JMB Talks Softly but Carries Big Investment Clout

First Chicago. Then Century City. Then the world?

That’s what it seems like when looking at recent activities of Chicago-based JMB Realty Corp., a little-noticed, low-profile entity until last fall when Aluminum Co. of America announced that it had agreed to sell its Alcoa Properties’ Century City real estate holdings to JMB.

That included the Century Plaza Hotel and 50% of the twin, 44-story Century Plaza (office) Towers. Selling price: more than $600 million.

Then, about two weeks ago, Walt Disney Co. said that it will sell assets of its Arvida development subsidiary to a JMB affiliate for about $400 million.

Kept Low Profile

Who or what is this JMB, which can spend hundreds of millions on one deal and still afford to spend hundreds of millions a few months later on another?

Until now, little has been reported from JMB, which seems to have unlimited resources from pension funds, college endowments, foundations and individuals.

JMB has preferred to let the sellers do the talking.

The other day, though, John G. Schreiber, executive vice president-acquisitions and development and a director of JMB Realty Corp., agreed to an exclusive interview. It was just before he spoke at the Century City Chamber of Commerce’s 28th annual installation and returned to his offices in Chicago.

The chamber gave Schreiber an award for JMB as “an investor in the future of Century City.”

Joint-Partnership Role

JMB, with its affiliates and partners, is already Century City’s largest investor. That didn’t happen in a single transaction.

JMB first entered the Century City office market in 1978. Between then and the Alcoa acquisitions, JMB gained a joint-partnership role with Metropolitan Life Insurance Co. in the 486,200-square-foot 1888 Century Park East building, which will soon carry the name of Orion Pictures.

Orion just signed what is considered to be the largest lease for office space in Century City’s history (see Hot Property column, Page 7.)

JMB interests also own Century City North, a 606,545-square-foot office building that primarily has entertainment-related tenants and a parking garage with floors themed to major motion pictures.

May Control More

Century Park Plaza, at 1801 Century Park East, with its 357,000 square feet of offices, is another JMB property.

Altogether, with half ownership of the 2.2-million-square-foot, 44-story theme towers (Prudential Insurance Co. owns the other half), JMB controls about 50%--3,649,745 square feet--of Century City’s office market.

Soon, JMB may control even more. In its Alcoa deal, JMB acquired two construction sites, one--on the northwest corner of Avenue of the Stars and Constellation Boulevard--already designated for an office tower.

Schreiber told The Times, “Alcoa designed a 720,000-square-foot office building for the site, and we are reviewing the plans and costing out the project. We’re serious about developing a building there, and we’ll make a decision about when to go ahead sometime this year.”

No Plans Yet

He told the chamber that a decision could be made within a few weeks, and although it was not an official announcement, construction could start as early as late 1987 or early 1988.

As for the other, larger construction site (260,000 in contrast with 121,000 square feet), behind the Century Plaza Hotel (along Century Park West near Constellation Boulevard), he told The Times, “We have yet to plan anything on it.”

A JMB subsidiary will develop the first building.

Schreiber calls JMB “a fully diversified real estate company.” With offices in most major cities, including Los Angeles and San Francisco, JMB can handle property management, leasing and development, as well as investment, which is how it started.

Manage Investments

It was in the ‘60s, and three young men--Bob Judelson, Judd Malkin and Neil Bluhm--got the notion to manage others’ investments in small Chicago-area properties.

Judelson, a real estate broker and the only one of the three who had been in the real estate business, left in the early ‘70s. The others, both certified public accountants, stayed on.

Today, Malkin is chairman of the board, and Bluhm is president of JMB Realty, which controls, through affiliates, more than $15.5 billion of income-producing properties throughout the United States.

Among the properties: 58 million square feet of shopping centers, 47 million square feet of office and industrial space, 5,700 hotel rooms and 16,000 apartment units.

Limited Partnerships

JMB invests about $1 billion a year in equity. “We are a major manager of investment funds--limited partnerships, with us as the general partner and mostly public syndications,” Schreiber explained.

Although the new tax law made many syndicators uneasy, JMB is not concerned, he said, because JMB’s investments are not structured as tax shelters.

JMB is also active as a developer of regional malls, as well as major office buildings and mixed-use developments.

With the purchase of Arvida, which is due to close May 30, JMB will be involved in developing planned residential, resort and business communities. Arvida is developing, with Chevron, Coto de Caza, a residential community in Orange County.

“My guess is that we will focus, through Arvida, on the assets it owns in Florida,” Schreiber said, “because Arvida has a big investment in land there.”

Santa Ana Mall

He views Arvida as the final link, enabling JMB “to do any kind of development any place in the country.”

JMB started getting into development in the ‘70s. Then, in 1983, it bought Federated Stores Realty (now JMB/Federated Realty Associates), which develops shopping centers. JMB/Federated is in a joint-venture development with C. J. Segerstrom & Sons in expanding and renovating Fashion Square, renamed Main Place, in Santa Ana--a $100-million project that will be worth $400 million to $500 million after office buildings and hotels are added, Schreiber said.

In 1984, JMB acquired Urban Investment & Development Co., which Schreiber heads as president. He is co-chairman of JMB/Federated.

Some of Urban’s well-known mixed-use projects are Water Tower Place in Chicago and Copley Place in Boston. With a portfolio valued at more than $1 billion, Urban represents JMB’s largest, single purchase.

Broadening Capabilities

The Alcoa Properties purchase at the end of last year has been called “one of the largest real estate deals ever in Los Angeles, rivaled in size only by the $620-million sale of the twin Arco Towers in downtown Los Angeles.”

Schreiber negates the comparison, noting that the Arco transaction involved one project and a single buyer, while the Alcoa deal was for several properties, some outside California, and the Alcoa acquisition involved partial, as well as full ownerships.

He looks at the purchase as just another step toward JMB’s goal of broadening its development capabilities while also investing in high-quality properties.

The interpretation is typical of JMB managers’ low-keyed approach--a paradox considering the vast sums they invest and the ambitions they have.

Young and Energetic

Neal Gumbin, senior vice president of JMB Realty, is representative of JMB’s leaders. They are young and energetic.

JMB’s principals are only in their 40s. Schreiber is 40. Gumbin is 28.

Gumbin has been aggressively seeking properties in Southern California since he was sent to Los Angeles from Chicago a couple of years ago.

During 1985-86, JMB’s affiliates or partners bought all or part of a dozen commercial projects, totaling about 5.8 million square feet, in the Southland. Before 1985, JMB held interests in six.

In addition to the 1985-86 purchases was the real estate held by Alcoa Properties. JMB’s Southern California activities also include construction that is under way on a few apartment projects, the Santa Ana mall, Coto de Caza and some other smaller residential and retail developments.

‘We’re Always Looking’

“We’re always looking,” Gumbin said. “We want a wider variety of investment properties, probably more apartments and industrial properties, but we will continue investing in retail and high-quality office projects.”

Offices, when there has been much talk about high vacancy rates?

“Sure,” he responds, undaunted, “there are 18 to 20 office markets in L. A.” They aren’t all bad, he said. “In fact, I don’t think there is any market we are afraid of. The future is good. There is no reason to be afraid of investing in offices in Los Angeles.”

Frank Coari, vice president of JMB Property Management Corp., said office demand is up in Century City, and he already has “several interested users lined up” for the office tower JMB plans to build.

Office in Japan

JMB also has plans for Northern California, where it opened an office about a year ago and since acquired, for its partners and affiliates, interests in six office projects.

Next, the world?

JMB already opened an office in Japan--”to open more investment relationships,” Schreiber explained, and in December, JMB sold its Coast Federal Savings office building in Pasadena to a Japanese investor.

“It was a small transaction,” Schreiber said, “only $20 million to $30 million.”