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Friday, Mar 29, 2024

Building Out

Titles: Founder and partner, InSite Development Born: Hollywood; 1965. Education: University of Arizona, bachelor’s degree in real estate and finance; attended Pepperdine University. Career Turning Point: “I don’t think there was a turning point. It’s been an evolution to where it is now.” Most Influential People: Stephen Pfahler, a long-time friend with whom he started a book club. Personal: Married, with three children. Hobbies: “I have no hobbies. I don’t enjoy working out. I have no bucket list left.” Scott Ehrlich describes himself as an “alchemist” – someone whose value is turning lead into gold. The 50-year-old developer has accomplished that with downtown Lancaster. In a three-year period starting in 2009, he developed several award-winning projects along Lancaster Boulevard, including cinemas, restaurants, shops and apartments. He started his development career in affordable housing. As founder of and a partner at InSite Development in Woodland Hills, Ehrlich has built hundreds of affordable housing units in the San Fernando Valley, Palmdale, Lancaster, Pasadena and Orange County. But real estate is just the start of what he has done in his 50 years. He has invested in stores and restaurants and started a chain of ice-cream and candy shops called SweetXO, which he soon divested. Four years ago, he wrote, directed and performed in a musical with a plotline taken from his life. He then made the musical into a movie that he wants to distribute to film festivals this year. Outside of work, Ehrlich has two electric cars – a Tesla and a Fisker – and a menagerie of animals at his Conejo Valley home that includes chicken, alpacas and a zebra. From an office that includes a pingpong table and boxes of candy from SweetXO, Ehrlich talked with the Business Journal about the benefits of working in Lancaster, his lasting legacy, the ups and downs of real estate, and his dream of seeing Palmdale and Lancaster merge into a single city. What have been some of the biggest challenges as a real estate developer? Bureaucracy. Bureaucracy and attorneys would be my two biggest challenges. How have you dealt with them? Not well. One of the real reasons I ended up in Lancaster is it was the first and only city that understood its role was to get out of the way and help in whatever manner they could. The reverse of that is when we were asked by (Los Angeles Mayor Eric) Garcetti to do a property in Echo Park. We could put in affordable artist lofts. What a great potential project it could have been. But we had NIMBY-ism; we had to go to community meetings and the city. We said forget it. I want to go to places that want me. Is downtown Lancaster your long-term legacy? It is a legacy. I don’t need another legacy. In some ways we are trying to create a life that was worthy of living. We do it with money or buildings. Doing what we accomplished up there, having a street named after me, I don’t need a legacy like that. Having said that, we are not done up there. Has the project turned out the way that you wanted? Yes. I think we’ve achieved everything that I hoped for. We revitalized an area. We provided in the neighborhood of 800 permanent jobs, 2,000 construction jobs. We’ve created 17 new businesses, and most important we created a place that people visit and forget about life for a while. What were the challenges to revitalizing downtown Lancaster? On one building, I went to the city and asked that we needed to move over to the property line. They said, “Yeah, we’ll do it, no problem.” What we did not realize is when we went up four stories, you could reach off a balcony and touch a wire that had 220,000 volts. Together I worked with the city to (put the wire) underground and figure what we could do to overcome the challenges. Have other cities approached you about revitalizing their downtowns? Numerous other cities. Newhall, San Fernando, Riverside. We’ve been approached many times. Why not take on those projects? The truth of the matter is they want it, but I never felt they had the same nonpolitical structure that Lancaster has. I don’t have an ulterior motive. Unless you have that kind of partnership, there’s no way it would ever work. But you are not finished with Lancaster? I am excited to get back up there and start again, and they are as well. We’ve been meeting over the last couple months on new projects, some exciting projects that are bigger than downtown. Can you describe one? The city is looking to re-create a campus environment around the hospital; a medical main street. They approached us to be the main developer. We’re talking a couple of square miles. I am using my magic as a catalyst to do it. Why did you start SweetXO? We built a number of different businesses in Lancaster. I thought what else would be fun to do is opening up a combination of all those businesses into one. I came up with the concept of SweetXO. Being me, I didn’t want to open just one. We opened five very quickly. What went wrong? The concept itself is absolutely brilliant. The big problem, however, is I did not realize how stressed out it would make me from the sense of embarrassment when I would walk in there and yogurt machines would be messy or the fruit wouldn’t be there; things that were driving me nuts. What did you end up doing with the stores? It ended up that my kids would want to go to SweetXO and I would wait in the car. That was the level of stress that was on me. It sounds stupid but it was real. We were losing a lot of money on the stores. I closed three of the stores and sold two to the manager for a cheap price. What did you learn from that experience? I don’t want to get married to a project. I want to date it. Opening up any store, a restaurant, you’re married. Unless you want to be married, it will fail. Great ideas are a dime a dozen, implementing them is near impossible. So you no longer have an ownership stake in downtown Lancaster restaurant Bex? Nope. I have no involvement in Bex. I sold it to the people who continue to run it. The same for Kinetic Brewing, the Lancaster brew pub? Same exact thing. Kinetic is a great story in itself. A guy who worked for Warner Bros. and always dreamed of owning a brewery. I allowed him to do it. They struggled beyond struggled. Now they are going to open an expansion because they cannot make enough beer (at their existing space) and are winning awards. That kind of stuff makes me feel good. Were you always interested in real estate? I was a stockbroker right out of a college. I went to work for E.F. Hutton. This was in 1986. I was a leader of a group in New York. Then the stock market crash hit in October 1987. Lucky me, I was what they called broker of the day, which means I had to take calls from people who couldn’t get hold of their brokers. I realized then that some brokers were more like bookies and cared more about themselves than their clients. So how did you get into real estate? One of my clients offered me a job in an affordable housing development unit in Los Angeles. I learned about affordable housing. What was the appeal? The normal way with real estate is put in $1 million, hope rents come up and refinance or sell and make money off it. Affordable housing is different. You get your money out and try to make a fee. That’s how I learned real estate, which was interesting because everyone thought it was crazy. Then the market collapsed and everybody wanted to become an affordable housing developer. What did you like about doing affordable housing? I loved the fact you could make money and help people at the same time. That in and of itself became my motivating factor. What a great career choice. Added to it, I got to play Lego in real life. I got to put something on a piece a paper and sometime in the future see it actually built. What was your first project in Lancaster? Lancaster was a place you drove through on your way to Mammoth. A broker came to me and said he had 320-unit apartment, a bank owned it and it’s 50 percent vacant. Its name was really Monte Verde but he called it Murder Verde. We ended up buying the building for $8 million with $5 million of unused tax credits on it. We did a joint venture with Sun America and in 90 days we had it fully leased. It was 1998 and the market was doing well and we started buying up more and more buildings there. We now own 10 percent of all apartments in the Antelope Valley. Have all your projects made money? (Pause) Yes. I hesitated because the only time that we invested that didn’t go with this model at all was a Las Vegas deal. That was the only time we ever had a deal lose money. We invested in buildings and let other people run it. A lesson well-learned. Where did your financing come from to start InSite? I started small with a house that I built. My sister co-signed on a loan with me. I literally would borrow from every person I knew. On Fridays I would fly to Las Vegas for a line of credit, play blackjack and come back with $10,000 to pay people so that I could get the next draw. It was crazy. I sold that house for $600,000 and bought an eight-unit (apartment building) and we kept buying and that’s how we grew. Who is the most influential person in your life who is not a family member? Since I was 21 I have a good friend, Stephen Pfahler, who is now a judge (in Los Angeles Superior Court). We started a group called Plato’s Cave. At the time my girlfriend’s father was a philosophical guy we called Socrates. Me, Steve and him had a book club. We’d meet every week and talk about the great books in history. I would say those two are the most influential from the perspective of identifying who I’ve become as a person. How do you go from real estate to filmmaking? While I was in the middle of redeveloping downtown Lancaster, we went into the Lancaster Performing Arts Center and I stood on the stage. It hit me that I always wanted to do a play. I ended up (in 2011) writing, directing and starring in a play called “Pearly Gates.” It was three months of the greatest time of my life. We performed it six times in front of 3,000 people and raised money for charity. What’s the plot? It was autobiographical. I don’t know how to write. The characters were everyone I know. It was about a guy who is diagnosed with cancer and how to figure out how to deal with that and his legacy. He realizes the only way to live on is in the memory of others. That’s what a legacy is. So how did that lead to a film? Fast-forward to the beginning of 2014. I am always looking for a passion project. One day I said, “I’ve never done a movie, let’s make a movie.” I am sitting there trying to write a movie and nothing is coming to me. I said, “What the heck, everybody loves the story (in ‘Pearly Gates’), let’s convert it into a movie.” I ended up getting a cast that was incredible and they did it for pennies on the dollar. I got people like (director) Peter Bogdanovich; Lainie Kazan; Uzo Aduba, who is Crazy Eyes from “Orange Is the New Black.” Why do a film? My motivation wasn’t to make money on it, it was to go to film festivals. The first film festival I got into was the Newport Beach Film Festival (in April). I got accepted into the Hollywood Film Festival coming up (in September). That’s the positive. The negative is the Hollywood Reporter reviewed it. They killed it. They did a really bad review on it. In 2012 at the Antelope Valley Board of Trade Outlook Conference you said in a speech that Palmdale and Lancaster should form a single city. Did that plea fall on deaf ears? It definitely did not fall on deaf ears. I got a lot of pushback, mostly from the (Antelope) Valley Press. Over the last three months I’ve fantasized about rekindling that flame as my next thing. I am 100 percent sure it’s the right thing to do. Why? Financially it is much more efficient when they are not fighting over whose going to get a Costco and suing each other. It’s divided by a fake line and the reality is those two cities would merge to create the third largest city in L.A. (County). It becomes a political warhorse together. What motivates you? Living every minute to the fullest. What makes me have the biggest rush is having every minute occupied with good stuff. What gives me the worst feeling is going home and watching TV for two hours. I hate it, yet I do it.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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