CIM///dp1st/mark2nd
By ELIZABETH HAYES
Staff Reporter
Santa Monica’s Third Street Promenade, San Diego’s Gaslamp Quarter, Old Pasadena, downtown Brea and Hollywood Boulevard.
What these seemingly disparate shopping districts have in common is a Westwood real estate firm that over the past four years has quietly built a small retail empire.
Since CIM Group LLC started collecting buildings in rundown but reviving areas, it has amassed a portfolio of more than $200 million worth of property encompassing over a million square feet. The firm is the largest landlord on the Third Street Promenade, with 13 buildings and 203,000 square feet of existing properties and others under development.
“These guys have incredible vision to pick properties. They know how to identify opportunities and create value,” said broker John Bertram with Westmac Commercial Brokerage Co., who has represented CIM in several deals.
CIM’s principals and founders, Avi Shemesh, Shaul Kuba and Richard Ressler, have established a reputation for jumping into markets on the verge of an upswing.
“They get in on the ground floor, after things have started, and push the momentum,” said Matthew May, a retail broker at Madison Partners. “They know their exit strategies they’re not going to take the risk and hope it’s going to work.”
When CIM first bought on Third Street, rents were $1.50 to $2 per square foot a month. Today, they’re in the $6 range.
So who are these guys who seem to have a Midas touch for picking properties?
Shemesh and Kuba were friends growing up in Israel who emigrated to Los Angeles in 1986. A year later, they formed Dekel Development Inc., which developed more than $60 million worth of commercial, apartment and condominium projects.
Shemesh also formed AA Landscaping, which is how he hooked up with Ressler, an attorney by training who worked in Drexel Burnham Lambert’s corporate finance and mergers-and-acquisitions department and later served as chief executive of various companies. Shemesh’s company did landscape work at Ressler’s house and the two talked about doing real estate deals together.
(CIM does deals with its own capital, as well as through partnerships with Federal Realty Investment Trust of Maryland and Credit Suisse First Boston Mortgage Capital LLC.)
In 1994, CIM Group made its first purchase five stores on the Third Street Promenade, where a few theaters and restaurants had emerged but retail was still struggling with mom-and-pop-type stores. The goal has been to attract tenants by creating the same kind of predictable environment that exists in enclosed malls, where tenants deal with one landlord and predictable rules.
“CIM bought right and brought in good tenants,” May said. “They understand retail and bring an eclectic mix to things.”
In Santa Monica, those tenants include The Disney Store, Abercrombie and Fitch, J. Crew, Nine & Co. and Gaucho Grill, and soon, a Banana Republic flagship store that will be built inside a former J.C. Penney Co. location.
They next entered Pasadena, picking up the Colfair Building, which had sat vacant for 20 years while the surrounding area boomed. After a $2.5 million renovation last spring, Pottery Barn opened a two-level store and 13 loft-style apartments leased as soon as they hit the market.
CIM is also evaluating how to remake Tanner Market, a retail development farther west on Colorado Boulevard that has never been able to draw shoppers to its retail spaces back off the street.
“You can’t push water uphill,” said Ressler. “We have to go into locations with the need for or an existing, nascent street coming up, where we can have a significant impact.”
Besides good location, there’s another essential ingredient: community encouragement. Before CIM invested on Third Street, the city had already decided to remake the street with retail and entertainment development.
“We’ve spoken to cities and said, ‘You’ve got a great opportunity here’ and they make the right noises. But if there’s not support for it, we move on,” Ressler said. “If the city doesn’t demand it, you’ll have a failed project.”
Westwood is a good example. The firm has looked at shop spaces there, but declined to invest. “It has so much going for it, but it doesn’t have the community will to establish it as a major location for an urban mix,” Ressler said.
When John Given joined the firm in 1995, they talked about investing in Hollywood. Given had seen the area’s potential through his work with the Community Redevelopment Agency and Metropolitan Transit Authority.
“It has great physical character and high density,” said Given, senior vice president of development. But, “it was not a direction we were jumping into right away.” But late last year, that changed. With TrizecHahn poised to break ground on its massive retail-entertainment project and civic and business leaders fully behind a long-talked-about resurgence, CIM made its move.
It bought a 184,000-square-foot office building with ground-floor retail and is in escrow to buy the Hollywood Galaxy, a retail project Shemesh described as “a big white elephant we have to turn around.” Farther east on the boulevard, CIM plans to redevelop a 32,000-square-foot building into a 64,000-square-foot retail project with a second-floor entertainment venue.
“It’s a classic example of a vacuum. That was an urban experience in need of a shape and framework,” Ressler said. “And there’s the will to make it happen.”
