Senior Vice PresidentOrganization:
Trizec Hahn DevelopmentBorn:
Los Angeles, 1955Education:
B.A., Claremont McKenna CollegeCareer Turning Points:
Returning to Southern California in 1986 after five years working for McCarthy Construction in St. Louis; joining Walt Disney Co. in 1988; being assigned management of renovation of New Amsterdam Theatre in Time Square in 1993Hobbies:
Surfing, wind surfing, skiing, reading, spending time with kids.Most admired person:
Development legend Jim Rouse, Sandy KoufaxPersonal:
Married, three childrenAs His Hollywood & Highland Project Takes Shape, Developer David Malmuth Is Seeing the Larger Vision of a Vibrant and Revitalized Tinseltown Finally Begin to Become a Reality
Working in corporate real estate with the Walt Disney Co. in the early '90s, David Malmuth spent four years and $10 million planning the ill-fated Disney Sea theme park. When that project failed to get off the sand in Long Beach, he picked himself up and presided over the highly successful renovation of Disney's New Amsterdam Theatre in New York, part of the ongoing revitalization of Times Square.
Malmuth then returned to Los Angeles with an idea to develop a mixed-use project that could ignite a renaissance in Hollywood. But Disney demurred, and so he planned to set out on his own to take on the project. Once he came to the realization that the project was too large to take on alone, he joined TrizecHahn Development Corp., which grasped his vision. As the senior vice president, Malmuth now watches from his office in the El Capitan building as his latest creation comes together at Hollywood Boulevard and Highland Avenue.
The 645,000-square-foot mixed-use Hollywood & Highland development has grown from an original budget of $385 million to a reported $615 million today. With TrizecHahn looking to get out of the retail development business, Malmuth said he will be leaving the company after the project opens in November and taking a much needed rest before deciding how best to continue his career.Question:
The one area of real estate that industry officials suggest could struggle in the coming months is retail. What is your perspective as you prepare to bring 425,000 square feet of retail onto the market?
Answer: If I were focused on macro, I would share the concern that we are over-retailed, but that's not how I think about things. There are very few places in the world that already get 8 million, 10 million people coming and this (area of Hollywood) is one of them. And these are people who have money in their pocket and are looking for some great Hollywood experience, and nobody's delivering it right now.
Q: How did the project's budget go from $385 million to $615 million?
A: The $385 million didn't include the whole program. It didn't include the hotel. The hotel's $175 million, plus or minus. And the program got bigger, too. I mean, we ended up spending more on the theater because we wanted to make it a better theater. We ended up spending more on the ballroom because we felt that the ballroom had the opportunity to be the best ballroom in town, but it had to be enhanced in terms of its size and amenities. And there were other parts of the ballroom that frankly ended up costing more than we anticipated. This is an enormously complex project. We've got uses stacked on top of one another that I don't think exist anyplace else. We've got a ballroom on top of cinemas on top of retail on top of five levels of parking.
Q: What is TrizecHahn's investment in the project?
A: Well, you've got $615 million. Let's take the hotel deal out of there, which is $175 million. You've got $100 million, plus or minus, of city money. You've got a $150 million loan. The balance of it ($190 million) is equity.
Q: You said that Pacific Theatres Corp.'s CineramaDome project was prompted by the Hollywood & Highland project. What other Hollywood projects are a direct result of what you're doing at Hollywood & Highland?
A: The guys at Pacific were looking right at this project and saying, "Is this going to happen? Because we don't want to commit until we know this is going forward, because this will be such a powerful symbol of Hollywood's revitalization." The other project that's going to kick off soon is Regent (Properties' project), that I think now is going to be housing. We were the first in, but those guys and the CRA were watching closely to see whether we were going to put our deal together. CIM came to the street and owns several properties now. I was talking to (CIM co-owner) Shaul (Kuba) four years ago, telling him this is the place to be.
Q: Why is TrizecHahn getting out of the retail business?
A: A decision has been made that we're going to focus our portfolio on office buildings. I think it's a reaction to the confusing signals that we've been sending the financial markets over the last couple of years, and the resultant poor performance of the stock. Frankly, companies that have two asset classes retail and offices are always going to be discounted because the institutional buyers want to own an asset class that they understand. When you mix the two together it always muddles the results. Since we have a huge office portfolio right now, the decision was made, "Let's focus on that."
Q: How difficult will it be to sell Hollywood & Highland?
A: The sale will ultimately be premised on the success of the project. Any buyer who's going to be interested in this is going to look at its fundamentals: what kind of cash flow is it producing, what are its future prospects. That's not going to happen today or tomorrow. The company has said (the sale of the project) is a couple of years down the road.
Q: Why was Disney not interested in developing Hollywood & Highland?
A: There was this thing called Disney's America. It was going to be a historically themed park in Virginia that would pay tribute to this country. For a lot of reasons, it met with a tremendous amount of resistance and some very tough press and some of it aimed at Michael (Eisner) personally. The company pulled out of Disney's America. I think one of the takeaways was that the Walt Disney Co. has to be very, very selective about certain things that it undertakes that expose it to the media. Here you have Hollywood Boulevard, which has struggled for 20 years to try to make redevelopment happen in a successful way, and, frankly, it didn't. When it was presented to senior management, including Michael, the response was: "Really complicated, difficult undertaking; the company doesn't own any of the property; isn't this going to be the subject of tremendous controversy? Wouldn't it make more sense to have some developer do it and then, if we want to be a participant, you know, then we'll lease a part of it?"
Q: So you left Disney to do this project?
A: Yes. I had a very significant experience that I haven't talked about, but I'll tell you what happened. I called (former L.A. city councilwoman) Jackie (Goldberg, who represented Hollywood) to tell her what had happened and she said, "Well, you know, I'm really sorry to hear that." I said, "I think there's still some opportunity for Disney to do some other things." She said, "No, I don't think you understand what I'm saying. This is not about Disney anymore. This is about you."
Q: So what are you going to do when Hollywood & Highland opens and you leave TrizecHahn?
A: I don't know. It's something I should probably be spending more time on, but right now this is pretty consuming. I, just as a life philosophy, don't think there's much to the notion of security. I've had life experiences that have suggested to me that you can do all the planning in the world and then things happen and you just have to adjust yourself to them. When I'm open to it and the moment's right, then it probably will present itself to me.
Q: Now that you're back home, do you think your next venture whatever that may be will be in Southern California?
A: I'd like to do something that makes a significant contribution. If it turns out it's in Southern California, that's my dearest hope. I love this area. This is where my friends are, where my family lives. But real estate doesn't always comport with all those things. Sometimes the best opportunity is in a place that you least expect, so that'll be a big part of what draws me.
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