Interview

By Jeannette DeSantis Contributing Reporter Since the early 1970s, Brentwood developer Gerald L. Katell has been a fixture in the San Fernando Valley, building his trademark projects across the skyline including the Northridge Business Park, the Agoura Hills Business Park and the Nordhoff Industrial Complex. But Katell will probably be best remembered as the man who ended years of battling between homeowners, city officials and developers by purchasing the 21.5-acre parcel of land called Warner Ridge in Woodland Hills. Since the mid-1980s the land located at the western edge of Pierce College near DeSoto Avenue has been left untouched because of two court battles and a lack of funding. But when Katell stepped into the picture last fall, he turned the controversial office and housing project into a promising development once again. The land entitlements are in place, tenants are lined up and construction on the 690,000-square-foot office tower complex is expected to begin early next year. It is scheduled to be ready for occupancy in mid-1999. Question: How did you get involved with Warner Ridge? Answer: Spound Development worked on the project in the late ’80s and early ’90s, and they ended up in a lawsuit with J.P. Morgan, which had become their partner. That lawsuit was ready to go to trial in October of 1996. Just before then, there was a whole series of three-way negotiations basically over one weekend last fall. The net result was that J.P. Morgan agreed to sell the property to me and at the same time, J.P. Morgan agreed to a settlement with the Spound bankruptcy estate that settled the lawsuit. Q: What attracted you to such a controversial development? A: Well, certainly not the controversy. What attracted us was the fact that it was such a well-located project and that the controversy was really over to the extent that the entitlements had all been approved and everybody now knew what was allowed to be built there, and the project could move forward. And I think that in most cases like this, once things are resolved people like to see them finally get done. Q: Some have said that it was actually your political savvy, more than anything else, that made the Warner Ridge project a reality. A: It is certainly a process I am familiar with I have built in cities like Agoura Hills and Thousand Oaks and Los Angeles, and one has to be both cognizant of and work closely with the neighborhoods and with the communities. I have always done that. When I build projects I am not building them for somebody else. I still own most of the projects I developed. Therefore, I want to build projects that I am proud of and I will keep. I am also sensitive to what the project is going to look like. One of the very critical aspects of projects that I always do is the landscaping because over time, especially with fairly low-rise buildings that really are my trademark, the most noticeable thing about the project is the landscaping, not necessarily the buildings. If you really do a nice job on the landscaping the project really gets more beautiful over time. Q: What types of concessions are you willing to make with the Warner Ridge project to appease the neighbors? A: I plan to meet with the homeowners associations. I haven’t done that yet. The reality is that the entitlements are all in place. There is no request at this point that I need to make. Everything is in place to proceed with the project. So I think my role now is to give information and to communicate so that people know what I am doing and when I am going to do it. But I am not going to be asking for anything that doesn’t already exist. Q: There are several new projects planned for construction in downtown L.A., like the Disney Concert Hall, a new sports arena and a new cathedral. If there is a revitalization of downtown, what will that mean for the suburbs? A: I am all for a revitalization of downtown L.A. The only thing that I see is that the corporate growth from what the brokers are telling us tends to be more oriented toward suburban, lowrise campus types of projects than it is toward downtown highrises. Because of those factors and others, the downtown highrises are renting for cheaper rates than the suburbans, so there will be some tenants that will say, “OK, we will go downtown because it’s cheaper.” So I would expect that downtown will continually and gradually improve, and those projects you mentioned will certainly help in that process. But we feel that the long-run growth will be in suburban places like Warner Center, Agoura Hills and Calabasas. People still prefer to work closer to home. Q: How has the real estate business changed since you first started in Los Angeles, back in 1971? A: The approval process has tended to become gradually more difficult over the years. In the 1970s and early 1980s it was easier to move a project through. Also, in the real estate business in general, especially in the ’90s, the places people get their capital and the nature of the businesses that are involved in development have changed. There certainly is a big wave of real estate investment trusts that are becoming very big players. We haven’t yet seen them become players in the development side we don’t know whether that is coming down the road or not but they are certainly becoming players in terms of the ownership of properties. Because of the grave difficulties of the economy and the overbuilding of the’80s, there are many developers who are not around anymore here in the later ’90s. Those of us who are still here and have survived the tough times are starting to see a lot of new opportunities to develop. Q: Times have been especially tough for the San Fernando Valley, with the Northridge earthquake and the recession. Do you see an upswing? A: There definitely is an upswing in the Valley. Industrial is doing extremely well. There is very limited space available for industrial tenants and industrial growth. The office market is improving. It is not a rip-roaring market like some other parts of the country, like Northern California’s Silicon Valley, which is on fire. We don’t have that. But we are seeing nice steady growth and absorption of all the space that has been overhanging the market. I think the effects of the earthquake are pretty well behind us now. Growth as it affects new development is really now dependent on other factors, on the particular industries that are growing. Q: What other factors? A: Well, the entertainment industry is driving the growth of the eastern end of the San Fernando Valley as well as the Santa Monica and Westside markets. But we think that the west end of the Valley will also start to see significant growth. There may be some entertainment companies moving in that direction, so we are hopeful of that, although not too much of it has happened yet. We think, more significantly, the high-technology and software companies are producing a lot of growth in those sectors. We are also going to see if we can bring those companies that are facing very high rent rates in Northern California down to Southern California with better rates. Gerald L. Katell Title: President, Katell Properties Born: Jan. 29, 1941 in New York Education: B.S. in civil engineering, MIT. M.B.A., Stanford University Most Admired Person: His wife, Sharon Katell Career Turning Point: Meeting partner Ray Watt in September 1976 Personal: Married, four children, two grandchildren Hobbies: Mountain biking, tennis, jogging, skiing