Taking the pulse on the erratic behavior of commercial real estate in Southern California comes naturally to Bram Goldsmith, a developer turned banker.
He has parlayed the assets of City National Bank from $600 million to its current $2.6 billion since taking over the Beverly Hills-based banking operation as chairman and chief executive officer in 1975.
A question on whether the Federal Reserve Board's recent lowering of its discount rate will substantially alter current real estate activity, emits a good-natured shrug from Goldsmith.
"We've been at almost zero inflation and actually heading for disinflation, so we needed some warming up," he said. "The Fed's actions are usually reactive, like a skipper who keeps a steady hand on the tiller. It was a move to ease up the money a little and to encourage stability and normal growth. Basically, I view it as a no-event event."
'Tough Cookie' Label
He recently completed the maximum-allowed, two three-year terms as a director of the Los Angeles branch of the San Francisco (12th District) Federal Reserve Bank, and now, as an esteemed Fed alumnus, continues to participate in an ongoing en famille exchange of information.
In an interview, the debonaire Goldsmith also comes across as a maverick, with a no-nonsense, clear-cut approach and the label of a "tough cookie."
He cares little whether his clients come to see him in a T-shirt or a three-piece business suit, but when it comes to closing a deal, the method is highly selective and the lending policy very conservative. A client's most effective calling card is his or her good credit and a healthy collateral.
In real estate dealings, Goldsmith has a distinct advantage. When he entered banking in 1975, he was president of Buckeye Realty & Management Co., then the largest privately held real estate development company in Southern California.
Built Bank Buildings
During the 1950s and 1960s, in a booming period of Los Angeles, Buckeye graduated from building homes in Downey to constructing downtown office buildings. The firm built several City National Bank buildings, including its headquarters at Roxbury Drive and Wilshire Boulevard, Beverly Hills, and the downtown office tower at 6th and Olive streets.
By the 1970s, with the Buckeye organization in partnership with George Konheim proving highly profitable, Goldsmith's fascination with putting together real estate deals had begun to wane.
His career took a sharp turn in 1975, when Alfred Hart, founder and former chief executive officer of City National Bank, agreed to sell Goldsmith his 259,800-share interest in City National Corp., the bank's parent company, for about $3.6 million.
Goldsmith already owned 20,000 shares of the company and had served as a CNB bank director since its inception in 1954. Since then, CNB has become the third largest bank headquartered in Southern California, with an added key role in data processing bank services to independent banks throughout the Western states.
'We're Renting Money'
In a 1986 report by Shearson Lehman Brothers, CNB ranked second among the nation's five top "pure banks." Pures, as opposed to "pit banks," are described as outperforming normal banks, offering investors psychological comfort levels, rapid earnings growth and superior management.
"We're in the business of renting money," is Goldsmith's simplistic explanation of the complexities of his profession, noting that more than 80% of the CNB's activity is business oriented, with very little emphasis on retail banking. Its 24 branches are heavily concentrated in the Los Angeles area.
Of that 80% activity, 25% is focused on real estate for both high-net-worth clients who include scores of movie celebrities, rock stars, film producers, agents and others in the entertainment industry, and middle-market clients with revenues of $150 million or less.
As head of one of California's premier business-oriented banks, Goldsmith moves cautiously, subscribing to the theory of high initial equity and low leverage.
"I don't generally finance anything for more than $15 million. That doesn't give you any landmarks--just some solid bread and butter business. I am of the old school, stemming from my development days," Goldsmith said.
"When I moved to California from Chicago in 1951, I built some houses, but as I got into office buildings, I found that the major insurance companies I was dealing with in the East still thought we had Indians in California, and they wouldn't lend money to anyone for an office or an industrial building without personal guarantees for the life of the loan.
"I had made a study of commercial properties during the 1930s, and I noticed that even in the depths of the Depression period, nearly all office buildings remained at least half full. So I convinced the lender that if one could design the financing so that one could make the mortgage payments with 50% occupancy, one could survive in the worst of times."