By JACQUELYN RYAN Staff Reporter

Local real estate developers might not like it, but the successor organizations of community redevelopment agencies have suspended sales of their properties because of a new law.

In the city of Los Angeles, for example, that means more than 150 properties held by the successor to the city’s Community Redevelopment Agency are off the market – at least for now.

The successor agencies had been required to sell their properties after the state’s decision last year to dissolve redevelopment agencies statewide. But a month-old law now requires the agencies to stop any sales at least temporarily while they develop a long-term property management plan. That means parcels could be retained for an additional three years.

What’s more, the new law requires that CRA successor agencies can no longer sell properties until they get approval from the state’s Finance Department. That adds another bureaucratic step to any future sales.

Among the prominent properties that are now off the market: downtown’s notorious 21-acre CleanTech Manufacturing site; Hollywood’s 1601 N. Vine St. property, where a $60 million office tower is planned; and the historic Westlake Theatre at 634 S. Alvarado St. near MacArthur Park.

Not surprisingly, local developers who had hoped to close sales are now worried about the delay and additional approval process.

Jason Gremillion, vice president of Trammell Crow Co., has been trying to close a $15.4 million deal to buy the CleanTech site for more than year and now will be delayed again.

“We’re all very much affected by it,” Gremillion said. “It severely impacts all developers who are trying to purchase land or execute a transaction with properties owned by successor agencies.”

His sale has already been approved by the necessary local authorities but now must get approval from the state.

Hastily formed

The law, which passed June 27, amends the decision by Gov. Jerry Brown last year to dissolve all of the state’s redevelopment agencies. The governor’s decision resulted in millions of dollars in property tax money staying in state coffers.

Successor agencies were hastily formed and CRA nonhousing properties were marketed with the intent of being sold to the highest bidder. (Housing-related properties are being transferred to the city of L.A.’s Department of Housing.) However, out of fear that properties were being dumped and that the state was losing control, the Legislature passed the new law calling a timeout.

Now, CRA successors must develop a long-term property management plan, which could allow them to keep properties for government use or development until 2015. Sales must be approved by local oversight boards and the Finance Department, giving the state more influence over the disposal of the parcels – the proceeds from which would also go to state coffers.

The new law affects all 425 redevelopment successor agencies in California, including the 74 in Los Angeles County.

In Long Beach, for example, the successor agency had to pull its properties off the market and halt any sales already under way. The Long Beach Press-Telegram estimated in May that the successor agency owns about 200 properties. At least three of them were under contract before the legislation was passed. Now they are stuck in limbo as the successor agency creates a new property plan.

Greg Gill, president of Lee & Associates L.A./Long Beach who is representing the buyers of those three properties, said that the biggest hindrance for developers will be the waiting time.

“We have people who are interested in acquiring assets and we are literally just waiting,” he said. “We are being told consistently, ‘We would love to sell but we can’t do it now; we have to get through this (property management plan) process.’ ”

In the city of Los Angeles, Richard Close, a local lawyer who’s on the oversight board monitoring the winding down of the CRA, said many private-sector plans are now on hold.

“A lot of developers wanted to get and pay fair market value for the land owned by the redevelopment agencies so they could build projects – retail, commercial or apartments – and that’s not going to happen as quickly as the original law anticipated,” Close said.

Some buyers are alarmed by a clause in the new law that could allow the state to take back a property that had been transferred if the state determined the deal wasn’t suitable. However, the circumstances under which that would be possible are still being worked out by lawmakers.

Too popular?

CRAs had been created in recent decades as a way to spur development and bring jobs to depressed areas. The government agencies could keep additional property taxes that resulted when real estate was improved. They used that money partly to provide subsidies to developers.

But in a sense, CRAs became too popular and bottled up tax money that the state coveted. By dissolving the agencies last year, the state regained that tax money.

But with the sense that the state acted hastily last year, the new law instructs the CRA successor agencies to stop selling their assets, at least for now, and come up with a thoughtful plan that will guide how and to whom the properties are sold. The guidelines for the plan allow for properties to be retained for government use, held for future development or sold. It also allows parcels to be transferred to cities if the property is part of an already approved redevelopment plan.

Nelson Rising, a veteran developer and one of three members of the CRA successor agency board in the city of Los Angeles, said that the group has not yet begun drafting a plan for its properties.

“We are just starting to deal with it,” he said. “I suspect at our next meeting we will try to develop a process and procedure that allows us to comply with this.”

In May, the agency did a preliminary assessment of its properties and calculated a total of 172 housing, mixed-use and commercial properties. Of that, 21 are housing properties and most of them likely are to be transferred to the state’s Housing Department.

Once a plan is approved, the properties will be placed in a trust fund administered by the successor agency for uses prescribed in the plan.

Notable properties

The highest-profile parcel is the 21-acre CleanTech site at 2425 E. Washington Blvd. that has been a crown jewel in Mayor Antonio Villaraigosa’s CleanTech Corridor. It was formerly home to a train depot and Crown Coach, a bus and fire engine manufacturer. The site has been vacant for nearly 30 years but is contaminated with decades’ worth of pollution.

The redevelopment agency, which had committed millions of dollars to helping mitigate the environmental hazards at the site, tried to get the property into the hands of developers at least five times in hopes of turning the area into a hub for clean technology and green businesses.

Among those that it has tried to have develop the site are Italian rail-car maker AnsaldoBreda Inc. and the electric-car maker Coda Automotive Inc.; neither worked out. Last year, Culver City developer Genton Property Group had bid to buy the property but backed out when it couldn’t secure financing. Now, Trammell Crow, a subsidiary of West L.A.’s CBRE Group Inc., is hoping the state will approve its plan to buy the property and develop a several-hundred-square-foot warehouse for use by tech and manufacturing companies.

Gremillion said that his company will continue to wait out the bureaucracy and hopes that this process serves as a learning experience because his company is interested in purchasing more properties from the agency in the future.

“We will see this as a litmus test as to how successful it can be,” he said. “If we can get this secured and deliver the jobs to the city and state, it’s the idiom that trust is earned. We hope this will have a positive impact on future opportunities.”

At 1601 N. Vine St., Santa Monica developer Hal Katersky was approved last year to build an eight-story, 100,000-square-foot office tower with ground-floor shops. He no longer owns the plans for the $60 million project, but another developer could move forward on it.

However, now it’s not clear who would buy the property, or even how or when such a sale could go through.

Mac Chandler, managing director at retail center developer Regency Centers, which has completed several projects with the CRA, said that he is not worried about the pending plan. His company is under contract to buy two properties from other redevelopment agencies in Southern California, which he declined to name, but said that he feels confident the sales will go through after the organizations come up with a property management plan.

“We are optimistic that the agencies realize that it’s really the state’s call on what can be sold and can’t be sold,” he said. “I think the agencies are realizing that it’s in the communal best interest to put these properties into production and see the community benefits of development, even if the proceeds from the property sale go to the state.”