SANTA MONICA, CA-One of the most important assets of the approximately 400 RDAs in California that were formally terminated in February was the commercial real estate they owned. Many investors and developers were looking forward to the opportunity to buy and develop this real estate, and in fact, the original AB 26 law that terminated the agencies stated that all real estate was to be sold expeditiously. However, nearly two months ago the law was changed, creating further delays in the sale of successor agencies’ land and properties statewide. The new law, AB 1484, states that each RDA successor is required to prepare a “property-management plan” to be approved by the State Department of Finance, determining what land will be retained by the agencies and what land will be sold.
“In my opinion, this is unfortunate because it does allow successor agencies to retain valuable land that could be sold, and the money could be transferred to the taxing authorities, cities, school districts and counties,” Richard H. Close, a partner with local law firm Gilchrist & Rutter and member of the Los Angeles Redevelopment Agency Dissolution Oversight Board, tells GlobeSt.com. In June, Close had told GlobeSt.com that CR-LA had recommended roughly 600 redevelopment projects to the state Department of Finance, and all of them had been approved by the Department to move forward. The new law affects between $2 billion and $3 billion worth of assets statewide that are still awaiting their fate.
“The land could be developed, and instead of it being, for example, a parking lot, it could be a retail or residential building, creating jobs and affordable housing,” Close adds.
Most property-management plans will not be ready before next spring, prompting Close to do a more in-depth interpretation of the law, which revealed that a redevelopment agency successor can sell individual parcels prior to the development of a property-management plan—they just can’t go into the business of wholesale selling until they have the plan developed.
“Therefore, I would encourage investors and developers to discuss with the successor agencies and oversight boards their desire to purchase a particular property,” Close urges. “These agencies need the money, the taxing agencies need the money, and an easy way to obtain funding is by selling land that is not being used productively.”
A common question is why did the legislature change the rules? Close tells GlobeSt.com that many cities wanted to retain ownership of some of the land, and under the law they can retain it if it is for “governmental purposes.” Retaining the land will decrease sales revenue, but the legislature agreed with the cities and is allowing them to retain some properties for governmental use. The amendment emerged from the legislature’s need to have the cities distinguish between properties that were being sold and those that were being retained for this use.
“Developers should at least approach the agencies and explain their desire to purchase individual parcels,” says Close. “If no one comes forward, it will be another six to eight months before they even start the process or sale.”
Since each plan needs to be approved by the Department of Finance, Close says the new law could delay the sale process by at least a year for those who wait it out. “Obviously, any properties would be sold in a public process, but they do no one good just sitting as a parking lot or a one-story store when they could be a 20-story office building or a new shopping center in an area that needs shopping centers.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
