Rigonomics:

I have been involved, in one way or another, in the real estate business since 1979.

I got my real estate license while in college to help pay my way through school. The plan was to sell houses in the summer to pay my way through the rest of the year. I did well at brokering real estate. I decided to take the fall semester off and start back at school the following semester. One thing led to another, and let’s just say that I received my degree 12 years later at night school.

Over the years I have been involved in everything from selling and building houses to developing neighborhood shopping centers. In my 30 years in this business, I have never seen what happened at Thursday’s auction of the Orange County Fairgrounds. In this columnist’s humble opinion, there was something strange with the bidding.

The bidding for our fairgrounds was the most bizarre process I’d ever seen. First off, the state allowed in a bidder whose opening bid was $1,000. That bidder had to put up a $50,000 cashier’s check to bid, yet was bidding only $1,000.

But what was really strange was that the original high bidder never so much as raised their paddle to bid during the live auction that followed the opening of initial bids.

A little background: The Department of General Services (DGS) received seven sealed bids by Monday’s submission deadline. Those bids were opened Thursday at the auction, when this was supposed to be the first time that the state publicly announced who the bidders were. More on that later.

The highest initial bid was set as the starting point for all seven bidders to raise their offer during a live auction. The highest bid was from Facilities Management West Inc., which is owned by a local Orange County family. The written bid was $55 million. The next-highest bid was from Craig Realty, a Newport Beach-based outlet mall developer, at $42.5 million.

Minimum bid raises were $500,000, so Craig Realty Group opened with $55.5 million. Advanced Real Estate Service, a Lake Forest-based apartment development company, countered with a bid of $56 million. Craig Realty followed with $56.5 million, and the auction ended as quickly as it started.

What was strange was what did not happen. The highest original bidder, Facilities Management West, sat on their paddle and did not bid even once to raise their original bid.

In all my years in real estate I have never seen anyone make the highest starting bid, and not even once raise it. It does not make sense that someone made their opening bid their highest bid. It just does not happen.

What made me more curious was that a representative from Facilities Management West Inc. told me last Tuesday, two days prior to all the bidders being made public, that Craig Realty was one of the seven bidders. When I asked him how he knew that, he said he knew people inside DGS who could give him the information. My first thought was that DGS must have released the names of the bidders, and I just had not seen the news release.

I did not think much about it until Facilities Management West stopped bidding and was beat out by Craig Realty Group. What happened?

I called DGS, and their representative said that they were unaware of any DGS employee leaking that information. They said they would investigate, if they had a name of that employee.

I contacted Steven Craig at Craig Reality Group, and he said, in no uncertain terms, that he did not talk to anyone at Facilities Management West.

I received a call from Craig’s partner, Dwight Manley. He told me he had no idea who any of the other bidders were and had not talked to anyone.

When I contacted a representative at Facilities Management West, he said that the reason they did not raise their bid was because once they realized who they were bidding against — an outlet mall developer and an apartment developer — they saw no reason to raise their bid because they felt both were valuing the land for other uses, while they were valuing it as a fairgrounds. They thought they were the only ones looking to keep it a fair. He said they were like the “White Knight.”

They also thought that there was a good chance that if Craig Realty did not close on the deal, the state would come back to them at their last bid. They did not want that bid to be high.

Well, unless one of the bidders comes out and says they colluded with another bidder, there really isn’t any evidence that something illegal happened. But it just looks strange. Of course that is what this whole “sell the fair to the highest bidder” process has been from the beginning. Strange.

Maybe it’s about time the state rejected all the bids, negotiated a price for the property with the city and county, and got out of the fair business all together.

JIM RIGHEIMER is a Costa Mesa Planning Commissioner, local business owner and a father of four. He can be reached at jim@rigonomics.com.


JIM RIGHEIMER is a Costa Mesa Planning Commissioner, local business owner and a father of four. He can be reached at jim@rigonomics.com.

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