Bidders Often Land a Deal at Auctions : Real Estate: A small but growing circle of buyers have acquired city property through occasional public auctions, but the pool of surplus sites is diminishing.
Developer Susan Lew didn’t relish the prospect of a bidding war when she set out to acquire a piece of property owned jointly by the city of San Diego and the state. But the San Diego developer wanted the vacant lot too much to pass it up.
Lew knew that buying land at public auction could be risky, but the 55,000-square-foot site at the northeast corner of Convoy Street and Aero Drive in the heart of Kearny Mesa’s burgeoning Asian community seemed perfectly suited for the Asian-American retail center she wanted to build.
Unlike many of the 15 prospective buyers who bid on the property, Lew was armed with reams of information--including a realistic idea of the property’s leasing income.
Lew, who had determined that she could pay up to $25 a square foot for the property and still turn a profit when it was developed, grabbed the site for $1.2 million, or $72,500 less than her top price.
“I was surprised we won,” Lew said. “People in the city were very helpful to explain the procedure. I knew immediately I wanted (the property). And when I found what I wanted, I determined to get it.”
The July, 1988, land auction introduced Lew, 42, to the small but growing circle of buyers who have acquired city property through the occasional public auctions held since 1974.
The city’s next public auction could be held as early as midsummer. A city manager’s report submitted last Wednesday to the City Council’s Public Facilities and Recreation Committee identified 48 pieces of property totaling 153 acres--and worth at least $6 million--that qualify to be auctioned.
The massive report does not include an estimated 125 additional sites that, because of their odd shapes or inconvenient locations, can be bought only by adjacent property owners.
Most of the city properties sold at auction have been residential sites because a city policy requires the leasing of commercial land. But occasionally, as in Lew’s case, the city does auction off a commercial property.
The city began to sell off its surplus lands in 1978 under a policy that directed it to begin auctioning off large portions of its remaining “pueblo lands,” that is, the unused properties the city had owned since its incorporation in 1850.
However, land sold during recent auctions was mainly acquired between 1930 and 1950, from citizens who failed to pay their taxes.
The city acquired much of its surplus property, at 50% of its assessed value, from the county tax collector. In most instances, the city intended to use the land to house schools, fire stations or other city projects, but, for one reason or another, the projects never worked out.
Surprisingly, few San Diego real estate agents or developers know about the auctions. But deals such as the one Lew found will become scarcer because the city’s inventory of surplus property is running out.
“We have diminishing assets here, and it has been rapidly decreasing since the late 1970s,” said Michael Steffens, marketing supervisor for the San Diego Property Department. “I just may be out of a job one day soon.”
Typically, any land sales must first be approved by the City Council.
The properties identified in the most recent report as auctionable range in size from .04 to 80 acres, and are valued at between $10,000 and $2.4 million.
Six of the sites listed--including an 80-acre parcel of grazing land valued at $160,000 that the city originally purchased for use as a reservoir--might one day be converted into public parks.
Steffens said the hottest surplus property likely to be auctioned is an 8,930-square-foot lot in La Jolla Shores zoned for a single-family home. Although the property department set the lot’s value at $259,000, brokers say it is worth substantially more.
“The least expensive lot in La Jolla is $375,000,” said Peggy Chodorow, associate vice president of Coldwell Banker Residential Real Estate. “This would have to be a real dog of a lot to be worth $259,000. I just hope they (city officials) are aware that condo prices rose 29% last year and home prices rose 36%.”
In fact, all the properties will be reassessed before the auction in order to get the city the best price possible, Steffens said. “The policy we have is if a property is developable as a separate parcel, we want to get the highest return we can. The best way to do that is through the auction process.”
Other properties likely to be approved for sale include:
* An 8.4-acre residential lot on the east side of Mast Boulevard north of Ronson Drive in Santee. The property, which is zoned to hold at least 40 apartment units, is estimated to be worth about $650,000.
* A 30-acre lot west of Interstate 5 and north of Ardath Road in La Jolla Shores, valued at $2.4 million. The property is zoned to hold up to 8 dwellings per acre in a cluster configuration, but the tract might be difficult to develop because of its topography.
* A 4,792-square-foot parcel in Uptown, zoned for commercial use. The property has height limitations, however, because it sits in the approach path to Lindbergh Field.
Lew, the developer who bought the Kearny Mesa site at the city’s last auction, said she plans to comb through the current list to look for other parcels she may want to buy. “If they have some good property available, I would do it again,” she said.
