Mike Adler is looking to sell. Following a period of ground-up construction, the Valley real estate investor and developer is selling off top-quality properties. He’s aiming to reinvest the capital in distressed real estate, rehabilitate the properties and turn a tidy profit for his company and investors. That’s how Adler — president of Adler Realty Investments Inc. — got his start in the mid 1990s. At the time, Adler was a real estate appraiser who invested in apartments that were damaged from the Northridge Earthquake. “I like to buy things that have problems,” said Adler, 50. His firm, located in Warner Center, has handled more than $600 million in acquisitions, employs about 20 in the Valley and currently maintains a 2.3 million square-foot portfolio of office, retail, industrial, land and multifamily properties. That number is lower than in recent years because Adler said he’s in the midst of selling properties. So far, he’s sold the Shops at Oak Creek, a Trader Joe’s-anchored retail center in Agoura Hills, which he built from the ground up. And he’s eyeing the purchase and revamp of a 70 percent occupied industrial park in Chatsworth. The recession was tough. The company cut staff by about 25 percent from its peak in 2006, and Adler said he fretted that firm would lose many of its holdings. But only one was given back and the market — and the company’s fortunes — have turned around, he said. “We are well positioned to bring in new investors and really grow the business from where we are right now,” Adler said, noting many of his 26 properties across four states are beginning to perform well and he’s looking to buy again in the Valley and beyond. Question: What kind of work are you doing now? Answer: We have 26 projects right now, and we are selling what I would say are the highest-quality, stable properties. We just sold our Trader Joe’s-anchored shopping center in Agoura Hills. We are selling a stabilized national (tenant shopping) center in Florida. We are selling one of our best office buildings in the Dallas market right now. Q: Why are you doing this? A: The institutional investors are paying a lot of money for top quality properties … and the lesser quality properties are still discounted. What I wanted to do is raise money to start acquiring Class B-type properties that might provide our investors a higher yield than what they would be getting if they were holding onto their A-properties. Q: Will these be renovated? A: Yes. Most of the properties that I buy — there are some problems with them. There are either leasing problems, maintenance and repair problems, or they are in need of cosmetic changes. We go in and we evaluate what is needed and fix the problems and get them leased. Q: What will you buy? A: One is a half-empty, 400,000-square-foot office building in Dallas and one is a 70 percent occupied industrial park in Chatsworth. We plan on making probably two to four purchases this year, and we will probably sell a similar number of properties. Title: President Adler Realty Investments Inc. College: B.S. of Business Administration. Double Major in Finance and Real Estate Construction Management. University of Denver Personal: Married, with a son and daughter Q: Why are you making the decision to do this now? A: The economy is finally starting to grow. I didn’t want to be the first one in when … we really weren’t sure of the direction. Now it looks pretty good that things are improving, and as things improve, rental rates start to firm up. Q: How did you get started in this business? A: I valued commercial properties in the Southern California market (as a real estate appraiser) and was tired of showing my clients how much money they were making and helping them buy real estate. I was watching the sales of apartment buildings and they were selling at very, very low prices where the actual yield to the investors was very high. And I thought, ‘This looks like a really good opportunity that people aren’t taking advantage of.’ Q: When did you start investing in real estate properties? A: I started right after the Northridge Earthquake and bought some earthquake-damaged apartment buildings and fixed those up. Q: How damaged were the apartments? A: They were not that bad. Some of it was structural (so) you had to reinforce them. There was a lot of cracked drywall, broken plumbing, and roofs that needed to be replaced. Q: What made you decide to be a real estate appraiser? A: I graduated in ’85 — right when the construction business was stopping. It was sort of like kids getting out of school two years ago, where there were zero jobs available. I knew how to build (properties), and I knew how to manage them, and I knew how to analyze them. Of those three things, the only opportunity that was available was the analyzing part. Q: What did you want to do after college? A: I wanted to build things. Every since I was 3 years old and I got my first Tonka truck, I thought, ‘Oh this looks like fun,’ and ‘It would be fun to build.’ Then after going through college I learned, ‘Well, instead of being the one driving the Tonka truck you are probably better off managing the people driving the Tonka trucks. Q: The recession was extremely tough for many in real estate, what was your experience? A: It was hard. We spent a lot of time making sure that we protected the properties we had. Every Monday morning (in 2009), I would come into my office and find out from my different asset managers what tenants went out of business over the weekend. We had 500 or 600 tenants throughout the country, and we were in a broad-based recession so we had oil companies that were going out of business; we had mortgage companies going out of business; we had law firms going out of business. People were suffering across the board, and when you are major investor in office space and you have a big decline in business activity … it was not the place you wanted to be. Q: How have things improved? A: Revenues are up almost across the board. Values are up. I was putting all my money into funding projects to keep them going and that requirement ended last year. We are now able to distribute money to investors. Q: Your firm holds mostly office space and that sector is struggling much more than other sectors. Why have you invested in office space? A: Because we are stupid (laughs). It’s more depressed. That is why I like it. I like to buy things that have problems and are priced based on them having problems. If we can go in and fix the problems and turn them around there is a better chance that we can add value to the properties. Q: Does your background as an appraiser help at all? A: It helped very much. I use those tools every day. Q: I know you mountain bike and ski for fun. Are you a risk taker? A: I never thought about it that way. Q: Have you ever crashed? A: A couple of times, yeah. Haven’t broken any bones yet. Ripped a lot of skin, but no broken bones. Q: Where do you see our office market going in the next few years? A: The San Fernando Valley (office) market is still weak. It is starting to improve. It has always been a market that businesses have moved to as a way of decreasing their cost of doing business. In West L.A. you are seeing rents go back up and you are seeing the market tightening. I think this cycle will start back up again, where a lot of companies that want to be in Santa Monica or West L.A. won’t want to pay the rent and they will want to look for alternatives, and the San Fernando Valley is a great alternative. Q: You’ve been through several downturns in the economy. What have you learned? A: The main thing is to make sure you are operating defensively. Keep your tenants happy. Keep your space leased. Be as transparent as you can with your investors. Make sure your investors know what is going on, and don’t try to hide the bad and the ugly from them. It makes things easier to navigate through the bad times, because people do understand that the economy can be detrimental to investments. But things do come back and what we are seeing now (is) a lot of properties that we thought we would be losing our investment money on are now coming back and some of them are performing quite well.
Distressed for Success
