April 1, 2010 - From the March, 2010 issue

A Westside Perspective On the Retail and Commercial Real Estate Market?

Currently in its third generation of family ownership and operation, Walter N. Marks Inc. helped develop the 3rd Street Promenade in Santa Monica and has overseen the preservation and redevelopment of the Helms Bakery site, which straddles the boundary between Culver City and Los Angeles. In order to gauge the prospects for the Westside's retail/commercial real estate market, TPR presents the following exclusive interview with Walter Marks III.


Wally Marks

Let's begin with the Helms Bakery, which your firm developed and owns. What was the real estate opportunity that attracted your company, and how has the development evolved to realize that opportunity?

Our history goes back to 1974 when we purchased the L.A./Culver City property. At the time, The Antique Guild had close to 150,000 square feet of retail space. It was an amazing entrepreneurial move by a man named Don Guild, who created it from nothing. Since that time we've evolved from just a center for home furnishings, into a center for home furnishings and the arts. Today, we have eight commercial photography studios, as well as 70,000 square feet of office space with tenants in multimedia, advertisers, architects, graphic designers, illustrators, and copywriters fields.

Six years ago, when the Antique Guild closed down, we made a move with a company on the east coast, which became known as H.D. Buttercup. It changed the direction that we were going here in the style of furniture being sold. Last year, in October, the Minnesota-based company Room and Board opened up with a 36,000-square-foot store. H.D. Buttercup has close to 100,000 square feet along with Ashley Furniture with 40,000 square feet. The whole complex is 350,000 square feet on about 11 acres.

Your change of direction overlaps the collapse in 2008 of the real estate market. How promising is the Westside real estate market, especially retail, today?

I hoped that in late 2009 all of the concessions and all the adjustments with our tenants would curtail; that hasn't happened. Fortunately, only about 10 percent of our tenants came to us and asked for help. Most of them got some level of support. We've always enjoyed the ability to offer reasonable rents and have never been too aggressive.

I am still seeing tenants struggle. The credit issues for them are the biggest issue; their lines of credit have been reduced or abandoned. The success stories that I see are from the entrepreneurs that saved money along the way. My tenants are trying new ways to generate income. Having good locations, well located to transit, as a part of neighborhoods with disposal incomes, is a recipe for success. We're not in an outlying area; we're in an area where the restaurants are still doing very well, and there's still commerce being done. The energy Room and Board brought by opening here in October 2009 has been exceptional. The amount of traffic we see, on the weekends especially, is much stronger. There was pent-up demand; people wanted something new, and Room and Board was a new player to Los Angeles.

Our success keeping the Bakery looking good with plentiful parking as well as being relevant helps our tenants grow.

The Helms site is split between two cities: Culver City and Los Angeles. Given the complexity of local land use regulations, how does a developer successfully manage projects in two cities?

About 30 percent of the campus is in Culver City and the rest is in L.A. There's no demarcation that you can visibly see in the building. We just know that for certain building permits we go to certain a city. There's a parking agreement that we put together with both cities. The cities cooperated very well in the agreement so that everyone knows what the other hand is doing. The tricky part came last year when we vacated Helms Avenue. We purchased the street that bifurcated the property. That took about eight years of work. It took tedious patience dealing with all of the details.

It isn't often you have such an opportunity to close down a street and turn it into a pedestrian plaza. Over the years, we found Helms Avenue was a real safety issue. There were none of the street icons like curbs, gutters, or safety features. Things were getting very busy with the success of our retailers and restaurateurs. Now, we're opening up our fourth restaurant in June 2010; we'll have another one next year. Since shutting down the street and making it into a public gathering space, I've heard better things regarding safety and now patrons of the Bakery are able to meander without safety concerns. In the past, trucks and deliveries used to compete for space with people along Helms Avenue.

To answer your question of how we work with two cities in this environment: patience, good associates, and great professionals to help along the way. We're at the tip-end of Herb Wesson's City of L.A. district and we appreciate all the support, but we don't ask much of L.A. That will change with the Expo Line station one block to our west in 2011.

How will the Helm's Bakery development leverage it's proximity to the new transit line?

We have no plans to add any additional density at the Bakery. We have buildings that we love and the community loves them too. We're not the people to ever raze the property and build condos. We feel like we are stewards of this institution. It is our job to preserve it, to make it better, to re-energize the center and inspire others around us to do the same. Over the years, we have helped the community around us. Residential home properties have stayed fairly strong, believe it or not, in the blocks around us because of what's gone on at our center as well as what Culver City has done. This location is a really well situated area in West Los Angeles, ten minutes from Santa Monica, ten minutes from LAX, ten minutes from Beverly Hills, and ten minutes from Downtown L.A. You can't get better than that. I see simply nurturing the wonderful aspects of the Bakery and letting the neighbor blossom.

More employers will want to be around us because of the train-with the ability for employees to use the train and the Venice bus line, which I think is the second busiest bus line, second to Wilshire Boulevard. This is the area where the Venice line and the station are closest to the 10 Freeway. All those points coming together give us very strong potential for the future.

Culver City has developers in hand that are going to develop properties around us on Washington Boulevard and near the station. That will just make the area stronger and better; there will be more density. Multimedia businesses want to be here. Sony being a heavy anchor to our west is wonderful. Success breeds success.

What has Culver City done to date to assist your project, and what it still could to?

They've designated 30 percent of the site as a historical landmark, which is wonderful-the things that we were doing over the past 15 years dovetailed with the interest of the historical society and with the interest of Culver City Redevelopment Agency. It was an unspoken synergy of thought regarding what is good retailing and what is good street frontage. For example, in 2002 when we renovated the 1931 Beacon Laundry Building from 14,000 feet to 40,000 feet, the city goal and our goal was to remove curb cuts and bring the face of the building to the street face and not have big setbacks, which some developments could have done here. That was meant to energize the street and to bring in smaller retailers. There was an incentive for small retail shops of less than 5,000 feet. The city helped with a shared parking concept as well as the right funds for the redevelopment of the exterior of the building. Our building, being historic in nature, went through a more rigorous process. But we would have done that with or without the city; it's just the nature of our business and the nature of how we preserve buildings. It was a good synergy.

For new development that will happen one block west of the Bakery and around the station, the city has a strong sense of design, open space, and an understanding of what it means to generate street retail and to get people walking on the street. They've done it successfully in downtown Culver City over the past five years. It will evolve into a much more mature retail area in the coming years.

Walter N. Marks Inc., your family's company, contributed to the development of Santa Monica's 3rd Street Promenade. How does that experience instruct your development company's present projects?

We have one hundred feet of frontage on the Promenade. We have two buildings, one of them we got back in the '40s. My father, in the '70s and '80s, had a leadership role with the city and the stakeholders in developing the district. I spent eight years on the Bayside District Board and a couple years as its chair.

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We get involved in the communities that we're in. We by no means did that ourselves; it was a community effort. The Promenade's success stemmed from the partnership between the City and the property owners. Moreover, the concept of the Bayside District Corporation, being the quasi-public agency, to link the two entities, was brilliant and continues to serve the entire community's goals.

When do partnerships between property owners and cities work to create retail energy, walkability, and commerce-and when don't they work?

It comes down to strong leadership from the stakeholders, where stakeholders are invested and put money where their mouth is. No doubt the promenade in Santa Monica would never have come about without the efforts of the City Council at the time-the visionary folks on Council, in Planning, as well as city management. They started bond issues; there was pent up demand in Santa Monica and it was in an affluent area.

Culver City has the same attributes; it's not as affluent, but its gaining affluence. I mentioned the locale; there's so many other areas around the city-LAX, Beverly Hills, and the like-that circulation issues are making Culver City more relevant. The center of West L.A. is moving east, incorporating Culver City, where before it was definitely on the other side of the 405. That's due to circulation issues.

We were able to open a second version Father's Office restaurant here; their original restaurant is on Montana in Santa Monica. This restaurant is doing well. Part of it is that they're drawing people that normally wouldn't go all the way into Santa Monica, traffic being the way it is.

When it comes to the issue of stakeholder investment: it's one thing to own properties; it is another thing to roll up your sleeves and help with the shoveling of the earth and building a community. With the success of Santa Monica, we had lots of property owners involved from day one in those projects, and that made the Promenade so special. We also ponied up money. The bond was a lot of money, and we pay it every year in our taxes.

Why is it so hard to replicate what was done in Santa Monica and Culver City in the city of Los Angeles?

Governmental agencies in Los Angeles lack the ability to be intimate with their numerous neighborhoods. This is not criticism. There are wonderful spots throughout L.A. But to replicate what Santa Monica or Culver City has achieved takes direct and prolonged city involvement. This has not been the nature of L.A. Perhaps it will change.

Your development company is now involved in the Baldwin project, correct?

The Baldwin project is a project that I worked with Jim Suhr, my business partner, totally separate from the family corporation. The city owns half an acre, a city block, between Meier and Moore just a couple blocks east of Centinela, along Washington Boulevard. The site held an old motel building, the "Baldwin Motel". The city razed it a few years back and reached out to the development community for proposals. The first development team failed to execute; the city put it out to bid again. Jim and I teamed up with architect Roger Sherman, had the winning submittal, and entitled our project-a 38,000 square foot office and retail project incorporating many of the adopted green building standards Culver City wants to see in new developments. We were fairly close to the issue of building permits but because of the sour economy, this great panic if you will, and all the credit drying up, we had to put our project on hold. Currently we're in a limbo state where the city has issued extensions to us, and at some point we will further develop the property, but we need market conditions to improve. It is simply a matter of time.

As the current housing/budget crisis ripples through the economy, cities obviously have to stretch to keep planning and community development departments, public works agencies, and support programs alive. How has budget slashing affected your projects' capacity to partner with cities, whether L.A. or Culver City?

I'm starting a new project next month in Beverly Hills, tearing down the 1925 building that we've owned on a three-hundred block of Rodeo Drive. I'm probably one of the very few with a new project in the Beverly Hills commercial district. The entitlement process has taken a longer time because of the overall economic crises which has affected Beverly Hills.

We've seen staff changes, delays, and reassignments. These adjustments end up costing us money, time and effort. It's frustrating, but the city has been extremely helpful; they're more than just apologetic about it. They understand the needs of developers and have reacted well. The cities that I've always dealt with-even L.A., Santa Monica, Culver City, and Beverly Hills-have always been helpful. I never find them to be an obstruction to getting things done. The innovations in technology have helped a lot. For example, Beverly Hills has a lot more online notifications, which is good. L.A. City has done extremely well with its online permitting processes. As much as I hope our retailers come back to the vitality that they once had over the next year or two, the cities are going to have a longer lag because of the legacy costs that they have and the revenue streams naturally lag behind. The cities will catch up as business improves.

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If we have a follow-up conversation in a year, will we be talking about a healthier retain/commercial real estate market?

I would hope to say to you that half of my tenants, out of the couple hundred of them, are doing better and are finding better ways to grow the business, and keep employment levels high. They are doing it because they are really good operators, and they are really good entrepreneurs. When it comes to retailing, their store must look fantastic; they must love retailing – being interested, and aggressive, with customers. They cannot wait at the cash register wishing for patrons to come in and shop.

What I strive for with all of my retailers is to make their stores look fantastic and to show that the customer is valued and encouraged to be here and they will return time and time again. Our restaurants at the Bakery are now looking to reinvest into their stores, looking to improve what they do so that the experience here is fantastic and people will say "Hey, I want to come back."

We have been really lucky here at the Bakery in that many of the people that come grew up in L.A. and have a fond personal memory of the bakery. So when they're here they're pointing at things like our historic murals, the Helms Museum and 1948 Helms coach, the artwork, the building restoration work, as well as restored the neon roof top signs. They feel like they're valued, history is preserved, that this is a fun place to come to and it's not just a solely a shopping experience, but it's place-making, and with our new pedestrian plaza, a place to hang out and meet friends and relax for a little bit.

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© 2019 The Planning Report | David Abel, Publisher, ABL, Inc.