At first glance, the case looked like a classic fight between environmentalists and developers.
Newport Beach was sued on environmental grounds after approving an apartment complex at the Koll Center business park near John Wayne Airport. The plaintiff argued the city failed to adequately assess the project’s impacts on noise, traffic and air pollution.
But the “environmentalist” in this case turned out to be another developer – Olen Properties Corp., a Newport Beach commercial property firm owned by billionaire real estate tycoon Igor Olenicoff.
On Wednesday, March 15, Olen Properties’ claims hit a roadblock when a judge ruled the city’s environmental review process was adequate. The ruling is expected to clear the way for construction of a 312-unit complex called Residences at 4400 Von Karman.
“Olen’s petition is denied,” Judge William Claster wrote in his 39-page ruling.
Jennifer Hernandez, an attorney for project developer The Picerne Group, or TPG, called the Olen Properties lawsuit a classic case of “CEQA abuse” — using the California Environmental Quality Act as a pretext to block new housing.
“We don’t think he has any legitimate basis for suing,” Hernandez, who specializes in CEQA cases, said of Olenicoff. “This is not a guy who has any environmental track record.”
Olen Properties disputed that assertion, saying it is genuinely concerned about the environmental impacts of the planned apartments as well as the increased density it would cause.
“The City is attempting to place thousands of new high-density apartments throughout Newport Beach. The quality of life and environment for tens of thousands of residents and workers will be affected,” Olen Properties General Counsel Julie Ault said in an email. “Olen’s national headquarters is in Newport Beach, and many of its employees and investments are also there. Given that context, the traffic, clean air, noise and other negative impacts of the Picerne project are deeply important to Olen, as they are to everyone who lives and works in this area.”
The company is reviewing the court ruling and trying to decide whether to appeal, Ault said. She added that if the project does get built, it “will open the floodgates to future high-density development.”
Newport Beach Community Development Director Seimone Jurjis said that while it’s true the city is planning for 4,845 more homes by 2030 to meet its state-mandated housing goal, it doesn’t designate how many are houses or how many are “high-density apartments.”
“We don’t get that granular,” Jurjis said. “It’s not all high density.”
Developers, academics and pro-housing groups have been clamoring for CEQA reform for more than a decade, calling the 1970 measure signed by then-Gov. Ronald Reagan a major cause of California’s housing shortage. Southern California cities and counties are facing a state order to build 1.34 million new homes by 2030, part of a statewide effort to build 2.5 million new homes by the end of the decade.
Hernandez, a CEQA-reform proponent, co-authored a 2016 study that found CEQA had been used as grounds for hundreds of “frivolous” lawsuits to block housing, including senior and affordable developments, a homeless shelter and environmental projects.
Environmental groups like the Sierra Club have opposed major changes to CEQA, saying it’s needed to protect clean air and water and to curb urban sprawl.
Olenicoff seems like an unlikely environmentalist, however.
At 79, he was tied for 229th wealthiest American on the latest Forbes 400 list, with a total net worth of $4.7 billion as of 2021. He has homes in Laguna Beach and Palm Beach, Fla.
His property firm owns about 7.2 million square feet of office space in California, Florida and Tennessee, plus about 16,000 apartments in California and seven other states, according to the company.
Born in Iran to Russian parents, Olenicoff’s family fled the former Soviet Union when he was 15.
He gained notoriety in 2007 after pleading guilty to hiding $200 million in offshore accounts from the IRS. He claimed during his sentencing he had relied on bad advice from his bankers, lawyers and accountants. Federal prosecutors later indicted two foreign bankers for their role in the matter.
The Newport Beach development cited in the latest lawsuit is planned for a Koll Center parking lot at the intersection of Birch Street and Von Karman Avenue. The 13-acre development includes parking structures and a 1.1-acre park.
Olen Properties owns a 10-story office building next door to the proposed project.
The apartments have been opposed by numerous groups over the years, including Olen Properties and other Koll Center business and property owners.
Olen Properties originally sued to stop the development in 2015, arguing it violated Koll Center deed restrictions. Last winter, the company filed an additional lawsuit on environmental grounds.
Geoffrey Willis, counsel for Olen Properties, complained that a city addendum to an earlier environmental impact report failed to adequately address all the possible environmental consequences of a new apartment building.
“The potential environmental harm caused by this project is significant and fatal,” he wrote in a 2021 letter to the city. The city needed to redo its EIR, he said.
Among Olen’s arguments: The city used an antiquated traffic impact tool and provided “zero analysis” on the project’s impact on greenhouse gases. The city also failed to assess impacts on aesthetics, air quality, cultural and tribal resources and water quality, the letter said.
In a detailed, point-by-point ruling, Judge Claster called the city’s environmental review sufficient.
“The court agrees with the city and TPG about the proper standard of review,” Claster wrote.
Two pro-housing groups joined the lawsuit on TPG’s behalf: Californians for Homeownership and the YIMBY Action-affiliated People for Housing Orange County. They argued the project is needed to address the state’s housing shortage, especially since it includes 13 affordable units for very-low-income households.
“We don’t think this case was ever about the environment,” said People for Housing co-founder Elizabeth Hansburg. “This case was about blocking new housing, especially affordable housing.”
Newport Beach Planning Commissioner Erik Weigand argued in a December op-ed opinion piece the Olen Properties lawsuit was one of two cases in his city where new apartments “are (being) stalled by aggressive tactics abusing the CEQA process.”
Apart from environmental issues, Olen worries the development would impact its office building by reducing street-level parking, disrupting tenants and creating more noise. The company argued further the Koll Center is giving away a portion of the parking lot, which it called a common area jointly held by all the center’s property owners.
Olen also objects to TPG’s plan to replace 546 street-level parking spaces with 560 new spaces in two parking structures.
“The project would remove the majority of our surface parking and force our tenants into a remote structured parking garage hundreds of feet from our building,” Ault wrote. “Our property rights are being trampled here by the city approval of this project, and it is unacceptable.”
Hernandez, the developer’s attorney, said the environmental case was just a pretext.
“I think (Olenicoff) is pretty clear he thinks (the project) harms his own financial interests,” Hernandez said. “And he added on a whole bunch of meritless environmental claims.”
Source: Orange County Register
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