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By Matthew Hinks
Chief Justice John Roberts recently observed during oral argument on the Supreme Court’s latest foray into the field of regulatory takings that the government does not lose a Penn Central case very often. A new opinion from the California Court of Appeal in Lockaway Storage v. County of Alameda represents one of those rare instances. But more than offering just an isolated example of a property owner victory in such cases, the court’s opinion in the Lockaway case delivers a significant blow to a major obstacle that has stood in the way for developers alleging damages caused by project delays — the California Supreme Court’s seminal decision in Landgate v. California Coastal Commission.

Facts of Complaint

In May 2000, Lockaway Storage (“Lockaway”) purchased an 8.45-acre parcel of land in an unincorporated area of Alameda County. The property was zoned for agricultural uses with an alternative conditional use for “open storage of recreational vehicles and boats”. Prior to Lockaway’s purchase of the property, the County had issued a Conditional Use Permit (“CUP”) authorizing an rv storage facility, which would expire if it was not implemented by September 22, 2002.
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By Matthew Hinks
Statues of limitations issues frequently loom large in litigation under the California Environmental Quality Act (“CEQA”) and can confound litigants and their counsel. Depending on the challenge being made and the context in which it is made, claims brought under CEQA may be subject to a range of limitations periods — from 30 to 180 days. Moreover, the date on which a CEQA claim accrues is not always clear. For example, an agency making a CEQA decision may file a Notice of Determination, which generally triggers the shorter CEQA limitations periods, but parties with an interest in that same decision may not always get notice of the filing. For these reasons, among others, calculating the correct statute of limitations period applicable to a CEQA claim can be risky business. A new opinion from the California court of appeal, Alliance for the Protection of the Auburn Community Environment v. County of Placer, raises the stakes even higher and holds that a party may not obtain relief from a late filing by reason of mistake, inadvertence, surprise, or excusable neglect.
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To review the statistical results of the survey, click here.

JMBM’s Real Estate Group recently polled nearly 200 California real estate professionals, gathering their views about the California real estate market and their expectations for 2013.

According to these industry insiders, there is a lot of good news to report. California real estate appears to be in the midst of a sustainable recovery. Survey respondents indicated that capital is more widely available than in recent years, and, for the first time since the housing bubble burst, developers are eager to commence project entitlements.

In terms of the real estate market in general, here is what we learned:

  • 2% of our respondents described themselves as “bullish.”
  • 55% described themselves as “cautious.”
  • 28% believe the market has already recovered; 43% believe the real estate market will achieve sustained recovery by the end of this year; 29% feel it will take at least 2 years to recover.
  • 90% feel that acquiring debt will be easier or the same in 2013, while a similar percentage (89%) believe acquiring equity will be easier or the same.

Over 93% indicated being active in the distressed market. However, nearly 61% noted a material decrease in note sale activity, signaling that loan defaults are down and that large numbers of expiring conduit loans appear not yet to have created a second wave of defaulted note sales.

Movement from distressed properties to stabilized real estate. JMBM represents clients in all facets of real estate, from entitlement through completion, from acquisition to disposition and, according to JMBM Real Estate Partner Seth Weissman, the survey results are consistent with what JMBM’s real estate lawyers are seeing. Weissman’s clients have been particularly active in the distressed market. “However, those transactions are giving way to more traditional ‘market’ deals as more conservative investors, looking to stabilized real estate as a traditional component of their portfolios, are re-entering the market,” said Weissman. “As the overall economy improves and interest rates remain low, we are seeing increased activity in office, multifamily, and industrial projects as well as the upscale single-family market.”

Multifamily. While cautiously optimistic about most sectors, our respondents indicated that multifamily is the most attractive market segment for investment. “Nearly two-thirds of our survey respondents are involved in some way in multifamily housing,” said Benjamin Reznik, Chair of JMBM’s Government, Land Use, Environment and Energy Group. “Demand for quality rentals remains very strong, and developers and lenders are eager to meet that demand.”

Hospitality and retail. A full third of our respondents are involved in the hospitality sector. “These hotel investors and developers see that the stage is set for continuing improvement in hotel industry fundamentals and hotel valuations for at least the next 5 years,” said Jim Butler, Chairman of JMBM’s Global Hospitality Group®. “The market is also experiencing a renaissance of ‘hotel-retail mixed-use’ development, as retail and hotel developers both seek the increased revenue that is generated when the right hotel is added to a shopping center.”

What’s coming online. Niche areas of development and acquisition that our respondents are actively involved in include transit oriented development (18% ), creative office (16%), medical office buildings (13%), senior housing (10%) and student housing (9%). “These unique infill opportunities have gained momentum for developers able to identify strategic development sites and seize upon demographic, transit or employment opportunities in local markets,” said JMBM Real Estate, Land Use and Environmental Partner David Waite.

EIRs and Entitlements. As projects get back underway, respondents are keenly interested in entitlements, but challenged by the process.

  • While nearly 90% of respondents feel 2013 will be a good year to entitle or re-entitle properties, and almost half (49%) reason that zoning authorities will be more lenient due to lingering economic difficulties, we learn more as we delve into specific responses. As one respondent noted, this year will be “a good year because of cycle considerations, not an easy year.” Another noted, “Getting entitlements is hard, and getting harder. Waiting just makes it worse.”
  • The picture on entitlements appears to dovetail with the general market sentiment. As one person said, “Entitlement now is necessary for successful delivery into a robust market.” Another noted that, “Market demand for entitlement projects are high, and barriers to entry are difficult.” A third agreed: “Entitlement is still very hard, so new entitlement will add great value.”
  • A majority also suggest that applicants will be more aggressive with their applications, and 36% think projects will be approved more quickly because the pool of applications has remained small.
  • 50% of participants said they would face the challenge of preparing and circulating a new or updated environmental impact report (EIR) this year. “While the prospects for CEQA reform appeared promising at the end of 2012, expectations for meaningful reform should be muted as a variety of environmental stakeholders and special interests jealously guard their cherished seat at the CEQA table,” said Waite.

Developers continue to be challenged by the entitlement process and realize that success may be buoyed by other factors, including the skills of qualified professionals. As one person wrote, “Applicants who engage high quality land use attorneys and consultants have a much higher chance of getting projects approved.”

Waite agrees. “There are so many good projects in the pipeline that languish simply because they lack knowledgeable advisors willing to thoughtfully and aggressively engage with regulators to achieve positive outcomes,” he said. “As development activity increases, having the right team of professionals in place will be more important than ever.”

We are pleased to share this feedback from our survey participants, and thank our clients and friends for their participation in the survey.

We look forward to assisting you in any way possible and invite you to contact us.

For a list of all JMBM real estate lawyers, click here.

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by Kerry Shapiro
As reported earlier this week in this blog, the recent Ninth Circuit Court of Appeals decision in Center for Biological Diversity v. Salazar allowed a uranium mine on federal lands in Arizona to re-open after being idled for seventeen years absent any new federal approval or supplemental environmental review. This decision is notable on its own, but carries added significance in California, where it now highlights a potential conflict between federal and state law regarding idle mines and the resumption of mining operations at such mines.
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On February 5, 2013, Jeffer Mangels Butler & Mitchell (JMBM) filed a lawsuit in Los Angeles Superior Court (Case # BS141623) against the City of Los Angeles on behalf of Tower Lane Properties LLP whose beneficial owner is Saudi prince Abdul-Aziz ibn Abdul-Aziz al Saud, the current Deputy Foreign Minister of Saudi Arabia. The lawsuit seeks a writ of mandate to compel the city to issue the building permits and damages in the amount of $25 million caused by the city’s allegedly illegal and discriminatory conduct.
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By Matthew Hinks
Evidence of just compensation to be awarded in an eminent domain action is all but invariably put on through expert opinion. In a bit of good news for property owners facing eminent domain proceedings, the California Court of Appeal has issued a new opinion offering a relaxed view of the admissibility of expert opinions relating to comparable sales.
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By Matthew Hinks
For those of us involved or merely interested in the seemingly endless spate of sign-related litigation, the Court of Appeal’s opinion in Summit Media LLC v. City of Los Angeles has been long anticipated. The Summit case was unlike many of the sign cases winding their way through California’s state and federal courts, which have largely involved constitutional challenges to various sign-related laws and actions or enforcement actions by local municipalities against non-complying signs. Summit involved litigation between sign companies — including two of the largest sign companies in the country. The court of appeal’s opinion in the Summit case, which holds that a city may not enter into a settlement agreement allowing for digital billboards when they are expressly prohibited by ordinance, is a stunning defeat for those two particular companies, but surely will not be the last we hear of digital sign conversions in the City of Los Angeles.
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By Matthew Hinks

In a question of first impression, the California Court of Appeal has held in, People ex rel. Department of Transportation v. Dry Canyon Enters., LLC, that “a business owner is entitled to a jury trial on the amount of goodwill lost by a taking only if he or she first establishes, as a threshold matter, that the business had goodwill to lose.” The court’s analysis seems correct; nevertheless, the result is a troubling one for property owners.

Background Facts

Dry Canyon is a wine maker. As part of its business plan, Dry Canyon planned to develop a flagship wine to be made from grapes grown on property it owns in Paso Robles. In 2009, Caltrans initiated eminent domain proceedings to acquire a strip of Dry Canyon’s Paso Robles property on which was located 21 percent of the vines Dry Canyon was growing for its new flagship wine. By the time the proceedings were initiated, Dry Canyon had blended and sold a few vintages but had yet to turn a profit on the new flagship brand. The parties agreed to a valuation of $203,500 for the real property, which was paid to Dry Canyon, leaving one remaining issue: the amount of lost goodwill.

Dry Canyon’s expert testified that Dry Canyon lost $240,000 in goodwill as a result of the taking, which he calculated using two different methodologies. First, the expert utilized a “cost-to-create” methodology in which he added all expenses incurred in cultivating the new wine and divided by four (being that Caltrans took one-fourth of the vines). The second methodology was defined as a “premium pricing” approach in which the expert calculated that the new vintage would fetch a premium of $10.62 more per bottle than comparable wines, then multiplied that figure by the total number of bottles that would not be sold as a result of the taking. Both methodologies yielded a $240,000 lost goodwill figure.

Unfortunately for Dry Canyon, the trial court disagreed that Dry Canyon had any goodwill at all and granted a motion for judgment. The court of appeal affirmed.
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By Matthew Hinks
The billboard wars rage on. In the latest battle, the court in West Washington Properties, LLC v. California Department of Transportation narrowly interpreted a provision of the Outdoor Advertising Act (“OAA”), which provides a rebuttable presumption of legality to advertising displays erected for more than five years without Caltrans enforcement, rejected equitable defenses and dismissed at the pleading stage plaintiff’s inverse condemnation claims. The opinion should be a wake up call for companies engaged in or considering transactions involving the transfer of sign rights.
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By Matthew Hinks
A new opinion from the Ninth Circuit out of the State of Washington — Laurel Park Community, LLC v. City of Tumwater — offers an interesting application of the Supreme Court’s regulatory taking jurisprudence.
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