Developers Gathering to Talk About Survival During Current Crisis

Embattled developers, suffering the worst real estate slump in years and increasingly under fire from vocal citizens groups, are gathering in Southern California this week to discuss ways to survive the troubled times.

At a two-day Los Angeles meeting of the Urban Land Institute that began Monday, more than 50 developers and other real estate experts are being encouraged to focus on winning greater public support from citizens groups that have become more resistant toward new development in recent years.

At a separate gathering in Irvine, sponsored by the trade publication Real Estate Week, about 300 developers and other experts were also wrestling with the tough times. They dealt with such topics as the slowdown in the housing and commercial office market as well as how to secure financing at a time few institutions are making new loans for real estate development.

“Developers are facing the worst crisis in the history of merchant building,” said Sanford Goodkin, national executive director of Peat Marwick/Goodkin Real Estate Consulting Group who is scheduled to speak at the ULI meeting today. “I expect that three out of four (California) developers who were in business in 1990 will be out of business by the end of 1991” because they can’t secure financing or face lengthy regulatory or other delays.

That gloomy view is supported by a nationwide survey scheduled to be released Thursday by Ernst & Young Real Estate Advisory Services.

The more than 500 developers and other real estate professionals who responded to the survey predicted that capital for real estate financing, which stood at more than $150 billion yearly in the late 1980s, will decline significantly from the current level of about $20 billion to $30 billion.

“Predictions that pension funds or other sources of capital will replace the banks and S&Ls; in sources of debt and equity capital to the real estate industry have not (been) borne out,” the survey found.

In addition to financing difficulties, developers across the country are facing more aggressive opposition from citizen groups, which are worried about the impact proposed projects will have on traffic congestion and the environment.

“Homeowners groups are becoming far more sophisticated at both the political level and in the use of the courts,” said Carlyle Hall, a Los Angeles lawyer who represented Friends of the Ballona Wetlands, a Marina del Rey area citizens group that specializes in land use issues. “From the homeowners’ perspective, if a huge development is happening in your back yard, it’s not welcome.”

Despite the conflicts, some developers say they are learning to better play the game of wooing citizen approval and construction financing.

Maguire Thomas Partners, the Los Angeles developer of the Ballona Wetlands, said it is seeking financing from pension funds and other alternative lenders and has learned to deal with citizens as a result of the debate over the development of the Ballona Wetlands.

“To be sure, there are a few people vigorously opposing anything we do,” said Nelson Rising, senior partner of the Los Angeles developer. “But the No. 1 thing is to listen to these groups and to recognize that there are legitimate” concerns.

Rising added that “people who talk about ‘no-growth’ are largely motivated by” specific concerns--such as traffic and safety issues--that can sometimes be addressed by altering the design of a project.

Meanwhile, other developers have managed to escape the financial and image problems besetting many of their peers. Los Angeles-based Kaufman & Broad Home Corp., for example, relies mostly on its own money for construction.