West Coast Real Estate Update: March 6, 2017
Gov. Brown Opposes Measure S
In a statement published less than two weeks before Los Angeles' Consolidated Municipal and Special Elections to be held on March 7, 2017, California Gov. Jerry Brown came out in opposition to Measure S, commonly known as the Neighborhood Integrity Initiative. If passed, Measure S would impose a two-year moratorium on real estate development projects that require a general plan amendment, zoning change or height limit change. In claiming that Measure S "goes too far," Gov. Brown joined several public figures who have expressed opposition to Measure S, including Los Angeles Mayor Eric Garcetti and other city officials.
If Measure S is approved by voters, Gov. Brown could take legislative and legal action against the measure, including directly challenging the measure in court.
FinCEN Extends Geographic Targeting Orders Aimed at Large Cash Real Estate Deals
In March 2016, the Financial Crimes Enforcement Network (FinCEN), the enforcement arm of the U.S. Department of the Treasury, began requiring title insurance companies to report the names of beneficial owners of companies paying cash to purchase high-end real estate. Initially, the Geographic Targeting Order (GTO) applied only to purchases of real property in Manhattan and Miami. In August 2016, FinCEN issued similar GTOs for Los Angeles, San Francisco, San Mateo, Santa Clara and San Diego counties. The GTOs targeting California apply to residential property transactions priced at more than $2 million.
The GTOs applicable to California were set to expire on Feb. 23, 2017, but FinCEN has extended them until Aug. 24, 2017. With these orders, FinCEN intends to uncover money laundering schemes that use shell companies to acquire expensive real estate with illicit funds. However, some local real estate industry professionals have expressed doubts about the program's effectiveness.
Measure P Could Help Revitalize Port of Los Angeles
While Measure S is hotly contested and receiving much media attention, another measure on the March 7, 2017, ballot that could also affect development in Los Angeles — Measure P — is flying under the radar. Measure P would extend leases for commercial properties at the Port of Los Angeles (the Port) from the current limit of 50 years to 66 years.
Usually, owners and developers of commercial real estate own the land on which their developments sit. However, land within the Port is owned by the State of California, held in trust by the City of Los Angeles and run by the Harbor Department. Thus, commercial property owners and developers in the Port must use their land leases as collateral when financing a development or redevelopment project. It is expected that the increased lease terms provided by Measure P would make it easier for developers at the Port to obtain financing for their projects and make the Port more competitive with nearby ports, such as Long Beach and San Diego.
It is estimated that full build-out of two redevelopment projects currently underway in the area could double the number of visitors to San Pedro by 2025 and provide 1,300 new full-time jobs. Los Angeles City Council Member Joe Buscaino strongly supports the measure, which has no major opponents.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.