By Tina Richards 

Since the OUSD surplus property located adjacent to Santiago Middle School fell out of escrow last fall, its sale to Shopoff Reality Investments has remained in limbo, as has the long-term lease of a portion of the site to a palm farm. 

The palm farm’s owners, Burl and Michelle Gregory, have leased three acres of the Walnut site (named for the street the school abuts) from the district since 1993. The district receives half the proceeds from palm tree sales, totaling $50,000 to $60,000 per year. The Gregorys also own the land that borders the south side of the OUSD surplus land, just behind the three acres they are leasing. The only access from that side of the school’s property to the street is across their entry lane. The only access from the north side of the parcel is through the parking lot of Santiago Middle School. Walnut’s 9.7 acres are virtually land locked. 

The Gregory’s property is also home to the Jones Victorian Estate, a popular venue for weddings, receptions and community events. They live there, and they run two businesses (palm farm and events) there. The Gregory’s have been willing to negotiate with the district and the developer to provide access to the surplus land. But they expect to be treated fairly in the process. 

Not quite neighborly

When the district sold the Walnut parcel to Shopoff Reality Investments in 2014, it gave the palm farm six months to vacate.  The Gregorys were stunned at the abbreviated timeframe because they knew it would take several years for any proposed development to be finalized and the palm farm would, in the meantime, provide income to the district. Shopoff, needing access, asked the OUSD Board of Trustees to renew the lease for two years, giving the developer time to negotiate a land exchange with the Gregorys. 

Shopoff subsequently agreed to give the Gregorys a parcel of land near their Victorian parcel of land near their Victorian home to be used for event parking, in exchange for the one-fifth acre of their property that connects the surplus school land to the street. It was considered a good deal for all parties.

Shopoff originally bid $20 million for the land, assuming it could get zone changes and build high density housing.  When it learned that the city would not grant those entitlements, the developer realized that the property’s existing R-7 zoning would not allow it to build enough residential units to make a profit, and that its $20 million purchase price was too high.  “It didn’t pencil out,” says Brian Rupp, Shopoff vice president of development. Shopoff went back to the OUSD board and reduced its offer.  The revised offer, although less than $20 million, was still more than the second highest bid received by the district when it originally put the land up for sale. The OUSD board rejected the lower bid and the sale’s escrow expired.

What’s it worth?

The property, currently used as a dump site for district detritus, has been appraised at $10.1 million – as is. With entitlements and access (cue the Gregorys), it is valued at $15.6 million.

All board discussions on the subject are held in closed session, and the district has been mum on its intentions so far.  Michelle Gregory reports, however, that after the escrow expired, they were again given six months to vacate.  Recently, OUSD’s attorney offered the palm farm a six-month lease in exchange for the one-fifth acre of their property that land locks (and devalues) the  surplus acreage.  “I told her to go pound sand,” Gregory says. “That was a ridiculous offer, and we were insulted.”

The board was slated to address the Walnut sale and the palm farm lease during a closed session be-fore its Feb. 18 public meeting. 

​Before retreating behind closed doors, the board heard public comments from Michelle and Burl Gregory, Tom Davidson of Orange Park Acres and Shopoff’s Brian Rupp.

The Gregorys noted the value of renewing their lease until the fate of the property was determined. “We currently have $500 thousand worth of trees there,” Michelle Gregory said. “And half of that goes to the district. If we’re forced to move in a hurry, we’ll have to have a fire sale and the district will get nothing. We’re neighbors,” she said. “We’re partners. We can make this work.”

Take the high road

Tom Davidson reminded the board that “the Gregorys hold some cards that can make your deal with Shopoff better. Don’t send your attorneys off to intimidate them,” he said. “All eyes are constantly analyzing everything that you do – what is smart, what is prudent. This needs to be good for everyone. You are not just dealing with some chunk of surplus property, you are dealing with someone’s home and livelihood.”

Brian Rupp took his comment time to make another offer on the property. Calling it a win-winwin situation, he offered more than the $15.6 million appraised value (with improvements) and told the district Shopoff would give it $500 thousand “as soon as the papers are signed.” He asked the district to renew the Gregory’s lease for two years, giving them time to realistically vacate the property. The developer again offered to provide parking for the Victorian mansion events, in exchange for access.

“Everybody wins,” he said. “The district sells the property for its highest value, the Gregorys get parking and time, and Shopoff gets to build houses.”

Trustees John Ortega and Tim Surridge were not at the closed session meeting; Surridge was, however, at the public meeting that followed. The district has not yet revealed what, if anything, was decided. A spokesperson, however, reports that the district intends to release a status report shortly. 

USD’s stewardship of its surplus property adjacent to Santiago Middle School stands in sharp contrast to the palm farm (rear) that leases a three-acre portion of the site.

Palm farm is reluctant player in OUSD surplus property sale