With no master plan to guide them, Los Angeles officials have bought more than $100 million in real estate in each of the last two years, prompting critics to accuse them of being on a buying binge without a strategy.
Critics inside and outside City Hall question the city’s practice of relying on real estate consultants, who are paid commissions from the building owner when the property is sold.
And they say the city shouldn’t dabble too heavily in real estate until it knows how much property it needs and where to buy it. In addition, some question whether the city should get into the business of leasing city property to private companies.
Until recently, the city kept no central database on the properties it owns. And until a City Council member asked for it, the city department in charge of real estate did not compile a master list of property acquisitions. “The City of Los Angeles does not currently manage its real estate assets well,” said City Controller Laura Chick. “If Los Angeles is to be a true state-of-the-art city, we need to gain a complete picture of the real estate we own and a vision for how we can take advantage of those assets.”
J. Richard Leyner, a commercial real estate broker who heads the Encino Neighborhood Council, said the city historically has mismanaged its real estate and shouldn’t splurge on new buildings until it has a better handle on what it owns.
“It’s time they realized they’re not in the real estate business, they’re in the city services business,” Leyner said. “They don’t know how to manage their real estate.”
Rickey Gelb, an Encino-based property manager, questioned whether the city should be buying property at the same time officials are asking the public to approve a sales tax increase to pay for law enforcement countywide, including an estimated 1,260 officers for the Los Angeles Police Department.
“If they have the cash to buy buildings, why can’t they use that cash to hire officers to improve public safety, and then businesses would start coming back to the city and that would increase tax revenues,” Gelb said.
City officials note that most building purchases are financed with bond revenue that can’t be diverted for other purposes.
According to city records, Los Angeles acquired $100.3 million in real estate between Aug. 12, 2002, and the same date in 2003 — including land for fire stations, parks and constituent service centers. For the same dates from 2003 to this year, the city bought $110.1 million in property, with the majority of that money going toward a sanitation transfer station and the purchase of the TransAmerica office building, both downtown.
The TransAmerica purchase — which capped months of debate over whether the 35-year-old building should become the new LAPD headquarters — also revealed the city’s scattershot approach to buying real estate, said some officials and observers.
The building was owned by a company that includes basketball great Earvin “Magic” Johnson and other supporters of Mayor James Hahn, prompting some charges of favoritism.
City officials also were put on the defensive over reports that part of the building still contained asbestos and that, as potential police headquarters, it might be vulnerable to terrorism.
The City Council voted in June to buy the TransAmerica building, but not as permanent police headquarters. Instead, the building will house other city departments that are now in leased space.
Councilman Tony Cardenas and Councilman Jack Weiss sponsored a motion to require the city to hire an independent consultant for all real estate purchases above $10 million who would not receive a commission from the sale of the property.
City officials say they listen to their consultants but ultimately make the decisions themselves. Julien J. Studley Inc., which also advises city officials on downtown real estate, said in a written statement, “It is important to note that every real estate transaction is subject to the city’s approval.”
Brokers from Studley, which has worked with the city since 1996, have contributed $3,600 to city politicians, including $1,000 toward the staff member in charge of real estate, Reginald Jones-Sawyer, who unsuccessfully ran for a South Los Angeles council seat last year. Mark T. Sullivan, executive vice president of Studley, said the company does not contribute to candidates nor reimburse its brokers for doing so.
Jones-Sawyer, the city’s director of asset management, said he and his staff constantly scour the city for available properties but let the council make the final decision.
Jones-Sawyer said political donations have no effect on his work as a city staff member.
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Jones-Sawyer said he and his staff are developing a long-term plan for the city’s real estate.
Some critics note that city officials have focused on the downtown core — the purchase of the TransAmerica building and attempted purchase of Figueroa Plaza being prime examples — while neglecting other parts of the city.
Cardenas and Councilwoman Wendy Greuel, who represent neighboring districts in the East San Fernando Valley, question why the city has not directed its attention to the Valley, where land is generally cheaper.
Of the more than $110 million in real estate the city bought between Aug. 12, 2003, and the same date in 2004, $1,141,353 was in the San Fernando Valley: three land purchases to expand the East Valley Animal Shelter and Blythe Street Park.