In materials submitted to LACERS' board members, Bond Companies predicted it would achieve a return for its investors of more than 42% for Blossom Plaza, a complex of condominiums and stores being built in Chinatown with at least $41 million in subsidies.
The number so disturbed redevelopment officials that they wrote an agreement to reduce the size of its subsidy if Blossom Plaza exceeds 10% on its return after costs. Bond Companies later said the 42% figure was wrong and should be readjusted to the low teens.
"We apologize for any misunderstanding that this may have caused," said Minkus, who blamed the marketing booklet information on a "third-party consultant."
Still, Bond Companies offered pension board members other cases where subsidized projects delivered double-digit returns.
In its booklet, the company promoted Aurora, an apartment building in San Francisco. City officials sold the site for $12 million below market value to ensure that 10% of the apartments would be reserved for lower-income residents, according to the booklet.
But Bond Companies renegotiated the pact to allow for the construction of a Whole Foods supermarket instead of subsidized housing. That project, when sold, gave investors a financial return of more than 42%, the booklet says.
In Hollywood, Bond Companies secured a $3.3-million subsidy for Sunset + Vine, apartments over a Borders bookstore and other retail space. Sunset + Vine also received special approval to erect billboards that generate $3 million in revenue each year.
The financial return? Twenty-nine percent, according to documents given to the pension board.
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david.zahniser@latimes.com
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Big subsidies, big profits
Two city of Los Angeles pension funds plan to invest up to $30 million in the Bond Companies, a real estate fund that describes taxpayer subsidies as a critical part of its bottom line. In its pitch to the pension boards, the Bond Companies said its recent development projects -- bolstered by subsidies -- have delivered strong returns to investors.
Sunset + Vine
Location: Hollywood
Project: Apartments above a Borders and other stores
Subsidy: $3.3 million from Los Angeles Community Redevelopment Agency
Special approval: Signs that generate $3 million annually
Rate of return: 29%
Aurora
Location: San Francisco
Project: Apartments above a Whole Foods Market
Subsidy: $12-million discount on the land cost
Special approval: Persuaded city officials to eliminate the affordable-housing requirement and built a high-end grocery store instead
Rate of return: 42.5%
Blossom Plaza (proposed)
Location: Chinatown
Project: 262 apartments with restaurants, stores and a plaza
Subsidies: $41 million from city, state and federal sources
Special approval: Public financing for 175 parking spaces and a walkway
Rate of return: Unavailable *
* Bond Companies told city officials last month that the project had a projected return of 42.3%. Weeks later, the company corrected the figure, saying the return would be in the "low teens."
Sources: Los Angeles City Employees' Retirement System; Los Angeles Community Redevelopment Agency
