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Commercial Real Estate

3 Arden Execs to Utilize New Firm

The top officers plan to focus on Southland industrial properties by investing through Rexford Industrial.

January 15, 2002|BOB HOWARD | SPECIAL TO THE TIMES

Three top executives of Southern California's biggest owner of office buildings, Arden Realty Inc., plan to invest heavily in Southland industrial properties through a new company called Rexford Industrial LLC.

The Arden executives--Richard Ziman, Victor Coleman and Andrew Sobel--are partners in the new venture with Rexford's founder and managing member Howard Schwimmer, a former industrial broker with Daum Commercial Real Estate who left that company at the end of last year to form Rexford.

Ziman is chairman and chief executive, Coleman is president and chief operating officer and Sobel is an executive vice president at West Los Angeles-based Arden, a publicly held real estate investment trust that owns more than 18 million square feet of office buildings. Privately held Rexford also is based in West Los Angeles.

Rexford has already bid on more than $15 million worth of industrial property and expects to invest $80 million to $100 million per year for the next four or five years, said Schwimmer, who owns interests in about $50 million worth of industrial property through a number of partnerships he formed with other investors during his 19 years with Daum.

Rexford will focus on older industrial properties within about an hour's drive of downtown Los Angeles, Schwimmer said, and the company's strategy will be to buy the buildings on a "long-term hold" basis for continued cash flow.

Schwimmer sees more potential profit in older Class B and C buildings than modern Class A buildings for a number of reasons.

First, he said, modern industrial properties are considerably more expensive because they are extremely popular with big institutional investors such as pension funds, life insurance companies and real estate investment trusts, which can afford to pay much higher prices than smaller private investors.

Second, the economic slump has reduced rents more in older buildings than in modern industrial projects, Schwimmer said, meaning savvy investors can find better bargains in the older variety. Rents have dipped by about 4% to 8% for the best industrial space, he estimated, compared with drops of nearly 25% for some older space.

"I don't think there is too much of an opportunity to make money on Class A property. There are too many people bidding on it, which drives up the prices," Schwimmer said. "Not as many people want to buy an older building that has a lot of functional problems that are going to take a lot of time and energy to resolve."

The Rexford strategy "sounds like a good plan," said Darla Longo, a CB Richard Ellis broker who specializes in industrial properties.

"The only challenge they're going to have is digging up the deals," Longo said, "but that's what Howard did at Daum, so it should work if he is the guy who will be finding the deals."

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