In a recent interview, I was asked to name my favorite real estate investment. While this is comparable to asking me which child is my favorite, here is a story that came to mind:
Westwood Village, California is nestled in West Los Angeles, just south of the UCLA campus and surrounded by the exclusive neighborhoods of Holmby Hills, Westwood Hills, Bel Air, and the Golden Mile of Wilshire Boulevard. Westwood was home for decades to great movie houses and restaurants, high-quality retail stores (Bullock’s Westwood), and reigned as one of the few and most popular pedestrian-friendly outdoor shopping and entertainment districts in Los Angeles.
As time passed, Westwood declined, losing its luster and lure for many reasons. Insufficient parking, newly opened competitive venues, and safety issues were contributing factors. Stakeholders (property owners, UCLA, and adjacent neighborhood groups) fretted over the decline and labored to preserve the Village. A business improvement district was established, and legislation was enacted to protect the area's character and special qualities. Contributing to the decline was the fact many long-term Westwood property owners had reaped the benefits of high demand and ever-increasing rents without re-investing in much-needed infrastructure improvements such as parking, security, lighting, maintenance, and landscaping.
One large Westwood property owner did not survive the mid-1990’s recession and tumbled into insolvency. This property owner had acquired, developed, and operated many of the most coveted Westwood properties, some of which I had offered to purchase without success.Then, as luck would have it, opportunity knocked!
While walking my dog on a warm Malibu evening, I happened upon my neighbor, Scott, who was out strolling with his dog. Scott was the Director of Real Estate for a major lending institution. I had learned that his employer was the new owner, through foreclosure, of one of the best properties in the Village. I asked Scott if the property was available for purchase. His response was, “It’s yours if you want it! What price will you pay, and when will you close?" My response was, “What will you accept?" We immediately agreed on the price and terms and the deal was made right there, standing on the road with our dogs. We shook hands and agreed to follow up the next day.
The acquisition price I negotiated for that property was far below true value. This represented a unique opportunity to acquire one of the best properties in the Village. I was thrilled.
Within a few weeks of closing the purchase with Scott’s bank, I received a call from a real estate broker representing the largest property owner in the Village. He wanted to know if I would like to acquire the properties adjacent to my recent acquisition. I responded affirmatively, while not feeling overly optimistic that they would actually be available for purchase.
Opportunity came knocking again. Let me explain.
While still in college and working for an attorney, I was tasked with the assignment to locate office space in Westwood for an international charity organization. During my search, I called upon this very same Westwood property owner to inquire as to availability. Having received a positive response, we arranged to meet and tour an office space that, as described, seemed to fit the bill. I must have made a pretty good impression on the property owner. Upon learning more about the charity, he agreed to provide the office space for free. That meeting turned out to be quite fortuitous then, and again.
I informed the real estate broker that I happened to know the adjacent property owner and suggested that, if there was indeed interest in selling, I would like to meet with him. A meeting was arranged soon thereafter, and, as soon as I walked into the room, there was an immediate and mutual connection. He remembered me from the time we met while I was seeking office space for the charity. He asked me what I had paid for the adjacent property and I told him the exact price and terms. In response, he said the price I had paid made sense as a basis for the price he would accept for his properties.
We arranged to meet his attorney to discuss the purchase. While we enjoyed a fine lunch of steak and pasta at a local Italian restaurant, the attorney hand wrote the purchase terms on one sheet of paper.The purchase agreement was signed before we finished lunch.
A few weeks later, the property owner called me and asked if I would come to his office to discuss an important matter. We set a date and time to meet. At that meeting he asked me, “Why don’t you buy all of the properties we own in the Village, utilizing the same price metrics?" Another one-page handwritten purchase agreement was prepared and signed, and the largest Westwood purchase in history was a done deal!
I hope you enjoyed this walk down memory lane. It's a reminder to stay persistent, and that you never know what could happen on a Sunday stroll with your dog.