A site-seeing tour of Santa Monica with veteran developer Ernest Auerbach is like being treated to an instant replay of four decades of changing real estate values in that community.
The chairman of the board of the Auerbach Cos., a mild-mannered man with an uncanny eye for the right opportunity, has built "something" on almost every street of that city, from small residences to apartment houses.
The same holds true for large stretches of Brentwood and Pacific Palisades.
Auerbach has a solid 40-year track record of development and leasing in Southern California. He has conceived and built more than 10 million square feet of commercial, retail and residential properties valued at more than $500 million, and his firm owns and manages more than 2,000 residential units.
Decided to Stay
The Brooklyn-born builder came to California in 1946 with only a temporary stay in mind, but he liked what he saw and decided to settle in Santa Monica.
Why Santa Monica? "No special reason. I had a brother living out here who owned the Wilshire Cafeteria in that area. I bused dishes, swept the floor and ate there. It was a good arrangement."
That same year Auerbach married and set out to make his fortune. He started out selling real estate.
"In those days if you wanted to sell a commercial lot," he said, "it was not enough to be a real estate agent. You also had to get a 'business opportunities license.' After I sold my first commercial lot, I convinced the investor to take me in as a partner. And that's how I got into the building business." He was joined by his wife, Lisa, who took on the dual role of secretary and saleswoman.
'Lovely, Sleepy Town'
In those days, Santa Monica was a "lovely, sleepy town," Auerbach recalled. "No parking meters, diagonal parking, and no building permit problems with the city. That came much later.
"In those days, all I had to do was to get my plans drawn, go to city hall, get my permit to build an apartment house. Within 60 to 90 days I would have a building."
Auerbach bought numerous residential lots in Santa Monica and Sunset Park from $500 to $1,000 each.
"They were good-sized lots, 60-by-150--a little over a dollar a foot. I built apartment houses for up $10 a foot and houses for $5 a foot," Auerbach said.
Brokers selling Auerbach-built properties in today's market pointed that up as a plus in their sales pitch. "We built quality buildings and stood behind our products. That is still the best form of advertising a developer can have," Auerbach stated.
Protect Ocean View
Auerbach-built apartment houses were rarely more than three stories high. "I don't mind seeing a tall building, here and there, as long as it isn't built alongside another tall building," he said.
He also dislikes seeing commercial structures along the beach front. "They should all be zoned residential along Ocean Avenue. When I work, how can I sit and watch the view all day? And after the office closes, who remains to enjoy the sunset and the surf? It's such a waste."
The developer views the future of Santa Monica somewhat pessimistically.
"I don't see much of a potential for development and upgrading in that area--not until the housing question is dealt with more fairly. Rent control is a real problem. Perhaps they can arrive at a happy medium with a good master plan," the developer said.
If Auerbach had his "druthers" on the rent control question, he would opt for the kind of plan that is in effect in Los Angeles.
'Rents Much Too Low'
"One doesn't have to go overboard," he said. "A 5% increase on a yearly basis is not unreasonable. And when a tenant moves out, the landlord has some incentive to renovate and upgrade his property.
"I still own properties in Santa Monica that I would like to improve and renovate but it is not feasible under rent control. The rents are much too low and even when tenants want the improvements and agree to pay a little more, the City of Santa Monica will not allow it. It hardly pays to own there, anymore."
On the other hand, property values in Santa Monica have risen astronomically. "It has been a gold mine for longtime owners. Even the most modest of structures have appreciated by more than 1,000%," Auerbach pointed out.
The formula for retirement, he related, went something like this: Buy a house for $10,000 in the 1940s and sell it for $400,000 in 1987. Then retire to the comforts of a Leisure World, free from financial worries.
"That is the idea I pushed in my advertising, early on. The only thing I didn't anticipate was rent control."
The situation in Santa Monica today doesn't make any sense, the developer said.
"There is, of course a limit to how many people can live in Santa Monica, so I agree with the need for a lowered density factor, but developers should be allowed to build some luxury units, within a well-balanced master plan, for those who want to live there and can afford the higher rents," he added.
"I'm afraid Santa Monica is doomed to become shabbier and shabbier because the little people are the ones who own most of the properties. They cannot raise the rents and therefore cannot afford to improve them. You can't change rent control until you put it up to a vote by the people, the majority of whom are renters. So you have a real problem."
The Auerbach Cos. are now almost exclusively involved in industrial high-tech and commercial properties, and company activity is spread throughout Los Angeles, Orange and San Diego counties. Five years ago, the firm built Auerbach Plaza at 2001 Wilshire Blvd. for its headquarters.
The firm has expanded to include the Auerbach Leasing and Management firm, headed by Lorna Auerbach, his daughter, and the Auerbach Construction Co. under the guidance of Rodney Freeman.
Auerbach, himself, now focuses some of his interest and energies to breeding thoroughbred race horses on his ranch in San Diego County.