Developer Finding a New Way to Survive : Real estate: With commercial development in a slump, Voit Cos., Warner Center’s biggest landlord, turns focus to property management.

Robert D. Voit got into commercial real estate development more than 20 years ago, back when someone who had never owned a piece of property could tie up huge tracts of land in the path of development and get a major ownership stake in the ensuing development.

That’s just what Voit did in Warner Center. A former commercial real estate broker with Coldwell Banker, Voit, now 52, started Voit Cos. in Woodland Hills in 1971 as a commercial development and property management firm. With partner Copley Real Estate Advisors, Voit purchased large blocks of land in the former Warner Ranch just as the huge, master-planned business center was getting started.

Today, Voit is Warner Center’s biggest developer with about 40 buildings, including six high-rise office towers and the 475-room Warner Center Marriott Hotel. Voit has also developed other properties in Orange and Ventura counties, and in Northern California. In all, Voit Cos. has developed and manages about 6 million square feet of commercial property throughout the state.

But times have changed and, now, so must Voit. The company opened its last Warner Center building in 1991 and is now out of land on which to build there.

It wouldn’t do Voit much good to look elsewhere: Commercial real estate development has come to a virtual halt throughout the nation, a result of overbuilding and tightened credit. Voit is finishing up a few projects in Simi Valley, Sylmar and in Northern California, but it hasn’t started any new developments in more than a year.

So Voit, as with many other developers, is shifting its focus from developing to managing existing properties. Property management doesn’t have the potential for the huge profits that developers can earn in good times, but it’s a less risky, more stable source of revenues and it can help developers keep their doors open at a time when even real estate giants such as Olympia & York Developments Ltd. are fighting to survive.

“Bob Voit got into developing at exactly the right time,” said Seth Dudley, senior vice president at the Los Angeles office of New York-based commercial real estate broker Julien J. Studley Inc. “You could make the argument that he’s getting out of it at the right time.”

Voit Cos. won’t disclose its revenues or profits, saying only that it manages properties--most developed by the company--with total rental income of $100 million.

But in the past year, the amount of property that the company manages for outside owners has jumped from 220,000 square feet to more than 1 million square feet. Voit’s management fees range from 1.5% to 4% of total rental income.

In the meantime, Voit’s development fees are expected to decline to just 10% to 20% of the firm’s total revenues in 1993 from about 50% of total revenues in 1990, said John A. Gebhardt, a Voit Cos. vice president who heads the company’s asset management and marketing operations. Development fees typically run between 2% and 5% of the total cost of construction.

But with its development projects basically finished, Voit must now aggressively seek management contracts to run buildings for other owners--so-called third-party projects. So far, its outside clients have included Security Pacific Bank and First National Bank of Chicago.

Ironically, many of these third-party contracts are available today because of the depressed real estate market. Many properties have fallen into the hands of banks and other financial institutions through foreclosures and other transactions. But those institutions typically don’t do their own property management.

Because of its experience developing and managing properties, Gebhardt said, Voit can sell itself to these property owners as a kind of one-stop service, able to perform a range of tasks including evaluating building maintenance equipment, collecting rents and finishing construction on properties that have been abandoned partway through the development process. Voit can also oversee security, make financial projections and handle tenant improvements. It even sometimes adds fitness centers or restaurants to help attract tenants.

In Orange County, for instance, First National Bank of Chicago assumed ownership of Raymond Commerce Center--an industrial, office and retail complex--through an exchange with the previous owner. The bank brought in Voit to give the property a make-over and improve leasing levels.

Voit added some cosmetic touches, changed the name of the complex to Commerce Center Anaheim and more aggressively marketed the property to prospective tenants through its affiliated brokerage company, Scher-Voit. As a result, Gebhardt said, the complex was sold last month and, “on an economic basis, the bank did very well.”

Voit was also hired by Copley to manage an office complex in Sacramento that is situated in an area where there isn’t a strong demand for office space. Voit redid the main lobby, changed the color scheme and brought in new brokers. Leasing has since increased substantially, Gebhardt said.

Other developers are adopting a similar strategy. Jim Buie, a senior vice president in the Los Angeles office of Houston-based Gerald D. Hines Interests, said many developers “have been trying to figure out how to rechannel their development experience.”

Like Voit, Hines has been drumming up management work for clients such as Pacific Gas & Electric and banks that are working out their troubled real estate portfolios. “That represents the future of our business right now,” Buie said. “Developers are either going to adapt or not survive.”

But Michael E. Meyer, a Los Angeles real estate attorney, warned that an increased focus on property management is hardly a panacea for developers. “Compared to what developers made in their heyday, they’re going to make a lot less,” he said.

And with growing competition for management contracts, fees are certain to go down, Meyer said. Eventually, he believes, companies will be forced to accept flat fees for their services rather than a share of rental income.

Gebhardt acknowledged that the competition for management contracts is growing, but he said Voit can still slice out a piece of the business for itself because of its experience with complex developments such as those in Warner Center. “We’ve been a long-term value player,” he said. “We bring that to the table.”

So far, Voit has found enough outside business, Gebhardt said, that the company has not laid off any of its more than 100 employees, largely because they are increasingly kept busy providing management and other services.

Also, Gebhardt said, some development work is still available for corporate clients that need buildings constructed for their specific needs or older buildings renovated. Other developers might use Voit’s help to obtain the permits and entitlements they’ll need once the market rebounds and they can start their projects, he said.

But even when the market does recover, Gebhardt doubts that developers will return in droves to starting new projects. The increased focus on management services is “really a reflection of the maturation of the industry,” he said. “For us, it’s a turn to the future.”