School Room : L.A. District, Needing Sites and Armed With Cash and Legal Powers, Now Is a Major Player in Real Estate Circles

When the Los Angeles Unified School District first announced its plans to acquire the Ambassador Hotel for a high school site, most real estate experts dismissed it as a lark.

After all, they said, the school board was no match for private real estate interests-- almost all of which are opposed to a new school on the 23.5-acre Mid-Wilshire site.

But the district--with a 50-person real estate department, wide powers of eminent domain, plenty of money from the State Allocation Board and lots of strong will--has proven itself a tough contender for the prized property.

The district already controls about 5,500 acres of Los Angeles real estate--worth an estimated $8.5 billion. Since 1985, it has spent $142 million acquiring 561 pieces of property for 16 school sites.

With enrollment on the upswing, an accelerated acquisition and development plan is being implemented. More than a dozen new schools are being considered, and the school district will spend $42 million on property this fiscal year alone.

In short, the school district has become a major player in Los Angeles real estate and in local land-use politics.

Creating new schools has become increasingly difficult for the district and its real estate staff. With most of the landscape already developed in Los Angeles, new school sites, for the most part, are replacing existing commercial and residential uses.

Acquiring land and changing its use has created conflicts between the school district and private property owners. The reputation of some schools as examples of poor urban design and magnets for crime hasn’t helped matters. And many owners are angered by the prospect of having to defend their property against the district’s eminent domain rights.

To deal with the politics and particulars of real estate management and acquisition, the school district’s real estate department staff has tripled in size since 1984, when director Robert J. Niccum took charge.

His office now supervises buying, selling and leasing of a portfolio that includes 411 elementary schools, 72 junior high schools, 49 senior high schools and a collection of other educational and administrative facilities, including a headquarters building on San Pedro Street in downtown’s industrial district.

Most notable among the growing number of controversies related to the school district and its real estate department is what the district has designated “Los Angeles New SHS No. 1,” otherwise known as the Ambassador Hotel site.

Trump Wilshire Associates owns the 69-year-old landmark and wants to create an office/retail/hotel development akin to New York’s Rockefeller Center. The school district wants the site condemned and transformed into a 2,500-student senior high school.

The battle lines over this plan have been drawn amid jousting by a host of consultants, lawyers, brokers, appraisers, neighbors and politicians. The Ambassador’s owners say it’s a fight between free enterprise and the quixotic forces of bureaucracy. School advocates say it is a battle between brash New Yorker Donald Trump and the children of Los Angeles.

The district has initiated eminent domain proceedings for 17.76-acres at the Ambassador. Trump and his partners can keep the 5.74 acres facing Wilshire Boulevard for whatever private development they can get city approval for, school district officials say.

Trump opposes such a plan. He and his supporters argue that the school should be built elsewhere because what Mid-Wilshire really needs is a revitalized commercial core.

The only sure thing in all of this is that nasty rhetoric will continue as the Trump/school district dispute heads for the courtroom.

Meanwhile, several other Los Angeles property owners are watching with a mixture of fascination and concern. The district’s acquisition plans this year don’t end with the Ambassador. With the need for more classrooms growing acute, other property owners are facing similar encounters.

Metromedia Co. and S-P Development are trying to talk the district out of its interest in their properties. The two companies control sizable parcels in Hollywood and Central City West, respectively, and both hope to persuade the school district that other sites are better suited for schools.

In Hollywood, the school district is looking at a chunk of land that is now home to Fox Television and KTTV. Metromedia Co. of New Jersey has a long-term lease interest in the 12.5- acre property, and the school district would like five of those acres for an elementary school.

Metromedia originally suggested that the district instead consider the headquarters of DeLuxe Laboratories in Hollywood. That idea was hastily withdrawn, however, by embarrassed Metromedia executives when they realized DeLuxe was owned by Metromedia’s tenant, Fox Inc.

The school board then agreed to explore other suggested sites, including the possible acquisition of nearby Dixon Cadillac Co. on Sunset Boulevard or the Hollywood Tropicana nightclub on Western Avenue.

Until the issue is resolved, “we’re in condemnation limbo,” said Richard Hamlin, an attorney with Century City-based Stall & Hamlin, speaking on behalf of Metromedia.

The most frustrating part of dealing with the school district, he added, is the length of time it takes for the district and its board to make a decision--as long as two or three years is not considered unusual.

In Central City West--a fast-emerging area of downtown Los Angeles just west of the Harbor Freeway--developer S-P has been working to keep its 26-acre land holdings intact.

The U.S.-Japan joint venture wants to build a collection of hotel, office and retail buildings on the site. The school district, however, expressed a strong interest in building a school on part of S-P’s property.

The developers appear to have reached a compromise with the school district by agreeing to participate in building 130 new housing units in the area. In exchange, the school district will shift its interest from S-P’s site at 1st Street and Beaudry Avenue to a site at Colton Street and Beaudry.

The school district is serious about developing not only schools but other profit-making projects too, Niccum said.

“All public agencies are looking at maximum asset management,” he said, and public/private partnerships are “certainly the wave of the future.”

As an example, Niccum cited a parcel of land in downtown Los Angeles being leased to developer Maguire Thomas Partners for use as a garage to accommodate cars that can’t be parked at its nearby office towers.

At the Ambassador Hotel site, the school district’s original plans included developing office and/or retail space along Wilshire Boulevard and using some of the profits to fund construction of a school facing 8th Street. Controversy over the district’s foray into private development stymied these plans, however.

Critics of the school district aren’t just worried about private development plans. They complain about the way the district exercises its broad powers of eminent domain and they worry about the look and location of new school sites.

An example of this brand of controversy can be found along Olympic Boulevard in Koreatown. As a new elementary school nears completion in the area, neighbors are complaining about a 9-foot cinder block wall that has been built 3 inches from the sidewalk along a full-block stretch of Olympic.

The new wall is an open invitation to graffiti, complained Dai Lee, president of neighboring Han Kook Motors. The district originally wanted to condemn his office building and dealership as part of its plans for the area. After much negotiation, however, Lee got to keep his dealership and had to sell just part of his property.

Now, Lee said, he and other business owners wonder what effect the new school and its fortress-like wall will have on the character of Olympic. He hopes for some change in design, but at this point he predicted, “the school board is not going to listen . . . they’re stubborn people.”

The reasons for the wall along Olympic relate to very strict guidelines laid down by the school district to architects.

“You can’t get too extravagant,” said Elliot Barker, architect of the Olympic Boulevard school. “You get sort of mediocre architecture.”

Another problem, he said, is the fear of lawsuits. Originally, he designed the perimeter wall with a setback and planters. That plan was nixed, though, for fear that pedestrians might get injured on school district property and sue.

“The school itself behind the wall will be beautiful,” Barker promised. But, he conceded, “There should have been community input into the design.”

Another architect involved with the school district had this to say about the board: “There is no political finesse in how they deal with people. . . . They come in like these big bad landlords and they have no idea what consensus planning is.”

The school district, for its part, responded by saying that its staff has worked very hard to cooperate with local residents affected by school development. And to avoid many conflicts with neighbors, the district has undertaken a policy of pursuing commercial sites instead of residential property for new schools.

“It’s a Board of Education policy to avoid demolishing homes,” Niccum said.

Three years ago, the district experienced a tremendous amount of bad publicity when it sought to tear down homes in several neighborhoods to make way for new schools.

The backlash from tenants and homeowners included picketing outside the homes of school board members and a staged “funeral procession” outside City Hall. Among other things, the residents succeeded in getting the school board to set new criteria for school site selection, with a preference for commercial sites over residential ones.

Another reason for the district’s interest in commercial sites is the heavy price that often has to be paid when relocating residents.

All government agencies are required by state law to provide assistance to residents being uprooted for public construction. Property owners are compensated by the district at fair-market value.

The school district helps find new housing for displaced renters and pays part of the difference between their old rent and new rent for as long as four years. This can and does get very expensive.

Most businesses are more likely to be satisfied with just getting reimbursed for their relocation, Niccum said. Most property owners, he added, agree to sell to the district voluntarily, avoiding the messy process of acquisition through eminent domain.

The school district only initiates eminent domain proceedings on about one-fourth of the properties it pursues for new school sites, Niccum said. Only a fraction of these one-fourth, he said, ever end up in court; most of the time, buyer and seller reach a peaceful agreement.

Homeowners and renters don’t take very kindly to being uprooted, though, Niccum said.

Concerned Citizens for South-Central Los Angeles, for example, has filed suit against the district over plans to demolish 72 dwelling units east of Broadway for a new elementary school.

For months, Niccum said, homes in the area displayed protest placards and neighbors organized against the district. Such opposition, Niccum said, is usually avoided when the district targets commercial sites or vacant parcels.

The nature of eminent domain is such that the district doesn’t have to please property owners, it need only reimburse them according to the ruling of a court. The district’s state-chartered status also gives it the authority to condemn a property and turn it into a school even if the mayor of Los Angeles and City Council object.

As far as the Ambassador site is concerned, the city can demand that 7th Street be reinstated through the property. Other than this, the city has very little say over what the district chooses to do.

In the years to come, Niccum predicted, the school district will become an even more prominent real estate player in Los Angeles. The debates over whose land to take for new construction promise to get more heated too.