July 20, 2006 - From the July, 2006 issue

New Pacific Unveils Plans for Beverly Hills ‘Trophy' Project

As land values continue to appreciate, developers face the challenge of having to ‘get it right' the first time-especially in the image-conscious, politically astute city of Beverly Hills. New Pacific Realty, the owner of the 8-acre Robinson-May site at the western entrace to Beverly Hills, plans to build a luxury residential development designed by Richard Meier and LEED-certified Gold. New Pacific CEO David Margulies discussed the challenges of building a ‘trophy' project with TPR.


David Margulies

Most people are familiar with the location of your property, near the intersection of Santa Monica and Wilshire. Describe the site and the challenges of developing this Beverly Hills location.

9900 Wilshire is one of the most famous trophy properties in the world. Containing almost eight acres, the site is the largest remaining development parcel in Beverly Hills. Bounded by Wilshire and Santa Monica boulevards, the property is adjacent to the Beverly Hilton Hotel and directly across from the Los Angeles Country Club, offering some of the most sweeping, unobstructed views anywhere in the city. The site forms the western entrance into Beverly Hills creating a unique opportunity to design a project that will transform the city's gateway.

How has this development evolved over the past three years? What challenges did you face, and what challenges remain?

Our first challenge was to acquire the property and complete the assemblage of the land. Over the years, some of the most recognized players in the real estate industry have attempted to acquire the property, so the process was highly competitive. The difficulty was that the property was encumbered by a department store lease, which required negotiating with multiple parties to redevelop the property.

An insurance company had owned the land, and Robinson's-May had a diminishing lease position, but not long enough to turn the property around. We put together a win-win solution that allowed the original ownership group to monetize their positions. From a development standpoint, we used the work of the Beverly Hills citizen general plan committees as our roadmap. They spelled out land uses for the site according to the community's need.

For a couple of years we worked with the department store to design a flagship store for Robinson's-May to be part of a mixed-use development. But after two years, Federated announced the merger, and of course Federated didn't need a third location within three blocks of their Macy's and Bloomingdale's in Century City, and they dropped out as a tenant. That allowed us to look at the site as an eight-acre open canvas. This relates not only to design and architecture, but also to the traffic. A developer can make such a big difference in the way they plan their site, I think there's a responsibility on us to do that.

Traffic is the bane of every development in Southern California. How do you propose to handle traffic on what is already one of the busiest intersections in the region?

As a ‘green' development company, New Pacific is committed to sustainable design, and our plan is traffic-neutral.

The typical strategy in development is to draw a plan, and bring it to the traffic engineers. They do an EIR, and then you know what your traffic numbers will be. We reversed the process. We brought in our traffic engineers up front, and they studied the Robinson's-May store for two or three years and produced great data. That store was doing about 10 percent what a typical flagship store would do, and we decided to be traffic-neutral.

We decided to build not what we could put on the site-it is a commercial site, and we're effectively down-zoning to go residential-but we measured the existing traffic situation and, with a clean slate, we decided we would put back on the site only as much traffic as there was before. The site today is zoned commercial C-3 in Beverly Hills; we could build an office building, medical offices, or a regional mall. But the community wanted residential-Beverly Hills needs high-end housing; people tend to down-size their homes after their kids leave-and it has the obvious benefit of being the lowest-traffic type of product. Retail requires 4:1 parking; residential is much lower. So we have the best of both worlds. While some may consider this heresy for a developer, we're basically asking the city to down-zone the property first, and then we're asking for only about 60 percent of what is allowable under Beverly Hills R-4 zoning.

For this approach, 9900 Wilshire recently won the "Urban Solutions" award from the Westside Urban Forum, a recognition of our traffic-neutral design. The project has also been recognized by some of the most prominent environmental organizations in the country, including Natural Resource Defense Council (NRDC) and Environmental Media Association (EMA).

Three years into the project, what is the status of the plan?

Assembling the site and bringing all the players together has taken three years. We spent a year-and-a-half doing preliminary concept design. We have filed our plan and we are in the early stages of the public approval process. The plan is primarily residential, with 252 condominium residences, with some support retail. It also includes 1,000 stalls of subterranean parking. The two signature buildings are 12 stories approximately 144 feet in height. We hope to break ground in 12 to 24 months.

What specifically did Beverly Hills leaders demand from this development and for this site?

Our approach to the planning of the site was to use the recommendations of the Beverly Hills citizen general plan committees as our roadmap. They made comprehensive studies of the site, based on input from the community. The committees' recommendations focus on the significance of the site as a "Gateway Site" in the city of Beverly Hills, deserving of master architecture. They also call for residential usage and for increased height.

They asked for great architecture, and you picked a great architect. Talk about that selection process. Of the architects you interviewed, what led you to Richard Meier?

We talked to four or five leading architects. The site has several unique features, and it really is interesting to see how great minds look at a site and solve a design challenge.

Meier's ideas were extraordinary, and his approach had a number of design features no one else came up with. One example is the reuse of the private alley behind the department store, which had been used for store deliveries. Meier oriented the buildings along the western edge of the property so that the alley becomes the private residential entry into the project. We found it really interesting that once you orient the building that way, other possibilities for the site emerge.

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Also important was the architect's sensibility with respect to his use of light, color, and landscaping. These elements in Richard's work create a wonderful sense of harmony with the environment. His familiarity with Beverly Hills was also important, as the project has the potential to transform the western entrance into the city.

We were honored that 9900 Wilshire received an award for Meier's design at the 36th annual Los Angeles Architectural Awards earlier this year.

Beyond the design and utilization of the site, the development must pencil out. Elaborate on the budget, especially with respect to meeting LEED Gold standards?

People keep asking how we're going to make any money without maxing out the land. We are business people. We don't have illusions about environmentalism. We are committed to environmentalism, but it has to be done with real-world math or else it doesn't work.

We've designed 9900 Wilshire to a LEED Gold standard, the first project of its kind in the West to qualify for such rating from the U.S. Green Building Council. Most of the green buildings built in the United States today are done by either governmental or civic organizations with some form of subsidy, because of the level of investment required (cost increase is typically 5-25 percent greater), but we are doing it privately.

What has astounded us is that when you start a project like this, you assume that the story will be about Richard Meier. But, we've also had an amazing response to the environmental aspects. Beverly Hills is obviously a luxury market, but it's also a very progressive market, and I've come to realize how progressive it really is. You set out to build a great building in every respect, including being green, but you don't know which elements the market will respond to most. Today, I think people are getting it. They're aware of the advantages of building green.

How will landscaping complement the design and increase the appeal of the project?

Meier is collaborating on the landscaping with the Olin Partnership, known for its redesign of the Washington Monument. It's not about just the buildings; it's about how we use the site. We're not a high-rise city, so we're not going to go up 47 stories like in Century City.

So how do you create a space that's so compelling from a design standpoint that it can be only ten or 11 stories and compete? The answer is that you have to have views, and you have to have a spectacular location. For us, some of that involves creating landscaped sculpture garden. The buildings will cover less than one-third of the site; over two-thirds will be open landscaping. It's going to be really dramatic, and it's a very large site. We've been approached by museums that want to partner with us on the art in the gardens, and it'll evolve as we go.

For the record, how did your team win control of one of the great trophy properties in the United States? Surely you weren't the first to redevelop the site.

The top players in the world were all interested in the property. It's a bit humbling, actually. I think what we did right was to create a win-win solution to what was a many decade old real estate problem, allowing the redevelopment to go forward. While we're a young company, I think it shows what we're capable of doing. We did this deal and the Transamerica Building within 36 months of our formation.

New Pacific has a track record in L.A., and your first development was the Transamerica Building in Downtown. How successful were you?

Transamerica was the first high-rise in Downtown Los Angeles, and I believe it was one of the great buildings of Los Angeles. For 40 years it was on the wrong side of the tracks. When they built it, they were convinced that Downtown was going to develop around them; but, it went north. The irony is that, as a result, they have the most fabulous views in the city, because they're looking across what is now all of Downtown. We believed that it could be repositioned and revitalized.

When we bought that building, it was just under 50 percent occupied. We successfully completed the repositioning, taking an approximate 1.4 million square foot property to 95 percent leased, within 14 months.

Impressive! You formed your firm a few years ago and you already have two trophy projects. Are you exhausted? What else is on your plate for development?

We have about $2 billion under development. We have a large capital base, and we've maintained our flexibility by keeping New Pacific private, but our capabilities now make us competitive with the established players. Over the next year, you'll hear some more major announcements from us. It's been a very good beginning.

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