The City of Commerce has rented 14.4 acres to a local businessman who generated up to $50,000 a month to park big rigs, while the city made as little as $1,000 a month.
The industrial city in southeast Los Angeles County rented the city-owned land for pennies on the dollar to businessman Martin Fierro, without City Council approval or going out to bid, the Los Angeles Daily News reported.
The investigative report said Fierro paid as little as $1,000 a month at one point, which real estate experts say could generate as much as $30,000 to $50,000 a month per acre in truck parking fees.
“It’s hugely valuable land and hard to find,” an unidentified developer who works in Commerce told the newspaper. “There is a lot of demand for it because truck parking is a critical component to the supply chain.”
Estimates of the potential revenue generated from the sites indicate the city has potentially missed out on hundreds of thousands — if not millions — of dollars over the duration of the leases.
The Ports of Los Angeles and Long Beach are among the busiest in the country, handling about 40 percent of U.S. imports and 25 percent of exports. Commerce, located 20 miles away, has direct access to both the 5 and the 710 freeways and intersects with the region’s railways.
After the ports ground to a halt last year, Gov. Gavin Newsom ordered his staff to identify land, owned either privately or publicly, that could be used to “address short-term storage needs to address the supply and distribution chain crisis.”
Rows of trucks on Telegraph Road and Sheila Street suggest Commerce is helping lessen that gap – though city coffers and residents aren’t seeing the benefits.
Fierro, who operates a swap meet in the city, is well liked by the City Council because he gives back to the community, according to a councilman. He donates backpacks and supplies to local students.
City Manager Edgar Cisneros, a former school district board member, said he has known Fierro for six or seven years, but denied Fierro or his company, Fenix Entrepreneur, get special treatment.
Cisneros said the leases to Fierro are temporary and generate revenues while the city finalizes efforts to sell those properties to other parties, including Citadel, the nearby outlet mall. Having a tenant on the property helps deter homeless encampments and illegal dumping, he said.
The fact that a sale might close any day made it necessary to find a tenant who was willing to accept having to vacate on short notice, Cisneros said.
Fenix’s low rental rates also factor in improvements it has made to the various sites, including $525,000 spent cleaning up debris and dirt illegally dumped on one of the Telegraph properties, Cisneros said. Much of the available space wouldn’t exist if Fenix hadn’t cleared the properties first, he said.
“The lower rate was in consideration for the improvements the tenant made on the site,” Cisneros said. Fierro, in an email, echoed the city’s explanation for his low rental rates.
Fenix began leasing 6007 and 6241 East Telegraph Road from Commerce last year for $1,000 and $1,700 per month, respectively. Combined, the two properties initially gave Fenix about 18.8 acres of land on which to store trucks and trailers, according to the leases.
New leases signed this year increased the total rent Fenix is paying for the two properties — with up to 26 acres available — to $15,000 per month. The rent is slated to increase again to $35,000 total per month in mid-2023, due in part to the demand for such properties, Cisneros said.
If someone were to make a better offer, Cisneros said the city would consider it after giving Fenix a chance to match it.
As many as 25 trucks per acre at $450 per truck could mean Fenix is pulling in roughly $300,000 per month from the 26 acres rented to the company today, according to the Daily News.
The deal between Commerce and Fenix doesn’t seem to pass the “smell test” for being above board, said Neama Rahmani, a former federal prosecutor who has served as director of enforcement for the Los Angeles City Ethics Commission.
“A grossly under-market rent, especially in Southern California where rents are extraordinarily high, is a huge red flag,” Rahmani said. “$1,000 rent for multiple acres is essentially free, and makes no business sense. The public and prosecutors need to scrutinize this deal.”
— Dana Bartholomew
Read more
Commercial
Los Angeles
Ares Management unit pays $50M for warehouse
Commercial
Los Angeles
Aerospace outfit leases 115K sf warehouse in Commerce