Costa Mesa-based Essex Realty Management Inc. recently gained the management assignment for The Waters at Creekside, a 156,854-square-foot, nine building, garden-style office complex in Costa Mesa.
Fairly small potatoes in the grand scheme of Orange County real estate, it’s the type of incremental deal that has propelled Essex to 50% annual growth in the past five years, while the industry average hovered around 6%.
Since 1995, the company has grown its third-party management line of business from 1 million to more than 6 million square feet. The company’s goal, according to company president Jim Neiger, is to maintain a 35% growth rate over the next five years and reach 20 million square feet under management.
However, without consolidating its portfolio with another property manager, those lofty numbers may be unreachable for Essex if the market slowdown occurs as predicted.
“That has about the probability as taking a trip to Mars,” said Walter Hahn, a real estate consultant with E & Y; Kenneth Leventhal. “It’s a competitive market out there and, in regards to new business and new buildings who would be looking for new property managers, it’s going to be slow for the next few years.”
Though the proposed numbers may be tough to reach, the Waters at Creekside office complex fits the Essex niche, which Neiger describes as “product in the A-minus to B range, from 50,000 to 300,000 square feet.”
The Waters at Creekside, at the corner of Bristol Street and Randolph Avenue, changed hands in January when Newport Beach-based Werdin Development Corp. acquired it. Essex will take over management on Oct. 1.
Werdin bought the property with a definite plan, according to a company spokesperson.
“We’ve put a map on the building and our objective is to sell off the nine buildings individually within about a year,” said Dave Archibald of Werdin.
But, he said, the office complex needed an exterior facelift and an experienced management team that could quell problems quickly.
“We needed someone that had the experience and background to come in and effectuate our business plan in a timely manner,” said Archibald.
The plan, according to Archibald, includes completely renovating the common area grounds, restrooms, landscaping, a shared waterway in the middle, and having music piped into the common grounds area.
“Our client base is made up chiefly of local investors, developers and smaller institutions that recognize the professionalism we provide,” Neiger said. “We manage lots of suburban office and business parks, industrial projects, neighborhood retail centers and commercial associations.”
Founded in 1987, Essex chugged along, floating mostly under the radar until 1995 when it landed its first assignment for Newport Beach-based CT Realty Corp.
“We were fortunate with the CT assignment,” Neiger said. “They’ve been real good to us. That got us our start and helped our rep and since then, we did a good job managing the projects we landed and building relationships with local investors.”
That project with CT Realty was the Carlsbad Research Center Plaza, an 81,000-square-foot R & D; facility in Carlsbad. According to Neiger, CT’s plan was to upgrade the exterior and bring up the occupancy rate,the property was 80% leased at the time of assignment.
Essex assisted in executing CT’s plan and the property sold again in 1998 to Koll-Bren-Schreiber with Essex continuing on as property manager.
“(CT) was comfortable with the job we did on the Research Center so they gave us a shot with more of their commercial property,” Neiger said.
Today, the relationship holds steady. Twenty percent of the Essex portfolio is owned by CT Realty, and that’s more than any other property owner.
Sixty percent of the portfolio is in OC, with the other 40% evenly distributed among Sacramento, the Inland Empire, and San Diego, where the company has regional offices.
In 1987, Burrell Magnusson bought into Essex, and became the sole owner when he bought out a partner in 1995. Neiger soon joined Magnusson, coming over to Essex after a lengthy career as a senior manager with the Newport Beach-based Koll Co.
Today, Linda Webber joins Magnusson and Neiger as principals in Essex.
In August, Neiger succeeded Magnusson as president. Magnusson remains chairman of the commercial real estate management company and chief executive officer of The Essex Group, the commercial and industrial development arm of Essex. Webber succeeds Neiger as executive vice president of the property management firm.
“It’s part of the evolution of the company. Burrell will continue to handle development and investment and I’ll run the management side of things,” Neiger said. “We have owned properties ourselves. We have managed from an ownership perspective and yet we are still small enough to manage the property with a local presence.”
The company’s strategy has been to pitch itself to local investors who want professionals with institutional experience, but don’t want to just be a number.
“We’ve got experienced folks on board,” said Neiger.
According to the president, the company’s 45 employees average approximately 12 years in commercial real estate experience.
“We tended to hire experienced folks. Many of our employees come from Koll, Legacy, PM Realty and many of the other, larger national companies,” Neiger said.
As for Neiger, he understands the Essex’ niche within property management and property management’s place within real estate, especially considering the slowing economy.
“Property management is not the glitzy end of the business, but it is a needed piece of the puzzle,” he said, adding, “As rents change and investors become more nervous, property managers will need to talk more to owners. They’ll need the face-to-face interaction.” n
