Crown Realty & Development Corp. has been keeping a low profile as of late. But things have been anything but low-key at the Irvine company’s headquarters.
“There’s never a quiet period here,” said Robert Flaxman, chief executive and cofounder of Crown Realty, which has been a big Southern California developer and investor since 1994.
This year could prove to be Crown’s biggest yet, with most of its activity happening in markets outside the state.
An ambitious luxury resort near Arizona’s Camelback Mountains is set to open this summer, at a cost of about $250 million. The resort is the biggest part of nearly $750 million of development projects the company has in the works.
In the Southeast,another new market for Crown,the company’s making an acquisition push, with close to $500 million of industrial and office building buys planned by the end of the year.
Closer to home, the company’s looking to close on a handful of big infill development projects around Los Angeles.
And it’s beefed up its management team with a number of hires: President David Gullen, the former chief operating officer of Long Beach-based developer Abbey Co.; and Chief Financial Officer Marc Artino, most recently a consultant to real estate investment trusts such as Maguire Properties Inc. and Impac Mortgage Holdings Inc.
Crown Realty now counts about 45 employees. Flaxman and most of the management team works in Irvine. The company’s chairman and other cofounder, Jaime Sohacheski, who along with Flaxman is the company’s principal owner, works out of Crown’s Beverly Hills office.
The growth plans aren’t the types of moves you’d expect in an iffy commercial real estate market and tumultuous credit market. Crown Realty has a balance sheet strong enough to handle the growth, Flaxman said.
Other companies might be retrenching and looking to refinance deals bought in the past few years, but “we don’t have to change our (financing) strategy,” he said.
Roughly 80% of the company’s funding is from its own cash, although Crown Realty might bring in investors on a case-by-case basis, he said.
JP Morgan Chase & Co., Deutsche Bank AG and Bank of America Corp. provide deal financing, according to Chief Investment Officer Scott San Filippo.
Crown Realty counts a portfolio of about $1 billion. Its most notable Southern California property is the 1.2 million-square-foot Burbank Town Center.
Until recently, its development history,totaling about 2 million square feet,had been focused on office and retail space in Los Angeles and Orange County.
Now, its biggest undertaking is in Arizona, where it’s working on the Montelucia Resort & Spa, its first resort.
Montelucia totals about 28 acres in Arizona’s Paradise Valley, on the former site of a La Posada hotel. Along with nearly 300 hotel rooms being run by Britain’s InterContinental Hotels Group PLC, the resort is set to include some 35 homes starting at $2 million.
Twenty-six of the homes have been sold, with the first owners moving in this summer.
The project’s faced delays and a slowing housing market since it broke ground in 2006.
“It’s been a trial by fire,” Flaxman said.
Another Resort
The change in Arizona’s real estate market hasn’t discouraged Crown Realty from tackling another resort project. A similar resort in Paradise Valley is in the planning stage. That development, the renovation of the former Marriott’s Mountain Shadows Resort, could cost $200 million.
Crown Realty’s looking farther east for another push. In December, it bought 15 industrial and office buildings, primarily in the area around Durham, N.C., totaling about 1.7 million square feet.
The $150 million paid for those buildings is part of $500 million the company has earmarked for buys in the Southeast during the next year or so. It recently hired Kreg Groat to head up acquisitions in the area. Groat’s a former Crown Realty employee who previously owned a North Carolina-based mortgage company.
“About 15 months ago, we realized Southern California was not going to be able to provide the risk-reward (returns) that we wanted,” while the Southeast’s demographics showed better opportunity, Flaxman said.
The company’s still on the lookout for deals in its backyard. In Southern California, Crown is looking at areas such as Burbank, Glendale and Hollywood for infill developments. It has a couple regional deals “percolating,” Flaxman said.
There are also fewer well-financed developers to compete with these days for deals, a change from the past few years when looseness in the financial markets allowed for debt-heavy deals to be made.
“We’re seeing deals hitting the streets today that are 25% (below) what they were six months ago,” said San Filippo.
In OC, Crown is still looking to build a six-story, class A office building next to Xerox Centre in Santa Ana. The 182,000-square-foot building has been on the books for years. But timing and entitlement issues have kept the developer from breaking ground.
The Santa Ana project “deserves to be built,” Flaxman said.
