real estate Archives

“You’ll Never Reach Your Destination If You Stop And Throw Stones At Every Dog That Barks” —Winston Churchill

Harbor Church in midtown Ventura

When it comes to real estate, Ventura’s City Council is, at best, inconsistent. At worst, they are reckless with our money. Their latest decision costs taxpayers over $1,000,000.

On June 16th, the Council accepted the city staff’s recommendations for the Harbor Church. Like some other real estate recommendations, it loses money.

How We Got Here

The Harbor Church—located in midtown Ventura—was feeding the homeless as part of their outreach program. Nearby residents were upset with the homeless. They asked the city to get Harbor Church to stop. The city said, “Stop it.” The church cried, “You’re violating our religious freedoms,” and threatened to sue.

The city is weak-kneed and folds at the hint of a lawsuit. Their solution was to buy out the Harbor Church to get them to move. City officials will claim this solution was less expensive than the legal costs of a suit but, at the heart of it, this is still a real estate transaction.

Nothing About This Deal Adds Up

2016 was a year of financial mistakes for the city.

The city paid church officials $2,300,000 to buy the Harbor Church property in 2016. City Hall and Harbor Church agreed the value of both the land and the church building was $1.6 million. The actual sales price included an additional $700,000 to pay the Church to move. By any measure, Ventura overpaid for the property.

City staff proposes to demolish the church, subdivide the property and sell the lots. Total cost to the taxpayers to clear the lot will be $2,670,000.

Purchase Harbor Church Building $1,600,000

Moving Expense $700,000

Demolish Church Building $350,000

Remove Hazardous Material $20,000

Total $2,670,000

The city staff enthusiastically reported the value of the property on which the Harbor Church sits increased by 66% since 2016. We see that factored into their optimistic projections. They believe we can get four lots on the existing site. They estimate each lot will sell for between $250,000 and $375,000.

The arithmetic didn’t add up from the beginning. A staff report lists the property and building appraisal at $1,350,000 in July 2017. A year earlier, the city paid $1,600,000 for the church and the lot—$250,000 more than the appraised value. This transaction lost money from the very start and doesn’t begin to realize the gains from the purported 66% increase in land value.

Something Else Doesn’t Add Up Either

The city staff used an optimistically over-valued selling price for the lots.

We pulled data from a local title company for homes sold in zip code 93003 for the past two years. What we discovered was shocking.

	Average	Median	Avg SF	$/SF	# Sales
2016	$ 628,321	$ 595,000	1619	388	184
2017	$ 633,269	$ 599,000	1700	372	322
2018	$ 593,415	$ 594,000	1747	340	179

According to the data, lots on Harbor Church’s corner should sell for between $215,000 and $233,000. We derived those figures using the standard property developer’s rule-of-thumb. The land is worth 1/3 of a home’s selling price. The market values the lots are well below the $250,000 to $375,000 the city staff believes they’re worth.

A More Realistic Calculation Of The Transaction

Using this realistic data from the title company and giving the city the higher anticipated value, the sale of the property would actually look something like this:

Sell Four Lots ($233,000 each) $932,000

Lease Payments From Harbor

Church For 12 months $36,000

Realtor’s Fee (6%) ($55,920)

Total Revenue $912,080

Total Costs (from above) ($2,670,000)

Total Loss on Transaction ($1,757,920)

Is The City Looking Out For Your Money In These Real Estate Transactions?

In April, the City Council sought outside experts for a real estate decision on the property at 505 Poli. The city staff made a recommendation that made the City Council uneasy. The Council instructed city staff to seek advice from a licensed commercial realtor. The Council wants to determine the actual value of the property. As far as we know, city staff has not reported the findings to the City Council in the last 90 days.

The Council was cautious with 505 Poli. They appeared skeptical of the city staff’s recommendations. They were willing to await the findings of an independent appraiser. So, why was the City Council so willing to accept staff’s opinion on the Harbor Church property?

The Council voted 6-0 to proceed based on city staff’s recommendation. Councilmember Jim Monahan was absent at the meeting. The City Council was uneasy with staff’s 505 Poli valuation and recommendations. One would think the Council should be cautious with the Harbor Church property, too.

The City Council’s inconsistent real estate decisions should concern citizens. It causes taxpayers to doubt their financial acumen. The Council trusted the city staff again, with the same disastrous, money-losing results. Decisions that lose over $1,000,000 makes one question whether they are good custodians of our tax money.

Editor’s Comments

We’ve believed the city should get out of the real estate business for a long time. The litany of poor decisions grows—the WAV Building, Brooks Institute lease, 505 Poli and the Harbor Church property.

Ventura owns commercial real estate throughout the city. As these examples demonstrate, the city has not made financially responsible decisions regarding these properties. We recommend the city to seek an independent appraisal of its property, and then to sell it to private enterprise. The city could then take the proceeds and invest them to cover the huge unfunded pension liabilities we face in the coming years.

At the very least, the city should seek advice from licensed realtors and experts whenever making a real estate decision.

Large financial decisions deserve scrutiny. When stewarding taxpayer money, it’s best to proceed with caution and with thought. It’s too easy for city staff to recommend spending taxpayer money on losing projects. We urge the City Council to approach each real estate transaction with skepticism. Treat the money as if it was coming out of their own pockets.

Insist Ventura Gets Out Of Commercial Real Estate

Below you’ll find the photos of our current City Council. Click on any Councilmember’s photo and you’ll open your email program so you can write directly to that Councilmember.

Let them know what you’re thinking. Tell them what they’re doing right and what they could improve upon. Share your opinion. Not participating in government weakens our democracy because our city government isn’t working for all of us.

Neal Andrews, Mayor		Matt LaVere, Deputy Mayor
Cheryl Heitmann		Jim Monahan
Erik Nasarenko		Mike Tracy
Christy Weir

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“ONLY THE MEDIOCRE ARE ALWAYS AT THEIR BEST”
—Jean Giroudoux

WILL VENTURA CITY GOVERNMENT EVER LEARN?

It’s déjâ vu all over again. Once again the past rears its ugly head. Only this time will the City Council be wise

The Trade Desk may not be the best deal for texpayers

Is The Trade Desk real estate deal a gift of taxpayer money to a private company?

enough to learn from its past mistakes? There are some things this Council and this city staff are not qualified to evaluate fully.

Among the first issues facing the 2017 Ventura City Council is a real estate transaction. Ventura is selling four parcels of City-owned, prime downtown public property. The properties for sale are at 535 East Main Street.

The fact that the City is pursuing the sale of surplus land is commendable. Selling these properties should be open and transparent. To do otherwise, invites the possible perception of favoritism or mismanagement of public funds. Proper evaluations, bidding and screening needs to happen.

CITY STAFF PROPOSES A NEW DEAL

Community Development Director, Jeff Lambert, presented a new real estate deal on November 15, 2016. He asked the City Council to approve the sale of a large, downtown city parking lot. The proposed buyer is a company called The Trade Desk. The Trade Desk wants to build a headquarters office building. The proposed offer was $1 million ($24 dollars a square foot).

City staff steered the selection of The Trade Desk as the sole qualified bidder. The City Council depended upon the recommendations of City Staff.

Four months earlier, the City Council relied on city staff’s recommendations on another deal. The city staff did an incomplete analysis before recommending the Brooks Institute project. They compounded this mistake by failing to collect deposits and rent. The Brooks Institute deal fell apart.

This time, the City Council was close to selecting The Trade Desk in another real estate deal. They almost decided without benefit of an independent financial analysis or a professional appraisal.

WHY THE TRADE DESK?

The Trade Desk is a Ventura success story. Does that entitle the company to favorable treatment from city government?

The Trade Desk is a success story many citizens do not know about. The City of Ventura funded an incubator business startup program. They used $5 million of taxpayer’s dollars to seed the fund. The Trade Desk was a beneficiary of the subsidized program. The Trade Desk is a large tech company that brought new jobs to Ventura. The company achieved early success. With their success, the Trade Desk went public and the stockholders have made millions. A true success story for Ventura.

The Trade Desk wants to enjoy the city’s largess, again. This time, they want to buy city property for their headquarters at below fair market value. Their business success should not cloud City Hall’s judgment. City Hall should not sell public property at a discounted price.

DOES THIS DEAL PASS THE SMELL TEST?

A first whiff of impropriety surfaced during the election. The Trade Desk donated $7,000 to support the successful city-backed ½¢ sales tax measure.

Another whiff arises with regards to the questions the city asked to approve The Trade Desk. A close examination of the specific judging criteria reveals the questions were subjective.

Of the three bids submitted, city staff selected The Trade Desk as the most qualified bidder. In its proposal, The Trade Desk offered $1,000,000 in cash for the properties.

The city purchased the properties for $618,000 in 1997. The city valued the properties at $1,684,000 in the original proposal. They base their estimate on a 6 year old value (10/25/10) comparable price for a city parking lot. The city’s valuation is $40 per square foot.

A QUESTION FROM THE AUDIENCE SLOWED DOWN THE PROCESS

The third impression of impropriety is how much the city valued the property. The city valued the property at $40 per square foot based on a 6-year old comparable property. In the same council meeting, city staff urged the Council to buy another parking lot for $64 per square foot. City staff recommended buying the parking lot for $64 per square foot. This established a new comparable price. The new comp values the parcels at 535 East Main Street at more than $1,684,000.

The City Council seemed oblivious to the conflicting valuations. A citizen in the audience brought it to the Council’s attention. Only then did the City Council call for an independent appraisal.

It’s a mistake to sell The Trade Desk these downtown lots for $1 million, when the true value is closer to $2 million.

GIFT OF PUBLIC FUNDS?

You decide if The Trade Desk real estate deal is in Ventura’s best interest.

The city staff recommended to City Council to sell the property at a price below market value. This is another real estate blunder the staff made in 2016. In essence, it would be a gift of public money through the sale of property for less than market value. The sale would enrich The Trade Desk’s shareholders on the back of Ventura’s taxpayers.

The final whiff of impropriety appeared in the handling of the finances. Ventura city staff was willing to accept $50,000 in escrow from The Trade Desk. The Trade Desk estimates it will spend $15 million to develop the property. The deposit works out to 0.3% of the total value of the project. Such a small deposit amount should have concerned city staff. One would think they would have learned from their prior mistakes. Not accepting an adequate deposit was a pitfall in the Brooks Institute situation.

EDITORS COMMENT

MOVING FORWARD RECOMMENDATIONS

Negotiations continue with The Trade Desk. Yet, the openness and transparency of this transaction remains in question.

To avoid any appearance of impropriety, Ventura should request new proposals for the property. The city must get an appraisal by an independent, certified commercial real estate appraiser. The sale price must be equal or higher than the appraised value. The city must make new bids public. And the final offer must generate a better return to Ventura’s citizens.

The successful bidder should make a good faith, earnest deposit. In the event the transaction doesn’t move forward, a deposit protects Ventura’s citizens. The deposit would cover any loss of value or cost to return the property to its current state.

Editors:

R. Alviani K. Corse T. Cook B. Frank
J. Tingstrom R. McCord S. Doll C. Kistner