Noguez donor’s firm got big cuts in property values

In the years after the real estate bubble burst in 2008, Santa Monica-based Douglas Emmett Inc.’s pleas for tax breaks on its portfolio of posh office buildings met with only modest success.

Then in late 2010, John Noguez was elected Los Angeles County assessor. His biggest campaign contributors: Douglas Emmett’s chief executive and his wife.

Within months, Noguez’s office slashed the taxable value of the company’s properties by $307 million, four times what Douglas Emmett had received in the previous four years, according to a Times analysis of tax records. The county ended up refunding the company more than $4.5 million in 2011.

The company’s success last year stood out, even among other office building owners who bought at the height of the market and won reductions. Douglas Emmett’s tax bills were reduced an average of 27% per building; for everyone else, it was 16%, the analysis found.

The Times described its analysis and conclusions to the company. Spokesman Steve Getzug explained the difference, saying “property owners may have pressed their cases to differing degrees with the assessor’s office.”

Getzug said the taxes on several Douglas Emmett properties should have been cut even more because the buildings were bought just before “the precipitous decline” in commercial property values in 2008.

The tax breaks, however, have caught the attention of prosecutors pursuing allegations of corruption within the assessor’s office.

In mid-June, investigators with the district attorney’s office interviewed a county appraiser about the tax reduction on one Douglas Emmett building. And David Demerjian, head of the district attorney’s public corruption unit, said his team was looking into a tax break on the $21.5-million Pacific Palisades home of Douglas Emmett’s chief executive, Jordan Kaplan.

So far, the broader investigation has led to searches of a dozen sites in two states and the arrest of a former county appraiser on 60 felony counts related to improper assessment reductions for wealthy Westside property owners.

It also prompted Noguez to take an indefinite paid leave of absence.

Noguez spent 19 months at the helm of the assessor’s office, a powerful but low-profile agency responsible for setting taxable values on more than $1 trillion in real estate. Before winning the agency’s top job, he worked for more than two decades as a county appraiser, specializing in large commercial properties.

Tapping a network of developers, landlords, tax consultants and others, Noguez raised more than $1 million during his successful campaign, far more than other candidates for the job. His most formidable opponent raised a bit less than $50,000.

The Kaplans contributed $10,000 to Noguez, more than any other individual donors, giving the maximum $1,000 each in 2010 to his primary campaign account, general campaign account and a fund for his attorney’s fees. The year after his election, they again gave the maximum to Noguez’s attorney’s fees account and to a new officeholder account.

Jordan Kaplan’s parents and company executives gave an additional $20,000, records show.

None of them contributed to other county candidates in the 2010 election cycle. Kaplan and the other executives declined to be interviewed for this article.

In Noguez’s first year in office his administration granted 23 tax reductions to Douglas Emmett, one of the largest commercial real estate firms in the West. The company owns 58 office buildings and nine luxury apartment complexes in Southern California and Hawaii, according to its website.

Reassessing the value of commercial property can be a complex process. Unlike homes, which almost always are taxed based on their sale price, office buildings also can be assessed on their income. When income declines — due to high vacancies or declining rents — owners can appeal for a lower valuation, a process that can take years.

Appeals are heard by an independent board in four small, windowless rooms in the basement of the county Hall of Administration.

A place most property owners in the county never see. For example, in the worst year of the recent real estate downturn, in 2008, fewer than 2% of Los Angeles property owners filed appeals.

Even among office building owners, only about a third who bought at the top of the market have sought relief since the crash, and just 17% of those won reductions, according to records from the county auditor-controller’s office.

None of Douglas Emmett’s reductions in 2011 made it to the board for a decision, records show. Noguez’s top deputies or other staff approved them before the panel could weigh in.

The company’s biggest victories were for a pair of buildings within half a mile of each other on a ritzy stretch of Wilshire Boulevard.

At 8383 Wilshire — described on the firm’s website as “among the most prestigious office properties in Beverly Hills” — the company got $104 million knocked off the building’s value, generating a total refund of $1.5 million, the auditor-controller’s records show.

Down the street at 9100 Wilshire, the company received nearly $107 million in reductions for nearly $1.6 million in refunds.

The assessor’s office has appraisals explaining the reasons for those reductions, but they are confidential and cannot be released without the property owner’s permission, said spokesman Louis Reyes.

Douglas Emmett executives would not allow access to the files, Getzug said, because they contain information that could help the company’s competitors.

Getzug said declining occupancy and rental income played a role in the reductions. He added that the apparent spike in refunds was the result of Noguez’s staff clearing out a backlog of appeals the firm had filed over several years.

Similar reductions for other Noguez campaign contributors caught the attention of some employees within the assessor’s office, who filed complaints with the district attorney.

Since then, other employees have stepped forward, expanding the scope of the criminal probe.

Dara Raazi, who worked in the assessor’s major properties division in 2011, said he was transferred to a less-desirable job after he “rather loudly” opposed Douglas Emmett’s request for a $4-million reduction on a Santa Monica office building.

Just before the transfer, Raazi said, his supervisor told him that Mark McNeil — one of Noguez’s top deputies — was “taking over” the case. Records show that within weeks, a total of $8.4 million had been removed from the building’s value for the 2009 and 2010 tax years.

Raazi said investigators interviewed him two weeks ago about the Santa Monica building, adding that questionable reductions appear to have stopped since the increased scrutiny began.

Last week, Santos Kreimann — who was picked by the county Board of Supervisors to run the assessor’s office — placed McNeil and another top Noguez aide, Andrew Stephens, on paid leave. Neither responded to requests for comment.

Employees’ complaints also focused on what they saw as the undue influence of some tax consultants who handled property owners’ appeals.

The reduction for the Santa Monica office building, like all other Douglas Emmett appeals approved last year, was handled by tax consultant and lawyer Robert Slavin.

Slavin represented Kaplan when he bought his Pacific Palisades mansion for $21.5 million in August 2010. For 19 months after the purchase, Noguez’s top aides delayed raising the assessed value of the home to the sale price — typically a routine step. Instead, Kaplan was taxed based on a 1997 appraisal that said the house was worth $11.5 million.

Slavin did not respond to requests for comment.

In May, Noguez raised the assessment to $21.5 million, following a series of Times reports on the delay.

County officials said last month that Kaplan would soon get bills for the additional taxes he should have paid on the house, an estimated $198,000.

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