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Sunday, May 28, 2023

Head of Grubb Office Learns Tough Realities of Market

Head of Grubb Office Learns Tough Realities of Market REAL ESTATE By Shelly Garcia These are not good times for nice guys in the real estate brokerage business. Just ask Pete Puzo. The executive vice president and managing director of Grubb & Ellis’s Sherman Oaks office was fired a few weeks ago, after about six years at his post, more than seven with the company. It was dispiriting news for those who knew him. Puzo was something of an elder statesman who was awfully well-liked by everyone who ever worked with him. No one wants to see nice guys finish last, least of all brokers who count likability among the most important yardsticks in the business. But it didn’t help Puzo this time, not when the industry is in the doldrums, not when corporate politics are in play, not when the demands on managers are changing. None of the brokers I spoke with was willing to speak on the record. But their private thoughts and observations about what went wrong and why tell a story about a nice guy caught in the wrong place at the wrong time. And, as is the case with all of us, he probably did a few things wrong as well. Over the past year under Puzo’s watch, Grubb’s business in the Valley has faltered and a highly productive broker team was lured to a competitor at a time when management had delivered marching orders to expand the North L.A. office. At another time, in another agency, these problems might be excused. But these are unforgiving times for brokerages in general and Grubb in particular, I’m told. Officials at Grubb & Ellis did not return phone calls seeking comment. But others point out that the brokerage has had four CEOs in four years, a management churn that doesn’t lend itself to long term planning or, for that matter, innovation. And a situation that makes it all the more challenging to deal with is the environment all commercial real estate brokerages are facing. The current business cycle is lousy, pure and simple. Office and industrial leasing has virtually shut down, and the sales environment is so lopsided a broker’s practically got to be clairvoyant just to find properties to market. In 2003, the value of Grubb & Ellis’ Valley lease deals was $203 million, up just slightly from about $199 million in the prior year. Sales deals declined to $257.5 million from $312.7 million in 2002. Brokers said the shop’s first half results are even softer. Others didn’t fare much better, but it’s a lot easier to survive the scrutiny if management knows you, trusts you and has bought into your plan. I’m just guessing here, but with the kind of management shuffle at Grubb, it would be difficult to get that support. Then there’s the issue of growth. Several rivals have recently boosted their ranks, and the L.A. North office of Grubb was under marching orders to expand that office as well. Puzo said he was asked to submit a plan to expand the Sherman Oaks office to a size comparable with Grubb’s largest offices in Newport Beach and New York City, and he offered up his ideas a few months ago. He also brought in three new brokers. “We were headed in the right direction,” he said, “but people only leave (other brokerages) if there’s a problem. It takes time to build from within.” After several decades when young grads didn’t exactly put commercial real estate brokerages at the top of their lists of career choices, the industry is graying and there is fierce competition for brokers. Pinching from other agencies takes years, managers say. So does training from within. Under that kind of pressure, it’s likely the loss of the broker team was especially troubling. And it didn’t matter if, as many other brokers say, the team was lured with a compensation package that would have been impossible for Grubb & Ellis to beat. As head of the Sherman Oaks office, Puzo was clearly accountable for these events. Is it fair? Maybe not. But it happens every day in corporate America. I spoke to Puzo just a week or two after his ouster. He wasn’t ready to say too much about what had happened. He’s going to take some time off and then pursue other opportunities. I hope he lands a good one, for his sake and for all the nice guys out there. Sale Pending Bentley Forbes Group has put the 21st Century towers in Woodland Hills up for sale, sources said. The real estate investment company acquired the property, totaling about 518,000 square feet, in 2001 from Tishman International Co. , which renovated the original tower and constructed the second building. Bentley Forbes paid about $120 million for the buildings, which do not include the land that’s owned by Douglas Emmett. Tom Bohlinger, senior vice president at Grubb & Ellis, is marketing the complex. There was no listing price put on the property. Centre Pointe Deal Centre Pointe Business Park has inked a deal with John Paul Mitchell Systems for a 171,000-square-foot build to suit in the Santa Clarita complex. The company will be moving from a 93,000-square-foot building nearby. Investment Development Services Inc. was tapped as construction manager for the project. The development is valued at about $12 million, said Dan Sibson, portfolio manager for IDS. Center Pointe was represented in the deal by Jim Linn and John Paul Mitchell was represented by Nigel Stout, both with Grubb & Ellis. The sale transaction will close upon completion of the construction, expected in December. “They looked at (Valencia) Gateway and some other areas,” said Stout. “It turned out this is a location that worked for them.” Senior Reporter Shelly Garcia can be reached at (818) 316-3123.

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