Rioting Casts Shadow on Real Estate : Conference: Events in L.A. present a new worry for development industry in Southland, speakers say.
There was still plenty of talk about the overambitious ‘80s, when office buildings went up left and right without much consideration to minor details like occupancy rates.
And, same as last year, there was discussion about the possibility of a housing shortage on the horizon because of the current dearth of construction lending.
But another topic--one that did not exist only a week ago--came up Tuesday at the annual UC Irvine Sumigarden Conference. What effect, some of the speakers wondered, might the Los Angeles riots have on Southern California real estate?
Economists, analysts, developers and financiers from across the country met at the Four Seasons Hotel in Newport Beach for the invitation-only confab, sponsored by the UCI Graduate School of Management. The conference, held yearly since 1984, was founded by economists Michael Sumichrast and Elm Weingarden: thus its unusual name, Sumigarden.
About 325 people attended the conference, at which Costa Mesa developer Henry T. Segerstrom was honored as the 1992 Builder/Developer of the Century--an award handed out every year, despite its less ephemeral-sounding appellation.
One of the speakers in the event’s round-table discussion, Louis H. Masotti, a professor of management and urban development at Northwestern University and currently a visiting professor at UCI, speculated that the destructive rioting in Los Angeles last week will have long-term repercussions on Southern California’s economy.
“For years, California from the outside has appeared to be a tremendous growth area,” Masotti said. “But the bloom seems to be off the California rose. And the riots didn’t help.”
California, he said, “may be joining the Union” as it loses its reputation as the one state immune to economic pitfalls. In addition to inner-city troubles, Masotti cited California’s “astronomical housing prices” and reports that employers are leaving the state in increasing numbers.
Masotti also pointed out that in the future, before lenders grant loans, they might look more carefully at the way a specific property--as well as the surrounding community--is managed.
“We’ve seen some good and bad examples of public management,” he said. “Certainly, mistakes were made in Los Angeles.”
Overall, however, the riots played a minor role at the conference, as speakers focused on more familiar subjects regarding real estate in the ‘90s.
“The office space problem is not just overbuilding--we can always work through overbuilding,” said John McMahan, president of Mellon/McMahan Real Estate Advisors Inc. of San Francisco. “But it’s harder to work through the declining demand for office space during this slowdown in economic growth.”
Daniel B. Platt, executive vice president of Bank of America, offered small and mid-size developers a ray of hope: The conventional wisdom, he said, “has been that only the biggest developers will survive the recession. I don’t believe that.”
It was many of the bigger developers, he said, who spread themselves too thin during the booming ‘80s.
When doling out loans in the future, Platt said, banks will examine a developer’s management of its assets rather than its size. “We’ll look at whether your level of activity is capable of supporting the loan, and that doesn’t mean that you have to be big.”
