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FORD—Ford’s Hands Tied on Pricey Burbank Real Estate Deal

The asking price for a prime piece of real estate in Burbank is not the only reason the Ford Motor Co. won’t offer it to one of its own dealers. Robert Bruncati, owner of North Hollywood-based Sunrise Ford, said as much as he’d like to he can’t afford to build a dealership on the now-vacant 8.14-acre parcel without tax incentives from Burbank, a deal the city once offered Bert Boeckmann, owner of Ford’s largest dealership, Galpin Motors, but won’t give anybody else. Burbank was prepared to subsidize a Boeckmann dealership on the former “Zero Corp.” property with $12 million in construction costs and tax rebates, and by throwing in a 3.8-acre parcel of city-owned land nearby. Now Ford, which paid $12 million for the land at 777 Front St., has the property listed for sale, asking $15.5 million, or roughly $40 a square foot. But auto dealers typically pay between $15 and $20 a square foot and, without tax incentives, Bruncati said neither he nor any other auto dealer in town can afford it. “At that price that would be insane,” said Bruncati, who also owns two dealerships in Fontana. “The one facility I built in Fontana is on 16 acres of land bought by the city for $3.75 a square foot.” But even with tax incentives, there is another obstacle. Bruncati said Boeckmann holds an exclusive on the property through an agreement he made with Ford three years ago to bring in an auto superstore. And, although Boeckmann has since backed out of that deal, the agreement, according to Bruncati, bars other Ford dealers from setting up shop there. “When Ford bought the property they had an agreement that there would be no other Ford dealership there, or that there would be an exclusive set aside for Burt Boeckmann,” Bruncati said. “Now Burt Boeckmann has the right for refusal for any Ford dealership other than his own.” “I’ve spoken with top executives from Ford, some who are personal friends, and they’ve said they are sorry. That they realize that it was a stupid thing to do and that it was wrong for them to do it at all.” Boeckmann declined to say whether he indeed does hold an exclusive agreement on the property that precludes other Ford dealers from moving in. He said the initial plan with Ford called for a network of dealerships that would include one on the Zero property, and that Ford “never intended to put a satellite dealership in Burbank.” John Clinard, regional communications manager for Ford, said he could neither confirm nor deny a Boeckmann exclusive on the property. “All of our business-related dealings with the dealers are confidential,” he said. Meanwhile, CB Richard Ellis Inc., Ford’s broker for the land, is said to be courting developers for non-automotive projects and hoping to persuade the Burbank City Council to change the zoning on the property. But a few key players in this version of “Car Wars” say Ford’s asking price for the property is way too high, and that eventually the company will have to reconsider selling the land to an auto dealer, even if it means cutting a deal with a major competitor. Further complicating the issue is a law that went into effect in January essentially making it illegal for cities or redevelopment agencies to now offer tax incentives to auto dealerships to help them move from one California city to another. The law, authored by state Sen. Tom Torlakson (D-Antioch), says an auto dealer or big-box retailer cannot use tax incentives or redevelopment agency assistance to move from one city to another unless it agrees to share tax revenues with the city left behind. “So, as of January of this year, it’s almost impossible to give an auto dealer a tax break,” said Burbank City Manager Robert “Bud” Ovrom. “If you take away from one area to give to another, then you essentially have just stolen from Peter to pay Paul.” Bruncati said he believes he could get around the law if he kept his North Hollywood dealership open while establishing a new dealership in Burbank, and he still wants the same deal Boeckmann would have gotten from the city. But the law isn’t his biggest roadblock. Burbank city officials say they can no longer afford to offer the same tax incentives they had offered Boeckmann. “(Bruncati) asked us if we would give the same deal to him and the answer is no,” said Ovrom. Ovrom said three years ago the notion of bringing in an auto mall was popular because it was the one retail tax drain the city wanted to plug. With just one auto dealer in town, Community Chevrolet, officials initially projected they could reap close to $55 million in sales tax revenue from the Boeckmann dealership over 25 years. “We were willing to give the first guy in there a tax break to do this,” said Ovrom. “But we are disillusioned with auto dealers now. If we gave them any subsidy, all we would be doing is lining the pockets of the Ford Motor Company.” Bruncati is not the only auto dealer in the Valley to hit a wall with the city of Burbank. In March, Jean Vaughn, president of Glendale-based Guy Schmidt Automotive Group, and Fred Bell, owner of Community Chevrolet, proposed building a satellite Buick-Pontiac, GMC Truck and Cadillac dealership. Ford turned down their $15-a-square-foot offer for the property. Vaughn has since withdrawn from the proposal, but Bell is still very interested in relocating, according to his representative, Michael Hastings of Los Angeles-based Direct Point Advisors. Hastings said his client would still qualify for incentives from the city because it would be moving from one Burbank location to another. He also said Ford’s asking price for the land is “unrealistic in the current market” and believes the city ought to do whatever it can to help Bell move, including considering the notion of a straight land swap. “The bottom line here is Burbank needs auto dealers, not more retailers,” said Hastings. “It’s time to bring in new sales tax generators that are not going to cannibalize on existing sales tax generators.”

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