The Legendary Lad Speculator And His Pals Pursue Maximum Profits. By Dave Devine IN EARLY 1993, legendary Tucson land speculator Don Diamond and his associates, working under the name 10th Avenue Properties L.L.C., acquired the former La Reforma housing project site near 22nd Street and 10th Avenue. They claim they did so at the encouragement of City Councilman Steve Leal and other city officials who were interested in revitalizing the area with private investment. According to City of Tucson estimates, the Diamond group paid $145,000 to acquire the note on the 14-acre site. The land also carried $90,000 in back taxes, and there were legal costs associated with the purchase. At the same time, the city government was publicly discussing with the Tucson Unified School District the possibility of acquiring the site. The two were planning to build a new school to replace the antiquated Drachman School located a few blocks away. In January 1994, city and TUSD officials ratified an intergovernmental agreement to build the new school. A few months before, however, the Diamond group had sold a corner of the property, roughly 1.5 acres, for $60,000 to the Assembly of God church. City officials and Diamond's group negotiated to settle on a purchase price both before and after the city filed a condemnation action on the property in March 1994. But the Diamond group maintained the land was very valuable, while the city argued it was worth much less--so the two sides could not reach an agreement. The extent of the disagreement is revealed in documents prepared for the often-delayed court case which will determine the land's value. The government now owns the property and the school building is under construction, but the cost of the land is still in question. Susan Corbett, a private appraiser, appraised the land for the city. She sets its value at $120,000. However, the Diamond group's appraiser, Walter Winius of Phoenix, says the land is worth $415,000. But Kenneth Abrahams, one of Diamond's partners in the La Reforma venture, has testified in a deposition that the property is worth between $700,000 and $1 million. City officials have aggressively tried to counter the Diamond group's appraisal technique. That appraisal was based on the assumption that a 214-unit garden apartment complex, without a pool, but charging $415 a month in rent per unit, could be built on the site. One of the city's expert witnesses analyzed that scenario and concluded no prudent investor would pay anything for the land under those circumstances. He based that conclusion on what he saw as the undesirable location of the property and other factors. Abrahams' estimate of value is even more out of line, according to city officials. They argue the land could not have increased in value several hundred percent during the 14 months Diamond's group owned the site. Discounting the amount paid by the church for its property as not indicative of the value of the much larger parcel, city officials insist their appraisal is accurate. They argue the Diamond group simply overpaid for the land to begin with. Abrahams bases his opinion of the value of the site on several factors, including a controversial earlier appraisal done for the city by someone who had business connections to Diamond. Abrahams also believes the site is unique in the downtown area because of its size and location. Diamond's partners, Abrahams says, made it clear to city officials when they got involved with the site that this would be a business deal for them, not a charity case. At the same time, Abrahams expresses consternation that city officials are now criticizing the La Reforma site as having many problems, when a few years ago they sang the praises of its potential. He also believes both of the city's experts on value have done a "character assassination" on the property in their work. Since all past attempts at negotiating a settlement have failed, the court case, now scheduled for November 5, will most likely set a price for the land. The case's timing is certainly appropriate--the new school on the property will be nearly completed by then. The likelihood of the trial being held even in November, however, seems to be fading. The Diamond group recently removed Jay Dushoff of Phoenix as their attorney on the case and sought to replace him with a Tucson lawyer who was also doing work for TUSD. District officials have decided they're in no mood to have an attorney battle them in court while also paying him. So, currently, Diamond and his associates have no legal representation. When they do obtain a lawyer, the Diamond group might want to think about the financial risk they have in this case. The property taxes haven't been paid on the land since 1990 and now exceed $111,000, and the bill is accruing interest at 16 percent a year. Combined with the price they paid for the property, their legal expenses and other costs, the Diamond group apparently would have to recoup at least $250,000 to $300,000 just to break even on their original investment. Add to that Diamond's recent public relations blunders--first he talked about using Tucson's CAP water up in Scottsdale, which upset a lot of folks here; then he wanted to change school district boundaries on his Pima Canyon property, again stepping on a lot of toes--and perhaps he'll want to settle this one before it goes to court. Perhaps this time Diamond, whose personal fortune is estimated to be several hundred million dollars, might consider giving Tucson taxpayers and school kids a break and agree to settle for what he paid for the property. But don't bet on it.

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