Every morning, Lawrence Taylor, founder and president of Malibu-based Christina Development Co., wakes up at 5:30 and checks the Los Angeles Times. He scrolls through the obituaries, in what some might consider an odd attempt to scope out potential real estate investments that may be hitting the market.
Taylor founded Christina, named after a fourth-grade crush, in 1977 after graduating from USC.
And after nearly five decades in business – in which Christina has grown into a major real estate investment company, currently operating with roughly $250 million assets under management – Taylor said that the key to his success is consistency.
Since Christina’s inception, the firm has been devoted to developing exclusively on the Westside – mainly in the areas of Westwood, Brentwood, Santa Monica, Beverly Hills, West Hollywood, Century City, Silicon Beach and Malibu – where Taylor believes his niche geographic focus gives his investors greater confidence in their returns.
The company’s latest development, Beverly Drive Promenade, is a 1948 portfolio that Christina demised to feature both office and retail on the trendy South Beverly Drive. The space has been fully leased and is awaiting tenant move-in.
You structured your first real estate deal when you were only 12 years old. Tell me about this and how that interaction sparked a lifelong career.
I’m a transplant from the East Coast. I was born in Pennsylvania in a coal-mining town. For the first nine years of my life, my existence was very rural, with no real understanding of the bigger world. I was like this kid that fell out of the sky when my family moved to Los Angeles, and I saw this amazing metropolis. What I didn’t realize was that people lived in apartment buildings. I found myself crammed into a two-bedroom, one-bath apartment with two older sisters who were teenagers. I was desperate. I was sleeping on the couch. I just picked up the phone one day and called a realtor and said, ‘I need a house.’
What asset types interest you most, and why?
I love triple-net leased high-end retail. Because it’s a combination of triple net, meaning tenants pay all the expenses, so income is pure, and I love retail. I love to shop. And I really love the high end, it’s just part of my fun. Shopping is fun as a social experience. I’m very attracted to the simplicity of the operational side. But I’m more of a location addict than I am an asset-type addict.
Tell me about your investment strategy. What do you look for in acquiring new properties?
It’s very location-centric. If it’s not in what I would call seven or eight separate submarkets in the five cities on the Westside, I don’t even look at it. My first attraction is location. Within location, what attracts me is the story – I never found it was very beneficial or profitable to buy properties from people that wanted to sell them. I found it was more beneficial to buy properties from sellers that needed to sell. And my first question is, what is the seller’s motivation? Is it a death where there’s an estate tax that needs to be paid? Is it a divorce where the couple needs to sell their assets and divide the proceeds? Is it a partnership dispute where the partners aren’t getting along and so they’ve decided to sell just to get out from one another? Those are all compelling reasons to be able to acquire properties at a discount to market value.
What’s special to you about the Westside?
There’s no vacant land. When there’s no vacant land, any time there is to be a new development that requires the acquisition of an existing property that’s already developed, that has to be removed. You have to actually buy a building to get to land to build a new building. That drives the cost of new construction tremendously up. I like that. It doesn’t much matter if everything is built if there’s no demand, but the Westside has had continuous demand. It’s a very simple formula. The closer you can get to the ocean, the more valuable (an area) is. And as a result, it’s the most expensive. And it always will be more and more expensive because demand will generally always exceed the supply.
Christina touts its consistent strategy as a way in which it’s gained success. In what ways does being consistent lead to higher rates of return?
It’s a two-part answer. One is that fundamentally, by not changing the strategy as the weather changes, we stay consistent. And by staying consistent in what is a long-term business, it shows that we’re committed to a strategy that has worked continuously for decades. That’s one prong. The other prong is, for investors looking for participation in the ownership of real estate, they know what’s coming. They know exactly where it is, they know what we’re doing, they know why we’re doing it and they understand our process. When you put those two things together, it just says, ‘We’re not struggling for an identity. We’re already identified.’
In a previous interview with the Business Journal, you said that Christina expanded its reach in 2012 following passage of the Jobs Act, enacted by President Barack Obama. How has this impacted your company?
It’s probably been the greatest thing that could possibly happen for our business. Prior to the Jobs Act, we were only able to present investment opportunities to individuals that we had a preexisting personal or business relationship with, or somehow they would get referred to us, because we were never allowed to advertise. Under the Jobs Act, we are an exempt offering. We can advertise in 50 states. Now we have over 450 individual investors from all over. And that’s been able to feed into our strategy, which is owning multiple properties in one entity. By offering it on a broader basis, we’re able to attract investors from around the country. It was a tremendous change in law. It’s been very helpful for us.
There’s a lot of distress in the marketplace right now. Do you see any new opportunities?
Every day. And it’s not a surprise when you take an industry like real estate that’s dependent on debt and you take debt, and you raise that cost 11 times in less than two years. That’s what the Federal Reserve did to fight inflation, but in that same process they destroyed real estate. The real estate industry, which is dependent on that cost of money, went up so rapidly that it’s almost impossible for the industry to adapt. It’s a slow-moving industry. Rents don’t go up that fast. And the ability for properties that were paying mortgages at 3%, to pay the same mortgage (now) at 9%, it’s next-to-near impossible. That, coupled with the displacement that’s going on in commercial real estate as a result of work at home. It’s a very strange time, but it’s very exciting for me. There’s something new to figure out.
What’s next for Christina?
We’re going to continue to grow our series of private equity real estate companies because we believe this is the future of how people will own real estate as an investment. There are very few options for people to really participate in the ownership of real estate. I think Christina real estate investors is the future of how people will participate. That’s my vision and our company growth plan.
