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The Cutting Edge | CALIFORNIA DREAMIN' / Financing
the State's Emerging Companies

Saybrook Is Making Big Noise in Real Estate--Very Quietly

September 28, 1998|DEBORA VRANA | TIMES STAFF WRITER

Saybrook Capital is involved in some of Southern California's largest and most controversial projects--a revitalization of Hollywood, the $350-million Staples Center sports arena and an expansion of Disneyland--yet this firm could almost be Santa Monica's version of a Swiss bank.

Most people have never heard of Saybrook despite its high-profile deals. The boutique investment banking firm, which has arranged a total of $15 billion in financings nationwide since its formation in 1990, recently moved into larger offices and nearly doubled its size to 17 bankers since last year.

This week it will expand its business lines when it announces the creation of a $50-million fund to invest in mid-sized home builders and apartment buildings.

Started by three San Fernando Valley natives, two of whom played against each other in high school tennis tournaments, Saybrook was created to specialize in municipal bonds, especially those involving distressed real estate deals.

But with the downturn in the municipal market in the early 1990s, the firm expanded into other businesses.

Now, Saybrook's diverse client list includes Walt Disney Co.; some investors in Playa Vista, a 1,100-acre mixed-use project planned near Marina del Rey; major Japanese banks; and the local governments that got burned by Orange County's investment pool when the county filed for bankruptcy protection in 1994.

"We're there where the capital markets meet the real estate world," said Jon P. Schotz, one of the founding members and a former banker with the now-defunct Erlich Bober & Co. in Los Angeles. "We're the experts to the experts."

Other founding partners include Jonathan Y. Thomas, also formerly with Erlich Bober, and Jonathan Rosenthal, an attorney. All three men are 43.

In January, one of Saybrook's financings won a coveted "Deal of the Year" award from Institutional Investor magazine, a trade publication. The deal was a complicated $510-million financing for Disneyland's $1.2-billion California Adventure, a new area of the Anaheim park that will include rides that mimic many of the Golden State's own natural attractions, such as Yosemite. Saybrook was financial advisor to Disney.

Saybrook is also advisor to TrizecHahn Centers, the Toronto-based developer of a $385-million project that is being billed as the cornerstone of a revitalized Hollywood. Saybrook is helping to structure the terms of the estimated $100-million debt portion of the project, at Hollywood Boulevard and Highland Avenue. The project will include a $30-million broadcast theater for the Academy Awards and retail and entertainment projects such as movie theaters and restaurants.

In addition, Saybrook is advising Majestic Anschutz Ventures on the development of its Staples Center, the massive downtown Los Angeles sports arena that will become the home of the Los Angeles Lakers, Clippers and Kings.

Saybrook also is advising Playa Capital, a partnership of Morgan Stanley Dean Witter; Goldman Sachs & Co., and Oaktree Capital Management on the Playa Vista project, which could include hundreds of homes and a major studio.

"It's fun for us to just keep showing up in these major deals," said Rosenthal. "I like to think it's like that line in 'Butch Cassidy and the Sundance Kid': 'Who are those guys?' "

Saybrook, named for co-founder Schotz's dorm at Yale, continues to provide financial workouts and analysis for troubled municipal bond deals, sometimes buying defaulted deals and refinancing the issues.

The firm's latest venture, a residential real estate fund that will invest in home builders and housing developments, is being run by Joel M. Shine, who is now looking for the firm's first investment.

The firm is also working on some deals it can't discuss yet, but one thing is for sure: The financings are likely to be a continuation of what this boutique shop is known for--an ability to combine municipal finance with corporate finance and speak the language of both Main Street and Wall Street.

"When you look at some of these deals in the traditional way, you'd say they can't be done," said George Mihlsten, a partner at Latham & Watkins, who worked on the Disney financing with Saybrook. "But they are innovative and think outside the box."

Mihlsten said the firm's strengths are its background in municipal finance coupled with investment banking expertise and knowledge of politics.

"With Hollywood, we put together a financing package that's unprecedented in the history of the city of Los Angeles," in terms of the type of structure for the deal's bond issue, said Thomas, who agreed with his partners that part of the firm's success is due to its location in Southern California.

"We can't think of any other region this complex and demanding," Schotz said. "We're fortunate to be positioned in a place where you get the opportunity to work on these deals."

In other capital-markets news last week, the public offerings market got a shot in the arm with online auction firm EBay, which surged Thursday after going public to break a monthlong IPO drought.

*

Debora Vrana covers investment banking for The Times. She can be reached via e-mail at debora.vrana@latimes.com.

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