As the pandemic clogged the ports of Los Angeles and Long Beach and demand for tractor-trailers parking skyrocketed in the region, the City of Commerce rented out as many as 26 acres of city-owned land for pennies on the dollar to a well-liked local businessman looking to capitalize on the need.
Though the businessman, Martin Fierro, paid as little as $1,000 per month to lease 14.4 acres at one point, real estate experts estimate each acre by itself could generate as much as $30,000 to $50,000 per month.
“It’s hugely valuable land and hard to find,” said a developer, who asked not to be identified because his company does work in Commerce and had not authorized him to speak on the matter. “There is a lot of demand for it because truck parking is a critical component to the supply chain.”
The largest of the lots in Commerce are rented by the city to Fierro, without City Council approval or going out to bid. 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.
Few cities, however, want such parking in their communities because it “doesn’t create much employment and puts more trucks on the road,” the developer said. Last year, a transportation company agreed to pay $2 million in fees to Carson to offset the impact from its trucks parking on 60 acres of privately owned land.
Why demand is so high
The Ports of Los Angeles and Long Beach are the two busiest in the country, handling about 40% of U.S. imports and 25% of exports. Commerce is ideally located about 20 miles away, has direct access to both the 5 and the 710 freeways and intersects with the region’s railways.
In 2021, after the ports ground to a halt, 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.” A February 2022 Caltrans study found that Los Angeles has the largest percentage gap between available parking and demand compared to other regions and needs to more than double its supply to break even.
Despite this, some municipalities have opted to ban truck parking altogether due to citizen complaints about noise and traffic, the study found.
The rows and rows of trailers tucked behind chain-link fences on Telegraph Road and Sheila Street suggest Commerce is helping lessen that gap, though the city’s coffers and residents aren’t seeing the benefits.
Trucks in ‘every empty lot’
Leonard Mendoza, a former councilman and mayor, said he often hears concerns from residents that the city is turning into a parking lot. He could not recall voting on any leases for parking during his time in office.
“For the last two or three years, it’s become an issue,” Mendoza said. “Every empty lot is full of trucks.”
Mendoza said Fierro, who also operates a swap meet in the city, is well liked by the City Council because he gives back to the community. He regularly donates backpacks and other supplies to students in the Montebello Unified School District, for example, Mendoza said.
“Whenever any of his businesses come up, he gets the thumbs up,” Mendoza said.
In an interview, City Manager Edgar Cisneros, a former Montebello Unified School District board member, said he has known Fierro for six or seven years, but he denied that Fierro or his company, Fenix Entrepreneur LLC, get any special treatment.
“I don’t know how I met him, he’s just a local business,” Cisneros said.
Leases are temporary
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 the sale might close any day now made it necessary to find a tenant who is willing to accept having to vacate on short notice, Cisneros said. Moreover, he said, there isn’t as high of a demand for the properties because they aren’t paved and have restrictions on use during the holidays when Citadel needs the extra space.
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 the 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.
None of the improvements was required to go to the city for approval, and Cisneros was unable to provide accounting or other documentation showing specific costs. The leases were processed administratively, rather than going through the City Council, due to their temporary nature and the pandemic, he said.
In an email, the city manager said the dollar figures for the improvements he provided were reported to him by the company and are consistent with bids the city previously solicited for the removal of the illegally dumped dirt. The city decided not to move forward with any of the project, but it appears Fenix has since done the work on its own. Fierro was not one of the original bidders, according to staff reports.
Aerial images taken by a photographer and obtained from Google Earth show both of the dirt lots rented to Fenix on Telegraph have been leveled to make more space for parking since 2020. A portion of the dirt on one of the properties was removed after the city settled with the illegal dumpers in late 2020, records showed.
The parking lots are authorized through temporary-use permits. The dirt lots operated by Fenix otherwise do not appear to conform to the city’s Municipal Code, which requires parking operators to install lighting and pave every space with “asphalt concrete or Portland cement.” In its study, Caltrans stated truck parking should have “essential amenities such as a paved and striped parking area, restrooms, water, vending machines, lighting, green space and picnic tables.”
Fierro, in an email, echoed the city’s explanation for his low rental rates.
“Felix (sic) undertook a significant clean-up effort of the properties in question, which placed my lease well within market range,” he wrote. “I have spent a lot of money and time improving the properties and creating additional parking space for vital goods that our communities depend on during the height of the pandemic and the related supply chain disruption.”
He did not respond to additional questions.
Prices increased this year
Fenix began leasing 6007 and 6241 E. Telegraph Road from Commerce in 2021 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.
While these early agreements did not specify that Fenix had to make any improvements, newer leases entered into earlier this year — after at least one individual made a public records request for information about the low rental rates given to the company — now state the rate is “in consideration of the fact that Licensee has cleared, cleaned and improved and shall continue to secure and maintain” the property at no cost to the city.
“None of the other tenants have made improvements,” Cisneros said. “They have saved us from that expense and that liability, that’s something to consider.”
Both of the Telegraph properties are dirt, except for about 3 acres of pavement on the lot at 6007 Telegraph.
New leases, entered into in 2022, 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, something it has done in the past.
“We consistently evaluate that,” he said.
What they could be making
Eduardo Veronica, a local truck driver operating in the area, said he tried to rent space from the lot at the corner of Washington and Telegraph for two of his trucks in early 2021, but decided against it when he was told it would cost him about $450 per month per truck.
Fenix was renting about 4 acres there at the time for $1,700 per month, records showed.
“They were easily renting to a hundred trucks with tractor and trailer,” Veronica said.
That’s about 25 trucks per acre — a lower amount than average for an acre — and would generate about $45,000 per month in revenues at the prices quoted to Veronica. Assuming those prices haven’t changed and the space isn’t being better utilized now, 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.
Cisneros said the city doesn’t monitor how many vehicles are stored or how much the tenant charges. Revenues aren’t factored into the rental rates, he said.
“The City charges Jack-in-the-Box $8,000 a month for the property it leases and doesn’t base it on their revenues,” Cisneros wrote in a follow-up email. “The City doesn’t operate these businesses, it holds property that is bound by existing purchase and sale agreements with private parties or that is slated for future development for either public use or housing.”
Doesn’t pass ‘smell test’
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.”
Many small cities such as Commerce don’t have an independent watchdog agency to investigate public integrity complaints or robust citizen participation demanding accountability, Rahmani said.
“People living in these cities get screwed,” he added.
Other properties rented cheaply
The city’s rental history suggests it has given Fierro deals on other properties, too.
In 2019 and 2020, Commerce charged FedEx $36,000 per month to place 60 trucks on a roughly 2-acre lot on Sheila Street for three months during the holidays. But in between FedEx’s two seasonal leases, Commerce rented a smaller portion of the site to Fenix for $3,000 per month to store the exact same number of trucks, according to a lease agreement and a staff report at the time.
The map attached to the lease indicated Fenix had access to two-thirds of the site when FedEx wasn’t using it, but Cisneros alleges the space shown was inaccurate. Fenix was allowed to use only about 35,000 square feet, or roughly a third of the lot, he said.
Fenix lost the Sheila Street property after another company, XPO Logistics, offered more, according to Cisneros. Today, XPO pays $38,000 to use a little more than an acre of the lot.
Fenix didn’t have to pay a third of the price charged to FedEx, however, because, according to Cisneros, Fenix also made improvements on the Sheila property, adding fencing, lighting and stripes and removing junk and debris.
Google Street Views of the property show a fence around the perimeter and painted stripes for several years before Fenix rented the property, though it appears someone added privacy screens to the fence sometime between 2019 and 2021.
The agreements with Fenix also were during a period “when there was no other use or interest in the site” and allowed the city to end the lease with only 10 days’ notice, Cisneros said.
Fenix paid less than the tenants before and after it because it had a smaller portion of the site, different terms, a different time frame and “less certainty regarding use of the site,” Cisneros said in an email.
The company behind the lots
Fenix Entrepreneur is a limited liability company formed in 2016 to act as a wholesaler, and today lists its purpose as “general merchandise,” according to filings with the state. Besides renting to trucks, property records indicate the company has purchased eight residential properties in the past year-and-a-half.
The company’s business license places its headquarters at a home in Downey owned by Fierro.
The Secretary of State’s Office labeled it as “pending suspension” in March 2020, two months before Fenix began leasing the space from Commerce on Sheila Street.
On its most recent leases, the company changed its address to 6046 E. Washington Boulevard, an address previously planned for a dispensary. The previous tenant, California Green World, was one of 24 cannabis companies approved by the city, though 6046 E. Washington ultimately was rejected as a location for being too close to residences, according to Cisneros.
Both Cisneros and Fierro say Fenix isn’t connected to California Green World and Fierro isn’t listed as having any ownership stake in the application.
Yet the future dispensary and Fenix used the same email address on city documents. California Green World’s owner, Michael Pouras, registered the company with an address in Vernon that Fierro also used for a different LLC with a similar name, California Green Fields.
Responding from the email address in question, Fierro stated that “Fenix has no business relationship with California Green World,” but did not answer additional questions asking about the overlaps.
Public records suggest California Green World was quietly sold sometime after it received the city’s initial approval in 2019, but it’s unclear for how much.
The new owners were allowed to continue the process from where California Green World left off and have since received a development agreement to open a commercial cannabis business in the city, according to the city’s website.
Source: Orange County Register
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