It is said that politics makes strange bedfellows. So apparently, does real estate. Real estate developer J.H. Snyder Co. and the Los Angeles Unified School District are close to two deals that will put new schools inside two North Hollywood commercial centers. If the deals go through as expected, the LAUSD will build a high school at the 23-acre Community Redevelopment Agency project site along Lankershim Boulevard in North Hollywood. A middle school will be located at the 49-acre Valley Plaza shopping center at Laurel Canyon and Victory boulevards. Both deals cap years of often contentious efforts to find sites for 85 new schools needed to accommodate an anticipated 80,000 new students district-wide in the next five to eight years. What makes the compromise so unusual is that throughout most of the process both the public and private sectors regarded their causes as all-or-nothing propositions, a choice between providing economic development now or securing an education for the city’s children in the future. “We have learned a lot,” said Julie Korenstein, a school board member. “We have to look out for the welfare of children, but there are ways to work things out in a cooperative manner. I understand the developer needs to make a profit, so it takes a while to finally come to an agreement on how to go about doing it.” The deals are part of a growing number of acquisitions the LAUSD is closing in on. In Korenstein’s district, negotiations are underway to acquire two parcels for new high schools. One is the old Carnation factory on Van Nuys Boulevard in Panorama City that Selleck Development Group Inc. had planned to develop for industrial use. The other is a parcel on the Cal State Northridge campus slated to become an academy for students interested in the teaching profession. The board has also identified three new elementary school sites and a location for a middle school in Korenstein’s district. In the North Hollywood community redevelopment area, Snyder will give up its rights to develop eight acres currently owned by CalTrans. The school board will add to that parcel by acquiring a number of homes adjacent to the property. In addition, Snyder will sell to the LAUSD a nine-acre parcel within the Valley Plaza shopping center. The Snyder properties are two of a total of five sites that have been identified in the portion of the school district represented by Korenstein, including a parcel owned by the Los Angeles Department of Water and Power and two others that will require tearing down homes and apartment buildings. “We’ve identified almost every school site of the 85 (district-wide) and we’re going after them,” said Caprice Young, a school board member whose district includes North Hollywood. The long, drawn-out process of identifying sites often left the school board between the proverbial devil and the deep blue sea. Residents protested locating the schools in their neighborhoods either because they did not want to lose their homes or because they feared a large influx of students would add to crime and congestion. Businesses threatened with eviction worried about losing customers and sales. Sentiments ran especially high near the Snyder projects because the two North Hollywood communities had become run down and blighted, and the developments promised an economic revitalization with new businesses and jobs. Cliff Goldstein, a partner with J.H. Snyder, said the difficulty the school board faced in securing locations was one reason the company decided to enter into negotiations. “What’s motivating us is to be good corporate citizens,” Goldstein said. “Maybe the reason I’m more sensitive to that is (seeing) the school board run into roadblocks at every turn.” While the LAUSD has the ability to seize property by eminent domain, both school board officials and the developers said they wanted to avoid such a last-resort action, which can tie the process up in courts for years. Rather, developers said they were resigned to the need for schools and focused on working out a deal that compensated them fairly, if not fully, for the properties. “I would have preferred to develop the project,” said Daniel F. Selleck, president of the company developing the Carnation site. “Except they need to build schools, so we worked out something we both could agree to, but we certainly would make more money if we had developed the property, at least on paper.” The board and developers declined to disclose details of the sales because negotiations are still underway. But generally, the school board would pay fair market value for the property. While that compensates a developer for the cost of the land, it does not take into account the revenue potential of any development placed on the site. For that reason, developers lose money by selling the land to the school board instead of developing it themselves. At the same time, the future revenues they factor into the equation may never materialize. “Potential income can only be realized once that property is improved and, in making the improvements, the developer incurs a risk,” said Roderick Hamilton, consulting senior facilities executive for the LAUSD. “So where a developer could say, ‘If I get this project done, I’m going to realize x amount of money,’ there are a lot of ifs. The amount he gets for a pure land sale might be less, but he doesn’t have to complete the development to realize the profit.” The sheer time it takes to bring such large projects to completion is also costly, and an immediate deal with the LAUSD can reduce those costs considerably. “Anytime you can get a committed sale, that reduces your cost of carry,” said Larry Kosmont, president of real estate consulting firm Kosmont Partners. “In L.A., it takes two to three or in some cases four years to entitle a property, do a redevelopment deal and get (environmental) clearance. If you can sell a portion of the site at the front end for real cash, guess what? You’ve reduced the cost to carry and changed the economics of the project.” The bird-in-the-hand strategy, however, was not a cure-all for the developers or the school district. LAUSD officials wanted more of the Snyder properties than the developer wanted to accommodate. And the agency’s long process of securing approvals for acquisitions threatened to cost Selleck far more than the land price covered. “In essence, we had our entire development plan and building drawings complete when they decided they wanted to buy the site,” Selleck said. “You factor in carrying costs and delay costs and those are real dollars we have to spend if we’re going to delay our project.” The LAUSD and Selleck struck a deal under which the school district compensated the developer for the cost of delaying the project while it completed the approval process to acquire the land, a procedure that the school board will now be able to follow with other acquisitions. “The deal we actually worked out would give the developer money to stop building (while the process goes through the approvals), and that money becomes part of the deal (when it’s executed),” said Korenstein. “We had to figure out how to do that because it wasn’t fair to ask the developer to stop building.” Because of the long delays and difficulties the LAUSD has faced in finding and acquiring these properties, the agency has also instituted a new land banking system. When the agency finds a property it thinks might be suitable for a school, it will now move forward to acquire the parcel, holding it until there is a need to begin building. “It cuts the (time required for the) process in half,” said Young. While the LAUSD has learned much and changed procedures during its first full-scale school site search in decades, it may not be enough to complete its task. The board was able to extend a June 30, 2000 deadline by which it was to have submitted sites and completed designs for construction in order to receive some $1.5 billion in funding from the state’s Prop. 1A bond measure, about half what it will take to build the required schools. But in the meantime, the bond fund is being depleted by other school districts that beat the LAUSD to the finish line with their requests. “Our current estimate is, if we play our cards right, we may be able to get as much as $900 million,” said Young. “But that’s optimistic. It requires we’ve cleared environmentals and entered into some agreements to purchase the site, and that’s a lot of stuff.”
