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Developer’s Gamble With Quake Properties Pays Off

Developer’s Gamble With Quake Properties Pays Off By SHELLY GARCIA Senior Reporter If not for the Northridge Earthquake, PCS Development would still likely be a small, telecommunications company only a fraction of its current size. It was the Federal Emergency Management Agency (FEMA) funding available in the aftermath of the earthquake, along with depressed real estate prices, that gave the company its jump start to becoming a pioneer in the development of luxury multifamily housing in the San Fernando Valley, a beginning that has since evolved into a portfolio of apartment buildings stretching from Northridge to Sherman Oaks and West Hills and Thousand Oaks. More recently, PCS has begun to offset its portfolio of luxury residences with a move into the senior living market. The company is currently developing a condominium complex for seniors in Sherman Oaks and in Calabasas. All told, PCS has built about 2,000 residential units since its entry into the market in 1995, and the privately held firm has grown to about 200 employees from a 25-worker telecom company. Paul Jennings, PCS’s CEO, who founded the company in the late 1980s, had been providing telephone equipment like pay phones to government agencies and other corporate institutions when a friend approached him for help navigating the mountain of paperwork needed to secure the FEMA funding available after the quake for his real estate project. As a government contractor, Jennings knew the ins and outs of government red tape. He also quickly saw the wisdom in his friend’s strategy, and it wasn’t long before Jennings decided to try his own hand at real estate. “The city identified twelve neighborhoods they called ghost town projects,” Jennings recalled. “They made designated zones and one of those ghost towns was Sherman Oaks, particularly the area around Willis and Natick avenues. PCS acquired seven of the buildings in that sector at about 30 cents on the dollar, and with grants provided by FEMA and administered through the Los Angeles Housing Department, redeveloped the properties. Faith in the market A native of New Jersey, Jennings had moved to L.A. about 15 years before and was living in Calabasas when the earthquake struck, but the temblor did little to shake his faith in the area’s real estate market. “My belief was just based on believing in California, and thinking California was a wonderful place,” Jennings said. Those smaller projects went virtually unnoticed, but they pumped enough profits back into the company so that PCS began to redevelop multifamily apartments buildings in earnest, even when FEMA funding was no longer available. The next project would put PCS on the development map. In 1996, the company acquired a former Oakwood Apartments development that had been all but leveled in the quake and, realizing that the demographics of Sherman Oaks were changing, set out to redevelop the property for the young urban professionals Jennings believed would be seeking luxury rentals in the area. The 372-unit Premiere at Sherman Oaks, with a common area screening room, conference rooms and banquet halls, broadband Internet access in the units, pools and volleyball courts was among the first super-luxury complexes of its size to be built in the Valley, traditionally known as an address for single family homes. “I thought Sherman Oaks was a fabulous area,” he said. “Other people were rebuilding (projects) as they had been, and I said, why? Let’s rebuild them as something better.” Additional costs At a cost of about $9 million, the property did not come cheaply, nor did the cost of retrofitting, which required among other things that PCS pump truckloads of concrete into the ground to stabilize it. “It was the largest, most damaged of the earthquake buildings,” Jennings said. “It was next to the wash so it had particularly severe damage. And it was an expensive building for us to buy. By then, values had gone up quite a bit.” The gambit paid off, and since then, a number of other players have entered the luxury apartment market, developing similar properties throughout the Valley. PCS has just completed a residential project in Long Beach, and the company is expected to soon begin a mixed-use development of apartments and retail space on Ventura Boulevard in Sherman Oaks. Sales have begun on another project, a condominium for active seniors in Valley Village. Real estate currently accounts for about 75 percent of the company’s business, with the remaining 25 percent still devoted to telecommunications. And while none of the company’s current projects involved earthquake damaged properties, Jennings doesn’t shy away from the fact that the Northridge Earthquake was singularly responsible for the company’s transition, although he does concede that the shift wasn’t without its risks. “I jump out of airplanes and I bungee jump for fun,” he said. “I wouldn’t be a risk taker buying earthquake damaged buildings if I didn’t have that other side. This was not for the faint of heart.”

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