Seller profit vexes council

CITY HALL — A Burbank Housing Corp. purchase of an apartment complex that resulted in a windfall profit for the seller has sparked concern on the City Council.

In December 2006, the Burbank Housing Corp. — a nonprofit agency that buys and rehabilitates residential properties for affordable housing — entered into a $1.4-million purchase agreement with property owner Michael Augustine of Burbank Properties, LLC, for a two-story, eight-unit complex on Verdugo Avenue. The council approved the agreement by a 4-1 vote at its Jan. 23 meeting.

But a city staff report that gave the council some details of the purchase did not include information that Augustine had acquired the property for $1.03 million on Nov. 21, 2005, just 10 days before selling it to Burbank Housing — at a profit of $365,000.

Though below-market purchases for the purpose of turning a profit of are not unusual, the council should have been made aware of the most recent transaction, Councilman Dave Golonski said.

"This is really a discretionary purchase, and I wouldn't have supported it if I had known it had been sold at that kind of profit," he said. "The bottom line, to me, is that the council, when they're considering something like this, needs to have all the facts in front of them."

City's appraiser Otis Hackett's assessment the property, prior to the purchase, valued the property at between $1.3 million and $1.4 million, said Ruth Davidson-Guerra, assistant community development director for Housing and Redevelopment.

A summary of the appraisal was presented to the council before the Jan. 23 vote.

The Nov. 21, 2005, transaction was not included in the appraiser's comparable sales chart because that sale was at a lower price than what the appraiser's expertise told him it should have been, she said.

But Burbank resident Stan Hymen, who challenged the transaction at a March 6 council meeting, questioned how both city staffers and council members could have been unaware of the sizable profit that Augustine reaped from the sale.

"What I found amazing is at this moment in the transaction, no one has noticed all the red flags flying due to the fact that the appraisal had several flaws," he said.

Golonski has asked that the details of the sale be brought back to council to consider possibly rescinding the transaction.

"I just think it's so wrong for people to profit that way speculating on real estate on our efforts to provide affordable housing for the city of Burbank," he said.

QUESTION

How do you think the city should react to the profit made on its purchase of a building? E-mail your responses to burbankleader@latimes.com; mail them to the Burbank Leader, 221 N. Brand Blvd., 2nd Floor, Glendale, CA 91203. Please spell your name and include your address and phone number for verification purposes only.