Buying Time at Playa Vista
A proposal to set aside half of the Playa Vista property for wetlands is a mixed victory for environmentalists and a shrewd connivance by developers desperate to stay in business. In the deal, announced last week with great fanfare, Playa Capital would hand over land west of Lincoln Boulevard, acreage on which the company originally planned to put businesses and homes.
But this is no gift.
Playa Capital is seeking top dollar for the land, considerably more than it paid in the first place. And the sought-after money would probably be used to finance the remainder of the project, which is currently on life support because of unflagging opposition by environmentalists seeking to stop the development entirely.
The latest financial drag on Playa Capital is a lawsuit claiming that the developer needs to update and expand its environmental review of the 1,087-acre site. Although the case is not expected to go to trial until early next year, its already had a profound consequence. Playa Capital was on the verge of receiving the first installment of $135 million in city-approved, tax-exempt Mello-Roos bonds to build Playa Vistas streets, sidewalks, and other infrastructure. But the Weekly has learned that, because of the pending litigation, the money wont be immediately forthcoming. The city has decided were not going to proceed with the sale of Mello-Roos bonds at this time, said William T. Fujioka, director of the City Administrative Office, in an interview. Were going to take a cautious approach.
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Playa Capital spokespersons downplayed the significance of the citys stance, but the company could use the first installment of that $135 million right now. For one thing, its money that costs the developers virtually nothing and carries no legal risk -- the burden of repayment falls upon whoever buys Playa Vistas homes, offices and stores. Moreover, sources in the financial world report that the New York investors behind Playa Capital are growing weary of putting money into the project and expect paying tenants by January 2002.
That timetable for opening Playa Vistas first units, the Fountain Park Apartments, could be difficult to meet unless another funding source is located, and thats no sure thing. Playa Capital, however, downplays such issues. Any delay in the issuance of the bonds would not affect [Fountain Parks] opening, the company said in a statement. Nor has the fact that the bonds have not been issued affected our ability to obtain construction or bridge financing.
Still, Californias simmering recession makes financing more difficult. The failure of dot-coms has already contributed to an 11 percent office vacancy rate in West Los Angeles, making such projects less attractive to investors; financing for speculative retail projects has reportedly dried up unless tenants have signed on for 60 percent of the space.
In the current financial climate, a funding delay could imperil any commercial project. And Playa Vista opponents hope to accomplish at least that much with their latest legal joust.
The lawsuit, filed July 26 by Santa Monica Baykeeper, raises familiar but unresolved issues, namely that the citys March 2001 environmental review of the first 169 acres scheduled for development failed to account properly for toxic chemicals at the site, fault zones that might become active in an earthquake and extensive pockets of potentially explosive methane gas. The suit also questions the adequacy of the citys original 1993 Playa Vista Environmental Impact Report, done before any work began. Baykeepers suit argues that the 1993 report is now outdated based on new regulations and a better understanding of the sites characteristics. These shortcomings and others violate the California Environmental Quality Act (CEQA), according to court documents.
Playa Capitals financial vise helps explain last Thursdays announcement that the Trust for Public Land has obtained an option to purchase approximately 193 acres of land along Ballona Creek for a sum to be determined later. The land will be appraised in the fall, and the Trust for Public Land, acting as a go-between, will then seek money for the purchase from the state Legislature and various federal agencies.
Attorney George Mihlsten, a senior partner at Latham & Watkins and a Playa Capital lobbyist, has reportedly told several environmental leaders in Los Angeles that the developer wants $200 million for the land, even though the property in question does not yet have necessary legal entitlements for development. (Playa Capital paid $101 million for the entire 1,087 acres in 1997.)
Environmentalists face the uncomfortable knowledge that paying to save part of the land could undermine efforts to save all of it. Profits from any land sale west of Lincoln could finance development to the east.
Thats one possibility members of the Citizens United To Save All of Ballona coalition would prefer to avoid, in part by keeping the purchase cost down. We will be watching to insure the public receives a fair bargain for land that cannot be developed as the developer originally intended, said Baykeeper executive director Steve Fleishli.
The state paid roughly $26,000 to $28,400 an acre for coastal land in Malibu earlier this year and at Bolsa Chica in 1997, said Sabrina Venskus, executive director of the Ballona Wetlands Land Trust. Using those figures, she contends that no legitimate appraiser could value these 193 acres at more than $6 million.
The distance between $6 million and $200 million is a solid indication of the gulf that remains between developers and activists.
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