Battle over value of Ambassador site set to begin; Trump, school district appraisals still worlds apart.

The long-awaited court battle between Trump Wilshire Associates and the Los Angeles Unified School District over the value of the Ambassador Hotel is scheduled to begin next month, and the two sides remain worlds apart in their appraisals of the property's worth.

Trump Wilshire Associates, which is battling the school district over the district's plan to buy most of the Ambassador site and build a new high school there, hired two independent appraisers who submitted appraisals of $120 million and $123 million, respectively. Those valuations are 150 and 157 percent higher than the $47.9 million valuation arrived at by the school district's appraiser.

The Ambassador case, which is expected to go before a jury in February, will determine which appraisal represents "fair market value."

By most accounts from veteran appraisers, the case represents one of the larger appraisal spreads in the history of condemnation suits in L.A.

"Even if the two sides took different assumptions on the highest and best use of the property, the spread seems ridiculous," said Robert Kerslake, president and chief executive of Marshall & Stevens Inc., a Mid-Wilshire-based independent national appraisal/valuation consulting firm.

Kerslake said two or more appraisers valuing the same property typically come up with values 10 to 20 percent apart.

But anything greater is where appraisers "step out of line of supportability," he said.

In 1989, at the height of the real estate market, Donald Trump, along with real estate heavyweights from Europe, purchased the 23-acre Ambassador site for $63 million.

The school district, which exerted its eminent domain authority to condemn a property for public use -- in this case, a new high school -- deposited $48 million with the court in August 1990 to purchase 16 acres of the site, leaving the seven acres along Wilshire Boulevard for Trump to develop.

In reaction to the savings and loan crisis, which many business observers charge was fueled by inflated property appraisals, the federal government established a number of regulations for appraisals in which the government is involved.

Starting last Nov. 1, appraisers who want to do any work with federally insured institutions, such as bank-related appraisals, must be state certified. At any point, an appraisal can be challenged by state officials and an appraiser's license can be revoked.

The Ambassador Hotel sale, however, is not such a transaction.

Many of the larger appraisal offices such as Marshall & Stevens and CB Commercial Real Estate Group Inc. have review processes and a separate set of standards. Kerslake said all appraisals at Marshall & Stevens are reviewed by senior appraisers and management.

"The risk for independent appraisers is they are their own reviewer," he said.

Neither the school district's appraiser -- George Hamilton Jones, an independent appraiser in Newport Beach -- nor Trump's appraisers, Dick Metcalfe of La Canada and Verne Cox of Newport Beach -- would comment on the Ambassador appraisals.

Cox did say the lopsided appraisals were a bit "unusual" and offered to sit down and discuss the case when it was over.

When asked how Cox and Metcalfe arrived at their figures, Kevin Brogan, an attorney for Trump Wilshire, said no instructions were given to the appraisers.

"They're just following California condemnation law," he said. "It's not unusual to have two disparate appraisals during litigation." Brogan said Trump Wilshire Associates is seeking $9 million in severance damages as part of the $120 million to $123 million appraisal figures, which accounts for a small portion of the gap.

James Colbert, an attorney in charge of litigating the case for the school district, said, in valuing the Ambassador, Jones gave particular weight to what the property sold for before condemnation took place and what other Mid-Wilshire properties sold for.

"As near as I can tell, appraisers on the Trump side gave little or no weight to what the property sold for," he said. Instead of concentrating on comparable sales in Mid-Wilshire, Colbert said, the Trump appraisers looked at property sales in Central City West, an area west of the Harbor Freeway and south of the Hollywood Freeway, adjacent to downtown L.A.

Disparities in appraisals, he said, are due to differing views on the area that should be searched for comparable sales and on what kind of development should be on the site.

Colbert said Jones valued the Ambassador site based on a mixed-use development of residential and commercial. He said the Trump appraisers "clearly put greater emphasis on the commercial side."

Appraisers surmised that wide divergences in appraisals are more tolerated during litigation because juries typically award a value in between the two appraisals.

Colbert also said a judge can legally throw out an appraisal he or she considers "off the charts" and force one side to pay all the legal costs incurred with bringing the case to trial. But, he said, he's never seen that happen.

Colbert said a jury can't go lower or higher than the two appraisals offered.

The Spanish-style Ambassador hotel with high ceilings and gilted painted rooms was built in 1919 as a civic project to "arrest national attention," according to old brochures.

The hotel was the playground for scores of major celebrities and the backdrop for several historic incidents, political as well as cinematic. It is probably best known as the place where Robert F. Kennedy was assassinated in 1968.