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Marina del Rey Prospers at Expense of County : Real estate: Developers make big profits through favorable long-term leases. Public services lose out.

MARINA DEL REY: FIRST OF THREE PARTS. Next: County management and maintenance. About This Series: Over the past year, The Times has assessed Los Angeles County's management of Marina del Rey, a publicly owned residential and commercial complex that earns money for the county. The project entailed scores of interviews, the examination of thousands of county documents and consultations with independent real estate experts. * TODAY: Los Angeles County's management of Marina del Rey has primarily benefited the developers who operate apartments, boat slips and commercial buildings on the county-owned property under long-term leases. * MONDAY: High operating expenses, deferred maintenance and a willingness to tolerate violations of basic lease provisions are driving down the marina's profitability. * TUESDAY: County officials and leaseholders plan an ambitious redevelopment of the aging marina, but experts raise questions about their strategy for doing so.

April 12, 1992|JEFFREY L. RABIN | TIMES STAFF WRITER

It is one choice chunk of real estate--on the water, on the Westside, close to freeways and the airport.

Marina del Rey--anchored by the world's largest man-made small-craft harbor--is owned by the public and managed by Los Angeles County. The marina was conceived in the late 1950s as a money-making partnership between government and business.

But The Times has found that the partnership has, at the expense of the public, primarily benefited a small group of developers who operate the marina's apartments, restaurants, hotels, boat slips and shopping centers under long-term leases.

Ten years ago, appraisers hired by the county concluded that the marina land was being leased for far less than prime waterfront land would command in the private sector.

For the Record
Los Angeles Times Tuesday April 14, 1992 Home Edition Part A Page 3 Column 4 Metro Desk 2 inches; 63 words Type of Material: Correction
Marina leases--A Times graphic that appeared Sunday with a story on Marina del Rey leases listed various partners in four apartment complexes controlled by members of the Ring family. Former state Sen. Alan Robbins is an investor in a partnership controlling two of the complexes, but Ellis Ring is not a member of that partnership and says that he has no financial dealings with Robbins. Developer Jerry Epstein also is not a member of that partnership.

Independent real estate experts consulted by The Times say this practice continues today. The marina, which made a $15.7-million profit for the county last year, could generate three to five times that amount under the terms of the existing leases, they say.

The marina income has a direct effect on county services because it enters the county treasury with no strings attached. The Board of Supervisors can direct the money to the county's most pressing needs. A shortage of these funds in recent years has prevented supervisors from meeting urgent needs such as mental health, trauma care and AIDS programs.

County officials say they are doing their best to maximize revenue from the marina, but their hands are tied by leases written 30 years ago when the harbor was carved out of swampland south of Venice. The leases--most for 60 years--were designed to encourage development long before the marina was a financial success.

"It was just a dirty old slough, a mess," said Deane Dana, chairman of the Board of Supervisors, whose district includes the marina. "Nobody envisioned it becoming the wonderful playground that it is now. . . . It was a risky venture."

The county's management of the marina, Dana said, should not be judged by the standards of private business because the government is subject to pressures from numerous directions--including the public, marina residents, boat owners and leaseholders.

"It's difficult to run the county like a business," he said. "Government just can't get away with what you can in the private sector."

As a public facility, Dana said, part of the marina's purpose is to enhance the quality of life for county residents. "I liken (it) to our parks," he said. "Money isn't everything."

Today, Marina del Rey is at a turning point. County officials are engaged in private negotiations with leaseholders that could enlarge the county's share of the marina's profits or perpetuate the developers' advantage past the middle of the next century.

The county and developers have come to the bargaining table to address a mutual problem: The marina is aging, and not altogether gracefully. Its buildings and harbor facilities need to be renovated and, in some cases, rebuilt to keep Marina del Rey competitive with newer developments on the Westside. Before making additional investments in the marina, however, developers want the security of longer leases.

The leaseholders are proposing to pay the county some cash up front and promising to redevelop and modernize their holdings. In exchange, the county would extend the leases, most scheduled to expire in about 30 years, until at least 2062.

Over the years, the leaseholders have cultivated a close relationship with supervisors and officials who administer the marina, according to records and interviews.

The six largest leaseholders, who control nearly two-thirds of the leased property at the marina, are major campaign contributors to supervisors. Marina leaseholders and developers have given more than $500,000 over the past six years.

Some leaseholders also give gifts, such as more than $30,000 in free food and lodging at hotels and memberships in yacht and athletic clubs, to top officials in the Department of Beaches and Harbors, which manages the marina.

Over the last 15 years, the supervisors have made decisions that have greatly increased the income of the leaseholders and added tens of millions of dollars to the value of their marina holdings.

The leaseholders are not required to disclose their marina profits to the county or public. County officials recently estimated that one marina leasehold containing 204 apartments, 462 boat slips and a restaurant generated a pretax profit of $3 million in 1990 for developer Jona Goldrich. The county's 1990 income from that property was $942,000.

One major leaseholder, Douglas Ring, described Marina del Rey as "the greatest real estate investment in Southern California." Apartment developer Jerry Epstein said: "I'm not crying poverty. . . . We do very, very well."

Under individually negotiated leases, the county collects a percentage of each leaseholder's gross revenues. The county's share ranges from a few percentage points at some retail shops to 25% or more on some boat slips.

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