High bid for O.C. Fairground called too low

Gov. Arnold Schwarzenegger’s plans to help California’s financial crisis by selling state-owned landmarks got off to a bumpy start Thursday when an auction to sell the Orange County Fairground drew a winning bid far below the estimated value of the property.

Hailed by the governor as a “new way of thinking” about generating revenues, the auction ended up raising serious doubts about the viability of selling other properties, including the L.A. Coliseum, the Del Mar racetrack and San Quentin State Prison.

The high bid for the 150-acre piece of prime property in Costa Mesa came from an outlet mall developer, Newport Beach-based Craig Realty and partner Dwight Manley, a former sports agent. The investors offered $56.5 million -- woefully short of the state’s expected $96-million to $180-million price tag.

The Department of General Services will determine over the next few weeks whether to accept the bid. Orange County officials, who begged Schwarzenegger to halt the auction, said it would be outrageous to sell the property at that price and would amount to a gift of public land to the developer.

“I don’t think the state should be selling a high-value asset for literally 25 cents on the dollar,” Assemblyman Jose Solorio (D-Santa Ana) said after the auction, which took place in a cramped administration building at the fairgrounds.

Schwarzenegger wants to sell numerous landmark properties across California, hoping to raise as much as $1 billion to help balance the state’s budget. Orange County, where conservative politicians advocate reducing the reach of government, was seen as a logical place to start.

If anything, the lackluster bids for prime Orange County real estate a few minutes’ drive from South Coast Plaza left some politicians wondering how the state could possibly have better luck selling state lands elsewhere in California.

“There is a real urgent need to get cash from someplace,” said Orange County Supervisor John Moorlach, a conservative Republican. “But the state needs to step back and say, ‘What are our priorities when we sell?’ Is this really surplus property or are they just trying to make a statement for the sake of shaking the taxpayers down?”

Assemblyman Van Tran (R-Garden Grove) described the auction as “a bust.” Even the swap meet owner who sets up shop at the fairgrounds every weekend likened the possible sale of the treasured property to selling an “old piece of furniture to the highest bidder.”

“If the state is happy with $56.5 million for something that will eventually be turned into an outlet mall, then it’s over,” Moorlach said. “But I have a funny feeling that they’re going to have to take a hard swallow to explain.”

In all, only seven bidders made offers on the property, which includes a concert amphitheater, exhibition halls, an outdoor swap meet and an equestrian center. The offers ranged from a $1,000 protest bid from the swap meet operators to a $55-million bid from Facilities Management West, Inc. The auction itself lasted less than a minute, and only increased the high bid by $1.5 million.

Winning bidder Steven Craig, whose company portfolio includes the Cabazon Outlets near Palm Springs and the Citadel Outlets in Commerce, said he’s “happy” to keep the fairgrounds intact.

“We like it that way,” Craig said. “But we’d like to find a way to make it financially viable. Maybe a private enterprise approach will work. . . . We see this as an interesting opportunity to enhance something that’s here.”

For now, the 2010 county fair, which starts its 51st year in Costa Mesa on July 16, is “forging ahead,” said fair spokeswoman Robin Wachner. What happens in 2011, however, is anyone’s guess.

A few dozen protesters -- some riding horses outside the auction site -- said they fear that a sale to a non-government agency could spell the end of the fairgrounds and lead to an outlet mall popping up in its place. Many carried signs and wore bright orange stickers that said, “Derail the sale.”

“This is really unfortunate,” said Costa Mesa Councilwoman Katrina Foley. “We can’t start selling off our public assets for under market value.”

Even if the state accepts the high bid, Solorio has sponsored a bill that would rescind authorization for the sale. Cosa Mesa is also putting up its own blockades by asking voters to approve a ballot measure in June that would lock in the fairgrounds zoning and make any commercial development impossible.

Eric Lamoureux, a spokesman for the state Department of General Services, said state real estate experts would evaluate the bids. If the agency accepts the $56.6-million offer, a contract could be signed by spring, with the property probably changing hands this fall. Although the bid fell far short of the state’s estimates, Lamoureux said, the “intention was to let the market dictate what the price of the property should be.”

The dearth of bids for prime Orange County real estate doesn’t bode well for the proposed sale of other high-profile properties. The sales were supposed to raise $600 million to $1 billion for the general fund.

After lawmakers balked at unloading these public assets, all major public landmarks except the Orange County Fairground were taken off the auction block. Orange County politicians were initially supportive but soured on the plan when they realized they couldn’t ensure the land’s continued use as a fairgrounds. The state wanted to sell to the highest bidder, regardless of how it would use the land.

Schwarzenegger was given authority to sell and lease back 11 large state office buildings, including the Ronald Reagan building in downtown Los Angeles. Those sales are expected to begin in a few weeks.

tony.barboza@latimes.com

kimi.yoshino@latimes.com