To bid or not to bid? With Angel Stadium sale in limbo, Anaheim is on the clock
In the final weeks of 2019, the city of Anaheim celebrated a landmark deal. The Angels would stay in Anaheim for decades, and the team’s owner would transform the desolate sea of parking lots surrounding the stadium into a vibrant ballpark neighborhood anchored by homes and offices, restaurants and shops, and Mike Trout.
As the first weeks of 2022 approach, no ground has been broken, and the deal remains in limbo. The latest hurdle: The state housing agency has charged the city with violating the law by failing to put the land up for bid among affordable housing developers. The city considers this bureaucratic nonsense, arguing the Angels’ ability to veto housing there for up to two decades makes the team owner the best buyer and likely the only bidder for the land.
If the city is correct, the state could back off. Real estate brokers suggest the city could be right. So why hasn’t the city put the land up for bid, the better to prove its point and the faster to proceed with the deal?
The Anaheim City Council meets Tuesday, for the first time since the state notified the city of the legal violation. The Angel Stadium land sale is not listed on the agenda, and the city has until Feb. 6 to resolve the violation with the state housing agency.
“We are in the early stages of preparing a response to the state’s notice and want to respect that process,” city spokesman Mike Lyster said. “We have many potential paths ahead of us and continue to evaluate all of them.”
After its deal with Angels owner Arte Moreno was declared illegal, Anaheim has 60 days to redo the terms or open the land to interested bidders.
Marie Garvey, spokeswoman for Angels owner Arte Moreno and his development company, declined to comment.
One of those paths could involve the courts. In a Dec. 2 letter to attorneys for the city and Moreno’s company, California Department of Housing and Community Development Deputy Director Megan Kirkeby cited mutual interest in “potential resolution given the uncertainty of litigation.” In a Dec. 10 column in the Orange County Register, Anaheim Mayor Harry Sidhu declared the city believes the affordable housing law “simply does not apply to Anaheim’s stadium plan.”
Under the plan, the city agreed to sell the 150-acre stadium site to Moreno’s company for $320 million, then credited $170 million toward the inclusion of affordable housing and parkland within the ballpark neighborhood. The final cash price: $150 million.
If the plan collapses, the Angels’ existing lease remains in effect, with the team holding options through 2038. That lease allows for shops, restaurants, hotels and offices on the site, but not housing. The lease also requires 12,500 above-ground parking spaces. Those restrictions, the city argues, would make the site unattractive to housing developers, who could face a hefty cost to buy the land and build parking structures while foregoing revenue from homes for decades.
“I think it’s either Arte or you wait until 2038,” said Louis Tomaselli, the Irvine-based senior managing director of JLL, a real estate and investment management firm.
“I really don’t think you’d have very many players interested at all. I think it would be very difficult to convince somebody to buy something with so many unknowns, no clear visibility to a development, and all of the stress and noise of Arte and the city and now the state potentially getting involved. I think it’s way too complicated, and there’s enough other things for developers to do without spending their time here.”
Kurt Strasmann, executive managing director at the Newport Beach office of real estate giant CBRE, said Anaheim finding a buyer to match Moreno’s price would be like finding “a real needle in the haystack.” If development could be restricted until 2038 — and with it the return on investment — he said a potential buyer likely would ask that the purchase price be “heavily discounted.”
If the city puts the land up for bid but there are no other bidders, Kirkeby said the state housing agency would approve the sale to Moreno’s company, provided the agency received sufficient documentation and the development reserved 15% of its homes as affordable. The city and Moreno’s company already have agreed to include 15% affordable housing in the project.
If other bidders promised a greater percentage of affordable housing but offered a lower purchase price, Kirkeby said, the city would be required to hold “good faith negotiations” with those bidders but would not be compelled to pursue those deals.
“There’s no requirement that Anaheim accept a lower bid,” Kirkeby said.
For instance, she said, the state could accept a project with 15% affordable housing over one with 25% affordable housing, if the one with 15% had a greater total number of affordable homes.
The city agreed to the $170-million development credit with Moreno’s company as a condition of the deal. Whether the city would agree to such a credit with another developer would be up for negotiation.
In addition, Moreno agreed to renovate or replace Angel Stadium as a condition of the deal. Whether he would agree to that condition in a deal in which he would not be the developer also would be up for negotiation.
However, the city granted Moreno’s company as long as 30 years after closing to complete the project. That would be no earlier than 2052, the kind of long-term time frame often considered by major real estate developers.
Richard Green, director of the USC Lusk Center for Real Estate, said such a developer could approach Moreno about a partnership, then see whether the city would consider providing the developer with an option to buy the land. Essentially, the developer could offer to buy out the Angels’ lease, which could accelerate the construction schedule.
“You may find that paying them to allow development to go forward now is a worthwhile thing to do,” Green said. “You might take them on as a limited partner. If you had a good developer with a good track record, they might find that appealing.”
The notice of violation sent to the city of Anaheim included a link to the state’s master list of housing developers interested in public land for sale. The Los Angeles Times contacted three major developers on that list with Orange County operations — Lennar Homes, Jamboree Housing, and Related — and representatives of those companies either declined comment or did not return messages.
Steve Soboroff, who was the mayoral point man on the construction of Staples Center and later president of the Playa Vista development on Los Angeles’ Westside, said he does not believe Anaheim would find a buyer willing to outbid Moreno for the Angel Stadium land.
Bubba Harkins, dismissed by the Angels for providing a sticky substance to visiting pitchers to aid their grip, asks a court to reinstate him.
“I would bet the ranch that they wouldn’t,” Soboroff said.
Still, he said, the city could face financial peril in putting the land up for bid.
“The possible downside would be that nobody comes in — or, worse than that, somebody comes in for $15 million,” Soboroff said. “Then the guy from the Angels says, ‘Now I won’t pay $150 million; I’ll pay $80 million.’ That’s the risk.”
Soboroff said city leaders also could face political backlash. The city negotiated only with Moreno and used an appraisal to determine land value, rather than putting the land up for bid and letting the market decide.
The city-commissioned appraisal valued the site at up to $500 million, but only with the Angels gone and the stadium demolished. After the Angels opted out of their stadium lease in 2018, the city council reinstated it in 2019, amid renewed negotiations with the team. That extended the time the Angels could control the property from 2020 to 2038 and, in turn, lowered the value in the appraisal to $320 million.
Moreno appears to be the best buyer, Soboroff said, but voters can be suspicious of elected officials who do not even consider other bidders.
“If I would move to Anaheim and run on that,” he said, “I would be elected mayor.”
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