Nov. 15—A civil trial in San Luis Obispo Superior Court will determine the future of the 2,400-acre Wild Cherry Canyon property near Diablo Canyon nuclear power plant.
The heart of the case is this: Does the property's lease allow for hundreds of homes to be developed?
The remote Wild Cherry Canyon land sits near the end of Avila Beach Drive and extends inland along the steep coastal hills lined with oak trees, brush and grassland grazed by cattle. The public is not allowed to access the land, and it is considered part of the 12,000 acres of Diablo Canyon Lands that PG&E owns as a buffer surrounding the nuclear power plant.
In the civil case, Pacho Limited and San Luis Bay Limited partnerships, which are largely owned by Carlsbad-based HomeFed Corp., are battling Eureka Energy Co., a subsidiary of PG&E.
The key question is whether HomeFed's 1968 lease for Wild Cherry Canyon is valid for 99 years, with an option to renew for another 99 years — or only for 51 years as an agricultural lease.
The lease itself calls for the two 99-year terms, but PG&E's attorneys have argued that is improper largely because the property is currently used primarily as agriculture land.
Should San Luis Obispo Superior Court Judge Rita Federman decide it is the former and HomeFed can hold on to the land possibly until 2166, HomeFed officials have said during the trial that they intend to develop a dense "urban village" with up to 2,500 units on the land's stunning hilltops with ocean views.
If Federman decides the lease was only valid for 51 years, PG&E would take it over. Officials with the utility company have previously indicated they intend to ask the local community whether it should be developed, or conserved with other parcels of the land surrounding the power plant.
The civil case trial does not have a jury, meaning Federman will be the sole deciding party.
Basil "Bill" Shiber alongside Angela Yu are representing Eureka, while Daniel Murphy and Robert Shoecraft are representing HomeFed.
The trial is expected to last through at least the end of November.
Lawyers argue over length of Wild Cherry Canyon lease
Over the first four days of the trial that began on Nov. 7, the attorneys gave opening statements and HomeFed called four witnesses to testify about the property and the lease.
Murphy's opening statements focused on how the property appeared to always be slated for development and that the lease was allegedly valid for the 99-year periods.
Shiber's disputed that, noting that there have not been any formal plans for development submitted to the county and that the land has been used for agricultural purposes, thus limiting it to the 51-year period per state law.
In 2014, HomeFed spent about $1 million to put rough plans for development on paper for the Wild Cherry Canyon land. The ideas ranged anywhere from a dude ranch-like development with equestrian and hiking trails plus a gun range and grand lodge, to a housing development with 1,000 to 2,500 units and extensive amenities.
Wild Cherry Canyon could be turned into a small, "exciting urban village," said Kent Aden, the senior vice president and senior development manager for HomeFed, during the trial.
"I'm sure people in San Francisco would love a vacation home here," testified Joseph Steinberg, chairman of Jefferies Financial Group, a New York-based investment banking firm that owns 90% of HomeFed's Wild Cherry Canyon leasehold.
Witnesses noted that HomeFed would, if it won the court case, likely only develop about 10% of the 2,400 acres of Wild Cherry Canyon land, leaving the rest for public open space and hiking trails. That could include a trail that links Montaña de Oro State Park to Avila Beach.
If HomeFed wins, "we're going to get busy again and fight with the world to get a (development) project entitled," Steinberg said during the trial.
Are the development plans legitimate?
In his cross-examination of the plaintiff's witnesses, Shiber asked whether the drawn-up plans for development at Wild Cherry Canyon were an elaborate scheme to drum up the price of the land for conservation groups wishing to buy it.
Over the past two decades, the Nature Conservancy and American Land Conservancy both attempted to raise enough money to buy Wild Cherry Canyon from HomeFed. Both were unsuccessful, with the leasehold valued at about $21 million during the American Land Conservancy's more recent bid in 2013.
Another recent appraisal put the price of the leasehold at $39 million, according to Steinberg. And Denis Sullivan, a local real estate developer, noted that he has roughly estimated that the property could be worth in excess of a billion dollars if developed lots sold for more than a million each.
HomeFed's witnesses disagreed with Shiber's accusation, noting that they wouldn't have put in the effort or spent as much money as they did on development plans if it were just a ruse. However, they admitted that conservation groups will typically be willing to spend more money for a property if there are plans to develop it.
"Even if the development never gets approved, the threat of it often results in much higher value for the property to be paid by conservation groups," Aden wrote in a 2013 email shown by Shiber in court.
Shiber also asked HomeFed's witnesses whether they were aware that the lease was possibly only valid for 51 years — each said they were unaware of such limitation.
However, Shiber showed during the trial a 2016 internal HomeFed email saying that engineers contracted to help the company prepare for future developments had "discovered a potential flaw in our lease," indicating that they believed it was an agricultural lease valid for shorter than the 99 year periods.
Tom Blessent, HomeFed's vice president of planning and entitlement, sent that 2016 email and testified in court on Monday that he remembered being concerned about the lease being rescinded.
The attorneys for HomeFed will continue to call witnesses to testify this week until they have rested their case, after which PG&E's attorneys will call their witnesses.
This story was originally published November 15, 2022 5:30 AM.
CORRECTION: This article was updated to correctly state that Daniel Murphy gave the opening statements for HomeFed in the trial.
Corrected Nov 15, 2022
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