Firm Building on Hollywood Revival
The partners at CIM Group are not particularly interested in pretty buildings.
In the last year, for example, the Westwood-based real estate firm has purchased about $40 million worth of humdrum properties in Hollywood, including an outdated office building and a failed shopping mall. “We have an eye for the dogs that come up on the market,” said John S. Given, senior vice president of development.
But CIM has also proved it has a knack for spotting up-and-coming urban districts such as Old Pasadena, the Gaslamp Quarter in San Diego and Santa Monica’s Third Street Promenade, where the firm is the largest landlord.
Now, CIM is banking on the revival of Hollywood Boulevard, with $100 million in planned building acquisitions and renovations.
“We are interested in developing a collection of properties,” Given said. “We can create and capture a market.
The firm is riding a national trend in the rebirth of urban shopping districts, which have grown in popularity among shoppers and retailers. Many of CIM’s storefronts are filled with major retailers--such as Pottery Barn and Banana Republic--that have emerged from enclosed shopping malls and established flashy urban outposts.
“There is a tremendous movement to the street,” said Avi Shemesh, who co-founded CIM Group in 1995 with partner Shaul Kuba. “Right now, the market has embraced it.”
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The momentum of storefront retail has caught the attention of huge investment firms and real estate companies that once shunned urban shopping districts. For example, Maryland-based Federal Realty Investment Trust, a large nationwide owner and operator of suburban shopping centers, has teamed with CIM on many of its urban retail ventures.
“CIM has been pretty good about identifying opportunities and . . . looking at areas where there are strong fundamental and positive things underway,” said Rob York, a retail and real estate consultant at Santa Monica-based Fransen Co. “They have moved quicker than some of the institutional types of investors.”
CIM is a privately owned firm whose partners come with a variety of experience. Shemesh and Kuba, for example, are Israeli immigrants who built apartments and condominiums during the late 1980s. Given is an urban planner who helped the Metropolitan Transportation Authority develop sites surrounding its three subway stations in Hollywood. The firm often teams up with much larger and well-known partners, such as Federal Realty Investment Trust or Credit Suisse, on separate projects.
The challenge for CIM is to buy into shopping streets after signs of revival--such as the opening of nightclubs and restaurants--begin, but before property values and rents skyrocket with the arrival of major chain retailers.
“You can’t open before [change] hits,” Given said.
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There must also be a mix of uses, including residential, to broaden the appeal of the area. In Pasadena, for example, CIM included 13 residential lofts in the five-story Colfair Building, where the Pottery Barn operates a large store on the first two levels. The firm is also exploring loft residences for some of its Hollywood properties.
“We don’t look at the street as just a retail [outlet],” Shemesh said. “It’s not like a mall.”
Ironically, for a firm oriented to the street, CIM gravitates toward areas that offer many of the benefits of shopping malls. They look for public investment in parking structures and security and the existence of a business improvement district to help pay for maintenance and marketing. These elements help take some of the risk out of operating in a freewheeling public space, where landlords and tenants are usually on their own.
In Hollywood, CIM found new night spots, substantial city investment in parking garages and a concerted effort by landlords and tenants to maintain security and cleanliness. Private investors had already staked a claim in Hollywood, including Canadian real estate giant TrizecHahn, which is building a $300-million retail and entertainment center next door to the landmark Mann’s Chinese Theatre.
Hollywood Boulevard already benefits from throngs of tourists, many of whom leave disappointed after failing to find any of Hollywood’s legendary glamour.
“They go there, and there is nothing to look at,” said Shemesh, whose firm will soon move into a 12-story office building it purchased across the street from the TrizecHahn project.
In addition to the office tower, which will be renovated, CIM is involved in a joint venture to develop a six-screen Laemmle theater at the intersection of Hollywood Boulevard and Cherokee Avenue. The firm also plans to overhaul the former Hollywood Galaxy, a mostly vacant, 120,000-square-foot mall on Hollywood Boulevard that CIM reportedly purchased for about half the $48 million it took to build in 1991.
Despite growing signs of investment and development activity in the area, Hollywood’s revival is still a ways off. Tacky storefronts line much of Hollywood Boulevard, and many side streets are forbidding or open up onto vast parking lots. Very little of it resembles the quaint and squeaky-clean environs of Old Pasadena or Santa Monica.
“It’s going to be a multiyear process to get [Hollywood] where everybody hopes it will be,” said York, the retail consultant. “If it comes off as planned, it will be very successful.”
If things do go as planned, many of CIM’s new storefront tenants will be opening just as Hollywood Boulevard’s revival begins to hit its stride.
The firm has already signed the Knitting Factory, a New York jazz club, to occupy space at the former Hollywood Galaxy.
Potential retail tenants are already inquiring about renting the firm’s properties.
“Two years ago, you could not have gotten retailers to come to Hollywood,” Given said. “Now, there is no problem getting people to look for space [there].”
