
The first tag applies to any property that had an existing agreement for government use before the dissolution of the agency. Future development properties must have been part of an existing redevelopment plan and will be handed over to the city and/or county that brokered the deal. The third category encompasses properties that will be retained for revenue, or sold outright, to pay off loans, bonds and other CRA debts.
The final category encompasses any remaining properties that will be sold, with the proceeds going to the various “taxing entities.” The county, city and Los Angeles United School District comprise the three biggest entities that stand to benefit from the redistribution of CRA resources, including past collected property taxes and future sale proceeds.
The bulk of the properties — 75 in all — fall into the for-sale category.
Bunker Hill Trophy
Perhaps the most intriguing property on the list is the parcel at 361 S. Hill St., directly south of Angels Flight and east of the skyscrapers One and Two California Plaza. It was once the site of the proposed third phase of the Cal Plaza office development, but plans for a high-rise were scrapped in the recession of the early 1990s. In recent years the site has drawn attention for the occasional herds of goats placed there to eat overgrown weeds.
Exactly what the 104,947-square-foot parcel fetches and who would be interested in buying it is unknown. An initial CRA valuation places it in the vague category of being worth more than $10 million, though a further appraisal will be necessary (it was acquired in 1961 for $2.7 million). It has already been entitled for an office high-rise, but it is unclear whether one will ultimately rise on the plot.
Steve Marcussen, executive director of brokerage at real estate firm Cushman & Wakefield, says the parcel has tremendous value because of the development boom Downtown is experiencing. Yet, he notes that any project will be “very, very expensive” because of the excavation the hill requires and possible pre-existing obligations for a development to connect with California Plaza.
“It could be a good residential site, but there are other plots that don’t require the kind of work and money the parcel needs,” Marcussen said. Referring to a proposed residential complex at Fifth and Olive streets, he added, “If the zoning allows for something half as big as originally planned, like with the new Park Fifth site project, that might be helpful for developers.”
Another hurdle for office development could be sagging demand for traditional office space: Vacancy in Downtown Class A buildings is 19.4%, according to research from brokerage firm Colliers International. That comes as Brookfield Office Properties is expected to spruce up four recently acquired buildings, heightening potential future competition for tenants.
“Bunker Hill used to be the epicenter of trophy office space,” said Adam Tischer, a vice president in the Downtown office of Colliers International. “But as retail and other amenities develop off the hill, and with more office users demanding more creative and lifestyle-centered working environments, Bunker Hill now is less desirable and is a removed island.”
Still, some worry that the parcel could be wasted on a smaller project that lacks density. Perhaps for this reason, the city has submitted a request to the CRA to acquire the parcel and redefine it as a “future development” property, according to a memo dated Oct. 1 from Mayor Eric Garcetti’s office obtained by Downtown News.
That aim doesn’t surprise Dan Rosenfeld, a former Downtown developer and economic development deputy for Supervisor Mark Ridley-Thomas who now sits on the oversight committee for CRA/LA’s property disposition process.
“There are people making very good arguments that some properties will be better for the public if they are held over a longer time so the market has more time to settle, rather than just putting them on the auction block right now,” Rosenfeld said.
Angels Flight and MOCA Land
Other Downtown properties on the for-sale roster include the land underneath One and Two Cal Plaza, the Omni Hotel on Bunker Hill, Angels Flight and the Museum of Contemporary Art. The current lessees of the Cal Plaza properties and the Omni have the first opportunity to buy the land; MOCA has expressed interest in acquiring its property, according to a CRA/LA document, but does not have preferential rights to a purchase.
Meanwhile, the questions surrounding operational safety at the Angels Flight funicular make its future unclear; the current lease runs through 2082 and again contains a preferential right to the land.
There are also questions regarding how long it will take to execute the Long Range Property Management Plan. The successor agency’s current timeline has the plan going to the state Department of Finance in January. If approved, the plan will begin divvying up the government use properties in February, and options for future development sites will be hashed out by the end of June. Bidding for open properties won’t happen until June 2015, according to the proposed timeline.
Marcussen expects delays in the process because of the complexities of each property, the bidding process and possible jockeying between the county, city and private-sector entities.
“There’s a lot at stake here, and everyone has a different agenda and ways they can benefit. It’s painful and long and expensive and political,” Marcussen said. “I think it will take much longer than anyone expects.”
In essence, expect to see more Bunker Hill goats before you see construction on a new Cal Plaza building.
© Los Angeles Downtown News 2013