If the state approves a deal to buy 30 acres of proposed parkland along the Los Angeles River near downtown, the seller--a Florida developer--stands to make a nearly $10-million profit at taxpayers' expense.
The proposed transaction has some park advocates wondering if state park money is fast becoming a financial trough for companies that acquire key parcels and jack up the value before selling to conservationists desperate to buy.
"We seem to be getting in a pattern where there's a whole new subculture of developers buying land and selling it for three times what it's worth," said Melanie Winter, head of the River Project, one of the main groups pushing for the state park.
Her organization and others have resigned themselves to such increases "because we want to see the park built," she said.
But representatives of the Florida company, Lennar Partners, said they are merely selling the land--known as the Taylor Yard--at fair market value based on an objective appraisal. After all, they said, the state Department of General Services must review and approve the deal.
"There is a legally established process here," said Bill Delvac, an attorney for Lennar. "There is a mechanism in place to make sure the state pays only fair market value."
He also noted that Lennar did not set out to sell the property, but agreed to do so only after park advocates successfully sued the company to conduct a complete environmental review, delaying the planned development of the property for months and putting its fate in jeopardy.
Lennar first secured an agreement in 1999 to purchase the land from Union Pacific for about $540,000 an acre. With millions of dollars in incentives from former Mayor Richard Riordan's office, the company hoped to build an industrial park on the property, but later ran up against a wall of opposition mounted by activists and politicians who wanted to create a state park there.
Last month, a deal was announced between the company's law firm, Latham & Watkins, and the American Land Conservancy.
Essentially, Lennar would buy the land from the railroad at the agreed-upon price and immediately sell it at $860,000 an acre. Nothing about the weedy old vacant lots that make up the parcel near Dodger Stadium has physically changed since Lennar agreed to buy it from the railroad. But with just a few signatures, the land's value would rise by close to $10 million.
The abandoned 30 acres occupy the northeast portion of what activists are hoping will be a 103-acre park and the crown jewel of a growing effort to revive and restore the Los Angeles River.
Intermediary Calls Appraisal Price Fair
American Land Conservancy, a nonprofit organization that will act as an intermediary between Lennar and state parks officials if the deal is approved--which could happen any time--said the price is fair.
"In the end, you've got to understand that Lennar has legal rights to build on its property," said Jeff Stump, project manager for the San Francisco-based conservancy. "If you have an appraisal that doesn't meet the type of return they want, they're not going to sell."
The conservancy will get a percentage of whatever money is exchanged, but it said that figure is confidential.
The Taylor Yard deal follows two other costly urban land acquisitions for state parks. The state is still assessing a proposed $30-million deal to buy 40 acres in Chinatown from developer Edward P. Roski Jr. And it paid $41.1 million for 68 acres in Baldwin Hills last year after the price skyrocketed when the land was hastily graded for a subdivision.
Some critics of the Taylor Yard proposal note that there is a crucial difference between those two deals and the Lennar parcel: The two other landowners had full entitlement to build on their land, which dramatically increases its value.
"They had entitlements, they had funding," said Assemblywoman Jackie Goldberg (D-Los Angeles). "They were ready to break ground. That is not the case [with Taylor Yard]. The state should drive a much harder bargain. This is too much money."
Until this summer, the Lennar industrial project looked as if it were moving full steam ahead. But in July, a Los Angeles judge threw out the city's approval of the plans. Judge David Yaffee ruled that Lennar had not conducted an appropriate environmental review and was required to do so before it could build, throwing its entitlements into question.
Even if Lennar could have addressed the air- and water-quality issues noted by the judge, the company would again have had to get city approval and hold public hearings, this time in a less-welcoming political climate. Riordan is gone, and Gov. Gray Davis supports the Taylor Yard state park. Davis has approved at least $45 million in funding for the various parcels needed to assemble it.
Although environmentalists said the judge's ruling signaled the development project's imminent death--and Lennar did indeed then begin negotiating to sell--the company's attorneys say that building there is still feasible.