Developer Fatigue

By Frank Gruber

Howard Jacobs, the developer of the Boulangerie mixed-use projects (as well as numerous other apartment buildings around Santa Monica) has moved out of Santa Monica. He sold the Boulangerie projects with their approvals to Archstone-Smith, a public real estate development company with a market-capitalization of more than $11 billion.

Jacobs spent several years in the planning process obtaining approval for the Boulangerie projects, which, with their mix of retail and residential, and their location along a transportation corridor, were a perfect expression of enlightened "smart growth" planning. Jacobs met countless times with community organizations and other locals; at one point, he changed architects and radically changed his design in response to community comments.

At another point, at a membership meeting of the Ocean Park Community Organization (R.I.P.), the membership approved his plans by a 45 to 5 vote; this did not, however, stop losing members from fighting the projects to the bitter end.

Jacobs ultimately sued the City for taking more than one year after finalizing the Environmental Impact Report to bring the projects to a hearing. Jacobs and the City ultimately settled; the City paid him $125,000.

This is not the first time Jacobs has sold a Santa Monica property to Archstone-Smith. In 2003, he sold them three apartment buildings near Fourth and Broadway. At the time, the Los Angeles Business Journal quoted an agent involved in the deal to explain the price Archstone-Smith was willing to pay (an average of $251,000 per apartment), as "The attraction was the high barrier to entry. It takes three to four years to get a project off the ground in Santa Monica."

In another recent transaction, Hines, the privately owned development company that developed Lantana Studios, has sold Lantana (including the existing studios, Revolution Studios building, and IMAX west coast headquarters, as well as the rights to build two more studio buildings under its recently-concluded development agreement with the City) to Maguire Properties, a public company that owns many of the biggest developments in Southern California.

Maguire Properties, which developed and owns the 1733 Ocean office building, last month released this statement from Robert F. Maguire III, its Chairman, about the purchase: "Lantana is an outstanding entertainment media campus. Given the nearly impossible barriers to entry in Santa Monica, the entitlements included in this project present an exciting development opportunity."

"High barrier to entry." "Impossible barriers to entry." Do we sense a theme?

Hines, itself a big international company but not one that has to answer to shareholders seeking quick quarterly returns, spent four and half years obtaining City approvals to expand Lantana, even though the project was inspired by the City's own changes to the zoning in the Light Manufacturing and Studio District. (Fortunately for everyone in the city who got to know and rely on Doug Holte, Hines' straight-shooting executive on the project, Maguire has engaged Hines as development consultants, to facilitate the implementation of the development agreement.)

A lot of Santa Monicans and other Westsiders work in the entertainment industry, of course, and it's a crucial local business. Lantana Studios provides headquarters for two quality companies, Revolution Studios and IMAX, as well as post-production space that keeps work in-town and close to home.

No-growth Santa Monicans who can hardly mention the noun "developer" without preceding it with the adjective "greedy," won't care about losing Jacobs and Hines. These Santa Monicans already have their homes -- no doubt a house or apartment a greedy developer once built.

Future Santa Monicans who will live in Archstone-Smith's apartments, and future entertainment industry workers, including many Santa Monicans, who can work at Lantana instead of, say, commuting to the South Bay or Orange County (or Canada, for that matter), will never think of the personal efforts of Jacobs and Holte that enabled them to live and/or work here, let alone the financial risks the developers and their backers took over many years.

But what does it say about Santa Monica? What does it say about us when smart, intrepid, "real people" developers who are willing to listen to the community, to do nearly everything we ask, to build within our zoning, cash out and sell their projects as soon as they make it through the maze?

Oh, I hear you. You say it says that the growth machine can't do business here. Santa Monica's not for sale. We're not L.A., you know.

Okay, I'm happy that we have standards and limits and more than happy that we're not for sale. But ask any developer: it's not the standards and the limits that are the "barriers to entry," as they can live with whatever rules are spelled out and, what's more, standards add value.

But it's the uncertainty and the delays. These not only add costs, which ultimately diminish the quality of projects, but they tip the risk/reward ratio to "why bother, life's too short."

Standard Santa Monica rhetoric celebrates the glories of "local," but you can't expect to have businesses with roots if you burn the trees.

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