Suicide Musings Turn to $600 Million in L.A. InvestmentsNadja Brandt
At 84, Los Angeles developer Jerry Snyder has $600 million of projects under construction or planned, including two apartment towers in the city’s Koreatown area and three office buildings.
“My doctor asked me, ‘When are you going to quit?’” Snyder said in an interview at his 30th-floor corner office overlooking the Los Angeles County Museum of Art and La Brea Tar Pits. “So I said, ‘Are you a better doctor now than you were 10 years ago?’ He said yes. Well, I am a better builder than I was 10 years ago.”
Snyder, who formed his first company when he was 19, is persevering after surviving some tough economic cycles. During the recession in the early 1990s, “suicide became an option,” he said, as values plunged on properties with millions of dollars of his personal guaranties. Six decades after entering the business, he’s about to sell his latest apartment project and intends to use the proceeds on new office buildings.
“I have been hearing more and more, ‘I need more space,’” Snyder said. “When you get the ‘I need more space’ in more than one of your buildings, you know things are getting better. It’s time to build.”
Snyder said he is planning a $70 million office project on Vine Street in the Hollywood section of Los Angeles, which he will start building later this year even without tenant commitments. He also said in the interview that he expects to start a $100 million building on Wilshire Boulevard, in addition to a $138 million Hollywood office development that’s already been announced.
Little office space has been added in the area in the past five years, putting Snyder ahead of the curve, said Todd Doney, vice chairman for brokerage office services at Los Angeles-based CBRE Group Inc.
“We are in the early stages of the office recovery,” Doney said. “As long as we keep the economy plugging along and can continue modest job growth, the office market here should continue to improve.”
Los Angeles County’s unemployment rate fell to 8.8 percent in December, the latest month for which figures are available, from 10.2 percent a year earlier, according to the state’s Employment Development Department.
Average monthly asking rents at Los Angeles County office buildings climbed to $2.63 a square foot last year, up 2.3 percent from 2012, according to CBRE. Rising rents have spurred an increase in construction, with 1.3 million square feet (121,000 square meters) of office space under development, the most since late 2008, according to the brokerage.
Higher rents are driven in part by demand from entertainment and technology companies in areas such as Los Angeles’s Westside, where asking rents were $3.62 on average, CBRE data show.
“We saw a rise in activity toward year-end for a number of reasons, including an increase in confidence by some Los Angeles-area companies as the national economy continued its modest recovery,” Mark Sullivan, executive vice president at New York-based commercial real estate services firm Studley Inc., said in an e-mailed statement.
Snyder last month broke ground on the $138 million Hollywood office project without tenant commitments, aiming for entertainment and media-related clients. His other speculative office development in the area will be a 107,000-square-foot building on Vine across from the W Hollywood hotel, he said. He is awaiting final regulatory approval and expects to begin construction in September.
“The office market was hit hard during the recession,” Snyder said. “But it’s pretty strong now in pockets. In Hollywood, for example, we’re right in the middle of post-production and all the ancillary businesses. It’s booming.”
Some of the biggest issues facing Los Angeles office developers are the slow growth in rents and the uneven recovery, according to a fourth-quarter report by tenant representative Studley.
“Other than a couple of larger renewals and some significant health-care leases, fourth-quarter leasing in most of the market was once again lackluster,” the firm said. The the majority of “employers -- particularly traditional-space users -- remain cautious and focused on cost containment.”
Shrinking space requirements by tenants are adding to high vacancies, according to Doney of CBRE. Vacancies of 15.9 percent remain close to their decade peak of 16.4 percent, from 2010, CBRE data show.
“People are continuing to expand the ‘free address’ concept, meaning you’re not building out space with the one-desk-per-employee concept,” Doney said. “So as tenants might sign leases, they may find they can make due with 60 percent of the original space. The question for developers has to be, will this continue at the pace it’s at, or is the pendulum swinging too far and will it mellow out again?”
Kilroy Realty Corp., a Los Angeles-based owner of commercial real estate along the West Coast, last month said it plans to develop a $300 million office-and-apartment project in Hollywood after acquiring land from the Academy of Motion Pictures Arts and Sciences, bringing the real estate investment trust’s commitments in the area to about $800 million.
“When you go to invest in a speculative office development, you are still more out there on the risk curve,” said Steve Reents, Seattle-based vice president of acquisitions at Bentall Kennedy, a Canadian real estate investment adviser. Snyder got a $95 million construction loan for his Hollywood office project from a fund advised by the firm.
“It was particularly important to work with a partner with a deep connection and reputation in the market and one with a strong vision of the current and future market place,” Reents said. “Jerry has that.”
On the Miracle Mile stretch of Wilshire Boulevard, Snyder is planning a build-to-suit project -- a model of which, complete with a replica of a mammoth drowning in the La Brea Tar Pits, sits on his conference table -- for a client he wouldn’t identify. The 13-story building would sit next to his existing property at 5757 Wilshire Blvd., which is almost fully leased.
“I build everything, but I love office,” Snyder said. “I enjoy office because I’m dealing with business people -- with professionals.”
Proceeds from Snyder’s 464-unit apartment complex in Koreatown may total $310 million, GlobeSt.com said on Jan. 29, citing industry experts it didn’t name. Snyder is planning to start marketing rental units at the project, called The Vermont, in early March, and put the entire development up for sale with the help of broker Jones Lang LaSalle Inc. Neither Snyder nor Jones Lang would comment on the potential price.
The property, which Snyder spent $190 million to build using a $65 million loan from Bentall Kennedy, has received “a lot of interest” from potential buyers, including U.S. real estate investment trusts and investors from Asia and Europe, he said. Snyder has shown the complex more than 20 times and expects a deal within 45 days.
“He’s been a developer that has been able to see the future and execute on that,” said Bruce Korter, director of real estate at Washington Capital Management. The Seattle-based firm manages investments for union pension funds in the state and was the lead equity investor in Snyder’s Vermont project. He wouldn’t disclose the size of the company’s investment.
“He’s gone through hard times and good times, and has come up a survivor,” Korter said. “We have a lot of faith in Jerry and are looking to do more business with him.”
Born in Brooklyn in 1930, Snyder broke into real estate as a general contractor working with his father. They moved to the West Coast when Snyder was a teenager and, at 19, he founded his own company, L. Snyder & Son, eventually buying an empty lot and building his first house.
“I loved it,” Snyder said. “I was the producer, the director and the screenplay writer. That’s when I decided I wanted to be a developer.”
He went from building one house after another to 500 at a time and, by the age of 22, was written up in the Wall Street Journal for being one of the youngest large-scale builders, developing 2,000 houses a year.
Snyder, who’s lived in the Bel Air neighborhood of Los Angeles with his wife, Joan, for 32 years and also owns houses in Montana and Rancho Mirage, California, focused on building single-family homes across the U.S. for three decades before entering the commercial real estate business in 1977 and ultimately focusing on Southern California.
After expanding his real estate projects -- including his development of the Water Garden office complex in Santa Monica, and 10 high-rise condominium buildings next to the Hotel Coronado in San Diego County -- he almost “lost his shirt” with $144 million of personal guaranties given during the rapid appreciation of property values in the 1980s that then plunged during the U.S. recession of the early 1990s, following the collapse of the savings-and-loan industry.
Snyder, who continues to arrive at his office at 9 a.m. most days, said he has since improved his financing strategies, keeping the leverage on his buildings manageable and focusing on cash flow and costs. He won’t give personal guaranties again, he said. By the time of Lehman Brothers Holdings Inc.’s 2008 demise and subsequent market crash, he had refinanced most of his properties and reaped profits from selling some of his buildings.
“This last downturn we kind of skipped,” Snyder said of his company, where one of his three children also works. “But back in the ’90s, I remember sitting on the weekends with my wife, and praying, ‘Please get me out of this one.’”
Snyder remains optimistic about development possibilities in the region today.
“There’s an old joke about a golfer,” he said. “He’s had a terrible day. So he goes into the locker room and cuts his throat. When his friend comes in and says, ‘You want to play tomorrow?’ he holds his throat and says, ‘What time, Charlie?’ It’s just like that for me. I see things coming my way, and I say, ‘Sure, I’ll look at it.’”