Bob Voit Is Wading Into the Surf on Balboa and Into the Real Estate Market in OC
The companies that bear his name remain headquartered in the San Fernando Valley, but Bob Voit himself is now firmly entrenched in Orange County.
Two years ago, Voit moved his residence from Woodland Hills to Balboa Island. A year ago he staffed up an office in Newport Beach, which is now his personal base of operation. Voit grew up in Arcadia, but he and his businesses are no strangers to OC, of course; Voit spent his college summers at his folks’ home on Balboa Island.
Voit is now ramping up his development activity in Southern California, but especially in OC (see story, page 1).
How large are Voit’s operations?
His commercial brokerage firm racked up revenue of $24.5 million last year on sales of $1.3 billion, which Voit believes ranks it as one of the leading producers in Southern California.
The development company acquired about $271 million in new properties last year in Southern California and Arizona. It also sold some $130 million of its portfolio.
Valley Commercial Contractors generated about $50 million in sales during 1999, according to company officials.
Many industry observers believe that his companies are positioned to become even larger players.
Voit, who will turn 60 on Feb. 26, recently agreed to an in-depth interview with the Business Journal’s Murray Coleman to discuss his plans for the future. Below are his thoughts about the economy, his career so far and a hint at what might be in store for competitors.
You have moved to Newport Beach?
Again.
Again?
Yes, I left for the San Fernando Valley in 1976 after having started our development company down here (in Orange County) in ’72. I decided at the time that I’d rather go out to the Valley where we didn’t have so much competition. So I was up there almost 25 years.
Now you’ve not only moved your home to Orange County but also opened a satellite office here as well.
Yes, we’ve closed an office in Sacramento and opened one in Newport Beach.
Why open an office in Newport Beach?
I guess the problem, for me, ended up being with multiple offices. I was on an airplane all of the time and never in the right city at the right time. So I decided that at this stage of the game the best choice would be to pick a city where I really wanted to live and go from there. So I chose the Balboa Peninsula and that’s where I live now.
What have you been doing in Newport Beach from a project standpoint?
In a little over a year, we’ve acquired some 3 million square feet of business parks and single-tenant industrial buildings. Most of those are in Orange County, some of them are in LA County as well as San Diego County. But primarily they’re in Orange County. It has amounted to about $271 million of acquisitions in a one-year period. So this has been a very, very busy year.
What do you see happening with the economy? How will that affect development prospects for you?
I starting hearing that the economy was going to slow down and that the stock market was going to fall almost five years ago. I don’t know what the future is going to be, and neither does anyone else. But the real estate fundamentals could hardly be stronger than they are right now. And I realize that it’s the tail-end, logically, of the business cycle. But real estate is typically not being overbuilt in most product types and in most areas. The vacancy rates are also low. So I really believe it’s a great time for commercial real estate.
What are your plans for the coming year then?
More of the same. We have an intention to be the largest multi-tenant business park owner in Orange County. We’re probably well on our way, with 21 business parks and six others under contract. But we want to buy more business parks, more industrial buildings along with more office product and retail. The heart of all that activity, though, will be multi-tenant industrial buildings in Orange County.
You’ve recently merged your property management company with Transwestern Commercial Services. What was the reason for that move?
Although they are much larger than us on a national level, in the West we had about 20 million square feet of properties and they only had 5 million. So we became Transwestern/Voit with a combined portfolio of about 25 million square feet under our management on the West Coast. Nationally, that number is around 200 million square feet.
Who controls what now?
Transwestern is the dominant partner in the property-management area. And of course, what was not involved is still solely ours,the brokerage company, our construction company and the development company. Those three are now our focus.
How did you get started in the business?
Well, I couldn’t figure out what I wanted to do with my life after I got out of school. I was the product of a wonderful but brain-damaging education at Berkeley. It was a very humbling experience for me. I was getting quite concerned that I was a round peg in a square hole and I would never find a decent career. Then a friend told me that I should go to work for Coldwell Banker, which is now CB Richard Ellis.
Why did that sound interesting to you?
When I found out a (broker’s) job had to do with shopping centers and office buildings and industrial parks, it just clicked. I said, “That is for me.” And I was particularly intrigued when I called up Coldwell Banker’s personnel department the next day and they said that they weren’t hiring. So I said, “That’s my company.” That was in ’62. Nine months later, I got a job for $400 a month. I was thrilled.
So you started out as a broker in LA?
Actually, before that, I was in the mail room. And then I was an assistant property manager, and then I worked as a runner for a successful salesman, and then I had eight years in commercial real estate sales in the San Fernando Valley.
Why did you move to development?
I was tiring of brokering and looking for another challenge. I saw this 14-acre parcel (in Woodland Hills) that was for sale for $3.50 a square foot. And I said, “You know, I think that should be a first-class, garden office building.” My major client thought it should be a high-rise. And I thought, “You know, the more I think about it, the more right I think I am. I’m going to leave Coldwell Banker and I’m gonna go build that thing.” So that’s what I did.
That was in 1972. How did you get the money together?
It’s very difficult now to go out on your own. But back then it was easy. We went to Wells Fargo and they provided the construction financing, and we’re still with Wells Fargo.
How much did you start with? How big of a development was it originally?
It was about 83,000 square feet of office space in two phases. As I recall, it was about a $4 million deal. It was a huge deal for us, I had a couple of partners and we were scared to death.
But you kept expanding?
We figured that if we could do it in Woodland Hills, we could do it in a dozen cities in the West. So we bought land in Sacramento and Reno and Thousand Oaks and Newport Beach as well as Tucson. Then we started construction of projects right into the recession in ’72 through ’74. That’s when we learned the downside of real estate development for the first time. It was pretty scary.
In 1974, you bought the property for your most ambitious project, the Warner Center, which was just down the street from that 4-acre parcel where you started.
Yes, we bought that in ’74. We were tiring of doing the multi-city thing where you run around and do deals that, when it’s all said and done, don’t make any difference in the world. So we wanted to take a larger project and really put some energy and time and thought into it and try to make the community a better place. And that’s what I think we did out in Warner Center where we have every amenity you can think of: office buildings, car washes, restaurants, hotels and gyms. We worked over 20 years to make that happen.
It’s actually designed a lot like Newport Center, isn’t it?
It’s a lot like Newport Center.
With 4 million square feet of high-rise office space and $500 million to complete, the Warner Center is a big project.
Yes, it took us 20 years to finish. But we finally completed it in 1994.
You seem to like to live where you develop. About four years ago, you moved to Phoenix for a little more than a year while a large project was going on down there.
Development is best done locally. It’s a very local game,it’s something that you need to know the people in the community; you need to have support for your project and you need to know the values of that area. If you just fly in from outer space, you’re likely to make mistakes that the locals won’t appreciate. And to me, that just ruins the enjoyment of being a developer.
So I guess that your moving to live and work here is good news for Orange County?
Well, I would like to think so. I don’t know that I would go quite so far, but it means that we really plan on focusing here for the duration.
Some companies in the development game with brokerage houses run into charges of conflicts of interest. How do you divide responsibilities between the development and the brokerage sides of the business?
It’s interesting. Most people think because our name is Voit Development and we have Voit Commercial Brokerage, we only source our deals through our brokerage company, which is really not true. We’ve actually done deals with CB (Richard Ellis) and we’ve bought a deal in Oceanside through Daum Commercial Brokerage. We’re also working with Grubb & Ellis elsewhere to acquire a business park. We’ve worked with most of the brokerage houses and really want to do that so that we can be as active as we can possibly be on the development side.
Bringing in Transwestern to do the property management end must also make it easier to explain your place in the market?
I think the real reason for the merger was that we wanted to get a little more focused on the brokerage and development side, which is really where we started. In a lot of companies they talk about conflict of interest. But the way I see this business and a lot of business today, many companies are wearing several different hats. As long as they are clear which hat they’re wearing, there’s really no conflict.
It’s like with Transwestern. At one point we were competitors as well as their tenant in a building that they owned. We were also potential joint-venture partners on a property in Arizona with them. So we were wearing five or six hats with them at one point. And that’s just the way it is today in the real estate business.
What is your deal with them now? Does Transwestern run it and you get a portion of the profits?
Yes. They run the property management for all of our projects.
From a revenue standpoint, how do you break out the brokerage business vs. the construction and development operations? What are your big money makers?
The brokerage side is very profitable. We’ve just had our second biggest year ever,1997 was the biggest. We dipped a little bit in ’98 and then we went back up in ’99 and it looks like 2000 will be great. The development company is sort of a funny beast. It doesn’t really own anything because it’s just a name out there that pays our salaries and so forth. But it tries to break even off of fees that are paid by the clients who own the real estate. I’m a major client, as are my friends and business associates, and we pay fees to the company in order to support the activity. So it doesn’t really generate a lot of revenue. Of course, we hope the development projects do.
So, right now, is the bulk of your revenue coming from projects?
The development company, with all the LLCs and partnerships put together, far outweighs the brokerage side. But it’s hard to track it that way. We may have 15 different partnerships that form the development company. But we track the 15 partnerships separately, not as a development company itself.
From a strategic standpoint, what game plan will you be following in 2000?
It’s really three separate initiatives. One is the disposition of existing assets that we’ve brought to maturity. The other is acquisition of assets that are mostly multi-tenant industrial parks needing a little work and attention. And the third initiative is development. We expect to be very active in all three of those.
Major national developers along with pension funds and institutional investors have found Orange County to be a prime market. How do you compete as a private independent?
I think it’s a great time to be a private developer as opposed to looking to Wall Street for funding. As I mentioned earlier, we never have had a great deal of difficulty raising equity or getting construction financing. So I think we’re in a great spot and in a position to be very flexible and very active in pursuing the types of projects we want to go after.
You’ve said before that a big part of what you can accomplish now is built on past relationships.
We’ll go down and underwrite a deal and make sure the deal makes sense from a standpoint of return on our equity first. Then, we’ll put the deal together from a standpoint of returns to everyone across the board. Only after that is done will we go to our banker, Wells Fargo, and say, “Here’s what we want to do.” So we don’t underwrite the deal and then go to the bank and ask them if it looks good.
Obviously, you’ve built up a track record with Wells Fargo, which helps.
We’ve worked with the same bank for 28 years. We’ve also been working with the same architects, the same contractors during that time. It makes a big difference.
A major part of your business strategy seems to that you like to do something that creates a value to others. Why is that?
It matters to make money. That’s very exciting, but there are other things that are exciting, too. I think redevelopment, where you can be the catalyst for new money in a deprived area, is very, very exciting. I think that making a community better is very important work and something I enjoy tackling.
Was your family in the real estate business?
Actually, I am the second real estate person in my family. My grandfather (William Voit) was in the business before he started Voit Rubber Company in 1926. He was an inventor who tried his hand at real estate but had a very spotty career at best. I think he had a couple of bankruptcies before he got the rubber company going.
Why didn’t you go to work for Voit Rubber then?
I worked there a couple of summers, and I decided that wasn’t for me.
Did your family live in Orange County?
My parents moved here in ’57 just as I was going off to Berkeley. So all of my vacations during those years and later were in Balboa.
And how long has it been since you’ve been back here?
Just two years.
Think you’ll stay a while?
Oh, I know I will. I love it here.
