Taking Risks Runs in the Ezralow Family
In an era dominated by real estate investment trusts and powerful institutional investors, some old-school independent real estate developers have found sanctuary in the offbeat, the risky and the complicated.
Projects that would scare off most corporate real estate types are catnip to Ezralow Co., a fourth-generation family business that has quietly grown to become one of the largest niche players in Southern California.
The Calabasas company is in the midst of such nervy projects as building housing on a former NASA complex in Downey, constructing a retail center on a once-polluted Superfund site in Monterey Park and demolishing and rebuilding an aging mall in Huntington Beach. The three developments are valued at more than $500 million.
That’s on top of more prosaic pursuits that include buying and renovating 3,000 apartment units each year, accumulating a portfolio of mini-warehouse properties and working to build a 550-home subdivision off the Antelope Valley Freeway in Santa Clarita.
Gradually taking the helm is Chief Executive Bryan Ezralow, the 34-year-old son of former CEO Marshall Ezralow, 63, who has assumed a chairman-like role. The senior Ezralow built thousands of apartment units during his long career, and Bryan is building on that legacy.
“Bryan is taking the Ezralow operation to a new level in how he approaches managing the assets that came through his father’s dynasty,” said Harvey Green, Encino-based president of brokerage Marcus & Millichap.
While pursuing these inherently risky ventures, Bryan Ezralow is applying lessons the family patriarchs have passed down--frequently outmaneuvering bigger and better-known developers along the way. One key strategy entails finding bargain properties and figuring out ways to improve them.
“We prosper when we can add value with a creative plan and a well-organized execution,” Bryan Ezralow said.
The younger Ezralow has already been in the business long enough to know what it’s like to be bloodied. Memories of the early-1990s recession that flattened the real estate business are strong.
“I always try to remind myself how ugly it was and try to avoid taking on too much while always keeping a downside strategy in mind” for each new venture, Ezralow said. “We always try to determine how far a property’s value could fall in another recession, and what alternatives we have.”
Ezralow’s current major redevelopment projects seem to reflect that cautious aggressiveness--not to mention the creativity and chutzpah required to risk millions on costly, difficult real estate ventures.
This month, an affiliate of Ezralow Co. started grading approximately 45 acres along the Pomona Freeway comprising part of the long-idled Operating Industries Inc. landfill in Monterey Park that the federal Environmental Protection Agency designated among its exceptionally contaminated Superfund sites in 1986.
Illustrating the retail demand in and around Monterey Park--and the potential profits if Ezralow executes its plan--the 550,000-square-foot center was almost entirely leased even before the grading began. The $50-million Monterey Park Towne Plaza project is expected to open next summer with Home Depot, Target and Staples among its tenants.
Ezralow is also in exclusive negotiations with Downey officials, who have tentatively selected the company to oversee redevelopment of more than 100 acres where thousands of aerospace employees once worked. The property will be turned into a business park and shopping mall valued at as much as $250 million. The project at Imperial Highway and Clark Avenue is tentatively scheduled to begin next year.
Meanwhile, Ezralow’s retail specialists are negotiating with potential tenants for 70% of the 1 million square feet of the upscale, open-air replacement for the 1960s-vintage Huntington Beach Mall. Demolition of the old enclosed mall is slated to begin late this year.
Not everyone is happy with the plan to convert the Huntington Beach Mall into an upscale shopping center. Longtime tenant Burlington Coat Factory has sued Ezralow and partners. The store believes it is being pushed out of the mall because its image as a discounter will clash with the Italian-village theme that will be created in the $150-million make-over.
Burlington’s attorney, Aviv Tuchman, said the 30-year lease the retailer signed with the previous property owner five years ago specifies the company’s rent and minimum store size as the mall gets rebuilt. But the Ezralow-led ownership group is now “trying to strong-arm” Burlington into paying more rent per square foot for a smaller store.
But Bryan Ezralow, while declining to debate the case’s particulars, said his company had anticipated Burlington’s legal moves after discussing the project’s potential pitfalls with other developers. “They’re not known to be cooperative,” he said of Burlington.
Similarly, the Ezralow team considered the potential downside of leasing a large warehouse near La Brea Avenue and Rodeo Road in Los Angeles last year to Internet-based grocery delivery specialist HomeGrocer.com. Executives took a hard look at HomeGrocer’s business plan and management team before going forward.
“We asked, ‘What if they’re not successful?’ and had to get comfortable with the real estate alone,” Ezralow said. As it turned out, HomeGrocer subsequently cut a deal to be acquired by rival Webvan Group--which is obligated to honor the HomeGrocer lease but is still deciding whether to occupy the building.
Adding in its considerable apartment, mini-storage and home-building activities, Ezralow and its various affiliates now employ about 200. Others work at one of Marshall Ezralow’s (and longtime partner Gary Leff’s) first major non-apartment development ventures, the Mid Valley Athletic Club in Reseda.
Ezralow typically brings in a financial partner for the biggest projects, but can call on substantial internal equity capital for most of its ventures. Affiliates of the big SunAmerica financial services organization founded by local billionaire Eli Broad have been Ezralow’s equity partners in the Huntington Beach project and other ventures over the years.
Veteran Ezralow executives David Leff, Christine Hughes, Gary Freedman and Doug Gray also join the family members as partners in many ventures. “We’ve always believed in having our people share in the upside,” Ezralow said.
