By Aaron Blevins, 3/22/2012
Agency Does Not Expect to Recoup a Majority of the Funding
Of the $703 million that remains in the Community Redevelopment Agency of Los Angeles’ (CRA/LA) portfolio, nearly $50 million are loans in default, a low figure compared to years past.
During a meeting last week of CRA/LA’s governing board, the three-person board was presented with a quarterly report of the agency’s defaulted loans. David Bloom, a spokesman for the agency, said those loans are actively being managed by a five-person unit within the agency.
“That’s a small percentage [of CRA/LA’s total portfolio], and probably a historical low for the agency,” Bloom said, adding that the city is likely in the worst commercial real estate market since the Great Depression.
The loans can go into default for monetary or technical reasons. Almost $12 million in loans are in monetary default, while nearly $38 million are in technical default for various reasons, including not providing information — such as annual reports — or not abiding by the terms of their respective agreements.
While the $50 million in taxpayer dollars could be helpful in shoring up the city’s budget, Bloom said the agency does not expect to recoup a majority of the funding, as most of CRA/LA’s loans are designed to turn into grants, helping the city in the long run. However, what to do with the agency’s portfolio and its defaulted loans in the future remains an unanswered question.
“There’s no decision to be made right now,” Bloom said. “It’s a little preliminary to talk about what happens two years from now, three years from now.”
He said the organization attempted to sell its portfolio, which includes 866 loans, a couple of years ago, but finding a suitor proved difficult, with the agency’s project containing hordes of stipulations that would require extensive management.
“It doesn’t have much in the way of actual value in the private market,” Bloom said.
How to manage the agency’s projects in the future is one of a “ton of issues” still facing the agency, he said. Bloom said officials have received little guidance from the state Assembly, which disbanded the agency through AB X1 26 and AB X1 27.
“That’s one of a lot of questions the agency is grappling with in a sea of uncertainty,” he added.
Bloom said that in rare cases, CRA/LA will foreclose on a property, although that is only done if the project is a danger to its tenants or if the builder goes into bankruptcy. As a general rule, the agency does not foreclose.
While uncertainty persists with CRA/LA, the agency’s current board, comprised of Gov. Jerry Brown appointees Timothy McOsker, Nelson Rising and Mee Semcken, has experience in the field and wield “stunning resumes.” However, they are only six weeks into “a new world,” Bloom said.
“They’re not inexperienced,” he said. “They’re actually a remarkable board.”
Bloom said the agency has faced a lot of pressure since the California Supreme Court upheld the Assembly and Senate bills late last year. He said agency officials hope the Legislature will step in and offer assistance.
“We can’t make decisions right now,” Bloom added.