Developer Lights Candle Instead of Cursing Dark Real Estate by Shelly Garcia Silagi Development and Management Co.’s newest project, a 93,000-square-foot office building in Agoura Hills, is open for business, and the timing could not be worse. Vacancies are up, demand is down and Katell Properties earlier this year completed 67,000 square feet of offices in Agoura which the company has yet to lease. But Moshe Silagi, president of the Thousand Oaks company that bears his name, isn’t breaking a sweat. Not that I expected to hear much panic when I called. Developers are a notoriously even-keeled bunch, accustomed as they are to the ups and downs of the real estate market, and Silagi is a veteran. I did, however, think a little bit of the ‘things are tough’ mantra was in order. Instead I got a systematic breakdown of the nuances of the current real estate market, along with a little lesson in strategic thinking. First Silagi makes the usual points about the fundamentally sound economy and the fact that the market is not overbuilt as it was during the recession of the 1990s. What space is available, Silagi says, has crept up in price so that his new development is more or less competitive with existing buildings. “We’re asking $2.20 (a square foot) and making deals between $2.10 and $2.15,” he said, “which is normal. Everybody wants a break.” But Silagi’s real ace in the hole is the design of his building, suited for requirements that range anywhere from 500 square feet up to 14,000. The Katell development, completed in the Agoura Hills Business Park early last spring, can’t accommodate such small tenants, Silagi said, which means Katell can’t take advantage of many of the opportunities out there. Silagi even switched leasing agents, substituting Westcord Commercial Real Estate Services for the larger CB Richard Ellis he had worked with, because Westcord’s contacts are better within that smaller tenant community. “We think that CB did a decent job, mostly for large-scale and corporate America tenants, and we felt by bringing in a new company with fresh blood, we may have a better result,” Silagi said. Silagi’s Agoura Hills Gateway is still a little behind schedule. Normally, Silagi says he’s about 35 percent to 40 percent leased upon completion he notes that smaller tenants never pre-lease before most of the construction is completed but he has managed to lease about 10 percent of the space with deals with Wood Ranch Barbecue, a small engineering firm and a small satellite office of a bank. The largest of those deals is 3,000 square feet. I wondered how many of those deals Silagi could expect to do in a market that everyone agrees is ice cold, but Silagi wasn’t having it. He tells me he’s just made three deals for a property he owns in Covina, one deal in Pomona and two in Westlake Village this month. He’s just gotten approval for two buildings in Riverside, and he’s already in negotiations on a 17,000-square-foot deal and another for 12,000 square feet. “You have to work harder,” he said. “You have to be more creative. You didn’t have to be smart three years ago to be a broker. Today you have to be smart.” The problem, he says, is that brokers think what happened in 1999 and 2000 was the normal course of business. “That was wonderland,” he says. And while he concedes leasing has slowed, he insists the market is still strong. “In sales it’s the best I remember it in the last 17 years,” Silagi said. “You never got such a high cap rate, and there are no fire sales and there are no bankruptcies. So if everything is so bad, why are there no bankruptcies?” Even if, as Silagi believes, the current leasing climate is likely to last through 2003 and perhaps into 2004, so what? The interest reserves he allocated were based on rates of 9 percent to 10 percent. They are now half that, which doubles the time he has to lease his new building. And, based on land and construction costs, he said, “I need 50 percent (of the building leased) to break even. “I’m not losing sleep.” Tejon City Planned The developers of the Tejon Ranch residential community have revised their plans to include a master-planned community phased in over a 25-year period. The developers, Tejon Ranch Co., Pardee Homes, Lewis Investment Co. and Standard Pacific Homes, have formed a joint venture partnership called Centennial Founders for the project, located at the junction of Interstate 5 and Highway 138 at the border of Kern County. The developers expect it will take two to three years to complete their plans for the development, which will be built on 6,000 acres of the 11,700-acre site. More than 5,500 acres will be devoted to open space. Plans include 23,000 homes, a business district, schools, libraries, retail and entertainment and recreation centers and medical facilities, built out over 25 years. Centennial expects the first home occupancies to take place in 2007. The company says the development will generate 30,000 jobs. Centennial initially planned to construct a 4,000-acre housing development on the site. Woodland Hills Sale The Woodland Hills headquarters of Panavision were sold to a private investor group for an estimated $14 million. Panavision will remain as the tenant in the 152,000-square-foot building at 6219 DeSoto Ave. under its nine-year lease. Bob Safai, a broker with Madison Partners, represented the buyer, 6219 DeSoto Associates, and the seller, Trizec Properties Inc., in the deal. ELabor Downsizes After completing the sale of one of its product lines, eLabor.com has reduced its headquarters office space by about 10,000 square feet. The Camarillo-based developer of labor management and recruiting software opted for a 30,000-square-foot space at Mission Oaks Technology Center at 5153 Camino Ruiz. The five-year lease is valued at somewhat more than $3.2 million. Bryan Lewitt and Matthew Miller, brokers with CRESA Partners, represented eLabor. The landlord, Kilroy Realty LP, was represented by David Garcia at Kilroy. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].
