Staff Reporter

When Newhall Land & Farming Co. sold its profitable Valencia Marketplace shopping center to an Arcadia businessman a little over a year ago, the developer insisted on an unusual clause in the contract language.

The $111 million deal was structured so that Newhall Land retains the power to decide whether the center remains in unincorporated Los Angeles County or is to be annexed to the city of Santa Clarita.

Typically, it's the property owner who must approve an annexation. But by retaining that power, even after selling its center, Newhall has considerable leverage in negotiations regarding its other real estate activities in L.A. County and Santa Clarita.

Newhall Land officials say the company only wants to preserve a traditional boundary that has kept L.A. County on the west side of Interstate 5 and Santa Clarita on the east side.

But others call it a brilliant stroke on the developer's part. Control over the 720,000-square-foot retail outlet that generates more than $1 million a year in tax revenue could give the developer considerable leverage at a time when Newhall Land is pushing to get county approval for its 21,600-home Newhall Ranch project and Westridge Golf Course project. Newhall also is talking about expanding Six Flags Magic Mountain, which would require county approval.

The strategizing reflects the little-publicized chess moves that go on among developers and city and county planners throughout Southern California in order to increase tax revenues from retail projects a key revenue source for many municipalities.

"The point is that (the mall) represents a lot of money to whatever jurisdiction controls it," said Tom Jirovsky, senior vice president of Kosmont and Associates. "The fact that they sell it and get to keep it as a bargaining chip, to think that far ahead, is brilliant."

Santa Clarita officials long have resented the Marketplace located on the west side of Interstate 5 just outside the city limits because they feel it has lured away many national chains that otherwise might have set up stores within the city's borders.

"Frankly, it's sucked the life out of local businesses in the city," said Gail Ortiz, a spokeswoman for the city of Santa Clarita.

Newhall Land spokeswoman Marlee Lauffer denied that the developer is using the Marketplace as a bargaining chip to win approval of its pending projects in unincorporated L.A. County.

She pointed out that the developer has projects pending approval in Santa Clarita as well (though the projects are smaller than in L.A. County).

Dave Vannetta, chief planner for county Supervisor Michael Antonovich's office, insisted that whatever position Newhall Land takes on the annexation of the Marketplace would have no bearing on whether the pending projects are approved.

"We've treated Newhall Land & Farming Co. and its Newhall Ranch project on the basis of the merits of the project," Vannetta said. "We didn't grant any bonus points because they didn't annex the Marketplace into the city."

Newhall Land officials said they would agree to allow the Marketplace to be annexed if that's what the county wants. While that seems unlikely given the revenues it supplies, Antonovich has said he would support annexation if residents living just west of the center favor such a move.

Ever since its incorporation in 1987, the city of Santa Clarita has pushed to annex businesses and homes west of Interstate 5. But city officials say they can't take on the burden of providing services to residents of the 4,000-home Stevenson Ranch area without receiving some tax revenue from the Marketplace in return.

Besides, any annexation of Stevenson Ranch would require the Marketplace to be annexed as well because the Marketplace stands between Stevenson Ranch and the Santa Clarita city limits.

A residents' association is working with Santa Clarita city officials to determine what the boundaries of the annexed area would be. But a vote by residents on the issue is probably at least a year away.

Keith Pritsker, president of Stevenson Ranch Town Council, an advisory board to Antonovich, said Newhall Land might be afraid of losing an important ally if annexation goes through.

"If the city of Santa Clarita were immediately adjacent to areas of new development, they'd have a greater stake in watching every aspect of development," he said.

Lauffer countered that the developer had worked with the city in its annexing of an area near Castaic, east of the I-5.

Meanwhile, Santa Clarita wants to use a bargaining chip of its own: luring a Nordstrom department store to the Valencia Town Center, which is within the city of Santa Clarita.

Nordstrom has requested $35 million in incentives, of which Newhall Land and the city have jointly agreed to provide $15 million in non-cash incentives. Newhall Land has offered to pay the remaining $20 million in advance to Nordstrom, if the city would agree to reimburse the developer over several years out of incremental tax revenues generated by the Nordstrom store. The city has thus far refused to go along, but continues to negotiate with Newhall Land and Nordstrom.

Lauffer said Newhall Land refuses to make the annexation of the Marketplace a part of the Nordstrom talks.

"We have just said that we'll discuss a myriad of subjects, but we're not willing to get into any discussion of annexation west of the 5," she said.

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