Brentwood-based Lowe, formerly Lowe Enterprises, has been a major player in L.A.’s real estate scene since its founding 50 years ago.
The company, which manages a portfolio of assets worth $4.5 billion, has led $32.5 billion of activity since its inception.
Ivy Station, one of the largest projects Lowe has ever brought to life, recently opened, and the 500,000-square-foot mixed-use project — located next to the Culver City Expo Station — has office spaces leased to Warner Bros. Discovery Inc.
The company has a number of other projects on the way, including 2130 Violet St., a 113,000-square-foot property in the Arts District; a reimagining of MainPlace Mall in Santa Ana into a mixed-use project; and Mason & Main, a 544-unit property in Seattle.
Company chief executives and brothers Mike Lowe and Rob Lowe — the business was founded by their father, Bob Lowe — sat down with the Business Journal to discuss their family business, the strategy they follow in acquiring other companies, and the various asset types they are investing in now.
How did you get interested in real estate?
Mike Lowe: It goes way back to when I was a youngster. My dad, Bob, started the company when I was 3 years old. I grew up around real estate and the real estate business and Lowe Enterprises my whole life…
When I was starting my career, I was fortunate enough to get my first job at a firm called LaSalle Investment Partners, and subsequently a job with Cushman Realty, which is now part of Cushman & Wakefield. I had a couple of experiences, both of which were different but very fulfilling for me. When I was in my mid-20s and was graduating from business school, I had the background that helped me make the decision to stay in the business.
Rob Lowe: Our dad was very careful to avoid pushing us into the business. But we really learned it through osmosis. When we were with him on the weekends or traveling on vacation there was always some real estate project that he was dropping in to look at. We were experiencing that along with him. During high school I worked as a construction laborer on three of the projects. I was interested in construction and seeing buildings go up. After college and it was time to begin looking for my first job, I really never considered another industry other than real estate. It came as part of the family legacy.
How has the company changed over the years?
RL: We have become more focused on our strategic platforms, and right now we have about five or six depending on how you categorize them. We view our real estate business through these strategic platforms and growing each one individually and together. When I first joined the company, we were more decentralized in how we approached the business, we were more opportunistic and less strategic.
What type of hotels are you interested in now?
RL: We are focused on primarily full-service hotels that attract both the leisure and group customer, which is where we think the strongest demand is going to be going forward. That’s where our management company, CoralTree Hospitality Group), has unique expertise. We have three strategies: We develop hotels, we acquire and fix up properties and we do third-party management for other owners and investors.
Is office still a focus?
ML: Over the past five to 10 years, we did generally less in office, as we were continuing to grow hospitality and multifamily and our mixed-use businesses. But we recently have seen a renewed opportunity in the sector. We think there are some ways to create value in offices that are currently being overlooked. We’re expanding our office management platform and we’ve acquired two other office management firms and are looking at others. At the same time, we are starting to look at new office-investment opportunities again.
RL: We’ve taken what we’ve learned in hospitality and we’re translating that into the office management business and focusing on creating a great environment for the people that work in that building so that it becomes a part of their life and culture.
Ivy Station in Culver City is a huge mixed-use project. Are mixed-use and multifamily part of your strategy going forward as well?
ML: We like complexity. It’s not because we like to bang our head against the wall, it’s because more complex assets tend to offer more opportunity to create value and to create places that people appreciate.
When you look at something like Ivy Station, between the acquisition process, the financing with three different equity partners plus a lender, with two city jurisdictions between Los Angeles and Culver City and a complicated entitlement process and then four products together, it’s very complicated. But to us it’s also extremely rewarding when we get to the finish line. If you look at Ivy Station, certainly that complexity is paying off with the project essentially being fully leased and stabilized shortly after completion.
RL: The apartment-development business is a newer business line for us. Whereas office and hospitality have been a part of the company for 50 years, we started this really in the last decade and we took a similar approach where our ability to understand the tenant and what they want drives everything in how we design an apartment building.
What’s your approach to retail?
RL: We call it retail re-envisioning. It’s a different kind of a mixed-use strategy. What we’re taking advantage of there is the oversupply of retail…we are taking large retail projects, reducing the retail footprint, adding office, multifamily and hospitality and turning them into suburban, walkable downtowns.
Do you have plans to expand Lowe?
ML: There’s really two growth opportunities. It’s going into new cities, which is a secondary growth opportunity. The primary growth opportunity we have in front of us is expanding our platforms in a market where we already have a presence.
Tell me about your newest platform, affordable housing development.
RL: There’s a huge undersupply of quality affordable housing and we saw…that we could have a direct impact on the problems of inequity by creating better affordable housing where people can start and finish their day in a much better platform for their families than what is generally available now.
All of our multifamily projects now all have affordable in them, but this strategy is building purpose-built affordable housing. We started it in the Washington, D.C., area, but plan on bringing it to each one of our markets.
How much of your expansion plans are ground-up versus value-add or management?
ML: Over the past five years we’ve been doing more building into the momentum of residential markets. But we do see an opportunity today for very special office buildings.
RL: Rising interest rates typically create some distress in the real estate markets when acquisitions become more opportunist than developments, so we’re looking forward to that happening over the next 18 months.
What else lies ahead for Lowe?
ML: Our strategy is focusing on the experiences and environments that attract people, and we’ve learned a lot about how to do that over the past several years. With a lot of the trends that have transpired, much (being) driven by the pandemic, we see an even greater opportunity to pursue that vision going forward.
Will there be more acquisitions?
ML: Acquisitions will be a greater part of our business over the next couple of years than new construction. We do see some challenges in the capital markets that we think are going to have some impact on real estate values.
RL: Particularly in the asset classes that have struggled during the pandemic, so the oversupply of retail, the office industry and business-focused hotels, increased interest rates are going to require more transactions to occur in those segments, so we are eagerly awaiting that opportunity.