Sold – or not? City may step in to buy auctioned downtown parking lot

Fresno developer Terance Frazier scored a win Wednesday in an auction to purchase a piece of land across the street from the city’s future high-speed rail station. But that $2.4 million win could be short-lived if the California High-Speed Rail Authority gets its way.

The Fresno City Council will decide Thursday whether it will step in with a first right of refusal to buy the property and, in turn, and re-sell it to the state rail agency. City Council President Paul Caprioglio added the issue as a special meeting of the city’s redevelopment successor agency to consider the deal.

The property is the 2.8-acre Merchant Lot, a paved parking lot on the east side of H Street between Fresno and Mariposa streets. The site has been identified by the state rail agency in plans for its passenger station on the west side of H Street between Fresno and Tulare streets. The parking lot was owned by the city of Fresno’s Redevelopment Agency until the state dissolved redevelopment agencies a few years ago.

“The dissolution law required us to sell those former Redevelopment Agency properties,” said Marlene Murphy, executive director of the city’s redevelopment successor agency. In Fresno, those properties are put up for auction to be sold to the highest bidder, and a redevelopment oversight board conducted an auction for the Merchant Lot on Wednesday.

Todd Stermer of the Fresno City Clerk’s Office said the oversight board auction drew two bidders: the rail authority and Frazier’s company, TFS Investments. Bidding opened at $1.8 million, and the two sides bid against each other until Frazier bid $2,402,000 and the rail authority dropped out.

Under ordinary circumstances, that might have been the end of it. But Murphy and Larry Westerlund, the city’s economic development director and Mayor Ashley Swearengin’s appointed representative to the oversight board, both said the city has the ability under the law to exercise a first right of refusal.

“The city can opt in and pay for the property at the highest price we got through our sale,” Westerlund said Wednesday afternoon.

That’s exactly what the rail authority is asking the city to do. In a letter to City Manager Bruce Rudd after the auction, the agency proposed that the city exercise that first-refusal right for $2,403,000 – $1,000 more than Frazier’s winning bid – and then re-sell the lot to the state.

“As part of the high-speed rail project, the Merchant Lot was identified as a future intermodal transit center and parking lot and an integral part of the success of the future downtown station,” said Diana Gomez, the rail agency’s Central Valley regional director, in a letter to Rudd. “It is in the best interest of the state to acquire this property to protect it from development that would increase the cost to the state.”

Frazier said he was disappointed and discouraged that the City Council might move to short-circuit the auction results. He and his fellow investor Matt Garza, a starting pitcher with Major League Baseball’s Milwaukee Brewers, bid on the property with the goal of building a mid-rise, mixed-use building with commercial and retail businesses on the ground floor with four to six floors of apartments above.

“Why would the city go against a private developer if your whole plan for downtown is to say you want private development?” Frazier asked. “If a developer follows the rules bidding at the auction, then that doesn’t make sense.”

Frazier said his investment team was prepared to bid up to $3 million on the property before the rail authority dropped out of the bidding. He added that he believes the situation underscores the need for the city to have a master plan “so nobody is stepping on each other’s toes.” Frazier said he was also concerned that the rail authority is seeking to nullify the auction rather than reaching out to see if the state could work with his company. “I am one of the biggest proponents of high-speed rail,” he said. “We need to be working together as a team, not against each other.”

Garza said Wednesday that if the city wanted the property, it should have either moved to acquire it before the auction or participated in the bidding. “I think it’s completely unfair,” he said. “It feels like an abuse of power.”

Garza added that his mother worked for years in downtown Fresno and that he was looking forward to participating in the the area’s revitalization. “I want Fresno to be proud of downtown,” he said. “I want to give people the opportunity to live in a vibrant neighborhood.”

Frazier, who is partnering with Mehmet Noyan on a mixed-use commercial/residential project a few blocks to the southeast near Chukchansi Park, has other plans in the works as the master developer for the downtown South Stadium project area. He held out hope that the council may allow the auction results to stand.

“The City Council will end up doing what they do,” he said. “I believe that if this goes to the council, they will make the right decision for the city.”

This story was originally published November 16, 2016 at 6:34 PM with the headline "Sold – or not? City may step in to buy auctioned downtown parking lot."