Fresno developer Terance Frazier, with investor partner Matt Garza, a pitcher for the Milwaukee Brewers, 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 victory was short-lived.
Frazier outbid the California High-Speed Rail Authority in Wednesday’s auction. But on Thursday, the Fresno City Council voted 5-2 to exercise a first right of refusal to buy the property and, in turn, re-sell it to the state rail agency.
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’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.
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The city can opt in and pay for the property at the highest price we got through our sale.
Larry Westerlund, mayor’s appointee to redevelopment oversight board
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, said the city has the ability under the law to exercise a first right of refusal.
That’s exactly what the rail authority asked the city to do. In a letter Wednesday 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.”
Councilmen Steve Brandau and Clint Olivier unsuccessfully sought to block the first-refusal rights, but their motion failed on a 5-2 vote. “Philosophically, I have a problem with government picking winners and losers,” Brandau said of upending the auction results.
“Secondly, I understand that (Frazier’s) team was willing to bid even more than they won the auction at. They were willing to go up to somewhere around $3 million,” Brandau added. “We are not only taking over an auction, but we are stunting the cap on the money that could have come to the city of Fresno.”
Other council members shared Brandau’s concerns, but said the importance of the property to the high-speed rail station overrode those issues.
Frazier said he and fellow investor Garza, a starting pitcher for the 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 and four to six floors of apartments above.
We are not only taking over an auction, but we are stunting the cap on the money that could have come to the city of Fresno.
Fresno City Councilman Steve Brandau
Immediately after the vote, an outraged Garza vented his frustration at losing the property and threatened to sue the city over the action.“I’ve got enough resources that I’m going to tie this up in litigation until Mayor (Ashley) Swearengin and that entire city council is out of office.”
A calmer Frazier was more philosophical about the vote. “I don’t take this as a loss,” he said. “I take it as (the city) won. I believe they are making the best decision they could with the information they have in front of them.”
Frazier, a former baseball player, compared the situation to the Chicago Cubs recent win over the Cleveland Indians in the World Series. “We went to bed thinking we’d won,” he said. “Then we woke up the next day and it’s like the baseball commissioner saying the Indians won instead.”
Garza said 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.”
Gomez said that while the rail authority’s initial plans for the site include a potential station for buses, cabs and other transportation modes connecting to the high-speed rail station, those plans are not set in stone. “We’re working with the city on the station area planning,” Gomez said. “We may do parking, or intermodal transit, or mixed use.”
Depending on the ultimate plans, the possibility exists for partnering with a developer such as Frazier on developing the property, Gomez acknowledged.
Brandau said that potential is important to him. “I’m going to be really pissed off one of these days if Mr. Frazier finds out that some other (outside) developer comes in and ends up profiting from this property,” he said.
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.
Frazier said he would be open to working with the rail authority in the future, but added that he cannot count on that possibility. “We’ll just have to look for other property,” he said. “I can’t afford to look in the rear-view mirror; we have to move forward.”