New Homes in Tree Section Buoys Neighboring Homes

The multiple listing services for the beach cities carves up Manhattan Beach into six distinct areas. The tree section generally has a higher percentage of homes for sale that is new buildouts and makes for an interesting study on the effects of the building activity on home prices here. Not surprisingly, the number of new buildouts has had a significant impact on median home prices for this area. The national financial crisis of 10 years ago practically shut down the new building and, as a result, lengthened the recovery time of home prices here to pre-crisis levels.

In 2000, there were 167 home sales in the tree section with a median sales price of $820,000. Of these transactions, 24 were for homes that were built within the prior two years. Over the next several years, this pattern of buildout activity would increase slightly and in 2006, before the financial crisis took hold, close to 22 percent of homes sold had been recently built. At $1.7 million, median prices were double what they were back in 2000, while at the same time the sales volume had fallen off by about 28 percent.

Prices would hit a pre-recovery peak the next year in 2007 at $1.9 million on declining sales volume. It would not be until 2014 that median sales prices returned to these levels. For several years, prices would decline and steady before hitting a low point of about $1.42 million, which represents a 24 percent drop from the peak back in 2007. The run-up in prices through 2007 had triggered a rise in building activity that would manifest in 31 sales of newly-built homes in 2008. Without these new home sales, there might have been an even sharper decline in sales prices over the ensuing years.

In 2009, the number of transactions fell to only 75, a sharp drop from 2000 and a level not seen since before 1995. The number of recently-built home sales dropped from 31 down to 18. In 2010, the number of newly-built homes would drop in half from the previous year and in 2011 only one new home was sold.

The financial crisis took its toll on housing and on real estate prices throughout the country. In the tree section, developers would move to the sidelines as seen with the near complete fall off of new buildouts in 2011, from a high of 31 in 2007. From 2012 through 2015, there would only be seven to eight new buildouts sold annually.

Last year the number of new homes built had tripled from the prior year. It is noteworthy that if the new home sales were stripped from the analysis, the median home price in 2016 matched the price in 2015. It was the 22 newer homes that were sold at a median price of $3.3 million that lifted prices to the tune of over 12 percent from 2015. New building activity propels the market.

The sales volume levels thus far this year are tracking last year’s though with a modest increase in the price of about 5 percent. There have already been 20 recently built homes sold this year at a median price of $3.49 million.

The number of current listings in the tree section represents about two months of inventory with the newer homes listed at $3.6 million. While year-to-date sales of older homes were just under $2.2 million, similar homes today are listed at $2.45 million. Building activity in the tree section has returned to healthy levels and with this has come stronger prices.

 

As seen in Easy Reader

‘The Brady Bunch’ Actor Knight Stars in Online Business

Actor Christopher Knight is best known as Peter Brady on “The Brady Bunch,” which aired from 1969 to 1974. There would be a number of spin-offs, reunion specials, and movies associated with the series, as well. He gained further notoriety with his reality television series, “My Fair Brady,” co-starring Italian supermodel Adrianne Curry, which aired from 2005 through 2008. Knight has lived in the Beach Cities for over 20 years and in his current Hermosa Beach home for 10 years.

But Knight is also known as an entrepreneur in the computer industry, beginning with a “The Brady Bunch” computer game. In 1991, he co-founded the 3-D company Visual Software. In 1995, he founded Kidwise Learningware, which manufactures interactive educational products and in 1998, he founded Eskape Labs, a TV tuner company.

Brady’s latest business venture is the online Christopher Knight Home furniture.

He formed the company with a friend in the furniture industry who wanted a known and trusted personality to help distinguish his brand from competitors in the online furniture market. Knight and his partners believe the future of furniture sales is online. Online furniture sales are estimated to reach $14 billion this year, or about 15 percent of all furniture sales.

Christopher Knight Home now has operations in China, Vietnam, and Malaysia. Revenues have grown by 100 percent every year in the four years since they partnered with Overstock.com, an early leader in online furniture sales. Other online sites offer Knight’s furniture include Walmart, Target, and Newegg. The company is currently selling 40,000 to 60,000 units monthly.

 

As seen in Easy Reader
Photo: Former “The Brady Bunch” star Christopher Knight has launched the Christopher Knight Home furniture line. Photo courtesy of Christopher Knight Home

Five New Upscale Restaurants Hope to Follow Recent Beach Successes

Baran’s 2239, Tower 12, Rabano’s, and a re-energized “modern old school” Bottle Inn are the latest examples of new beach city restaurants experiencing tremendous success. More are coming.

Radici, Decadence, Serve Kitchen, Sister’s Barn, and Gabi are all in various stages of development and will contribute unique offerings to our evolving dining scene.  The owners of each of these restaurants are making substantial investments in design and all have committed to hiring top chefs to turbocharge their menus.

Laura Francisco, with the help of her family and award-winning designers, is nearing completion of Radici in the former Cali Cantina space on Hermosa Avenue. They “are taking their time to make it the way they want it,” including a menu that will have “food that comes from the heart” without any “compromises on ingredients.”  The menu will have a number of dishes that have origins in her mother’s hometown of Pacentro in the region of Abruzzo, Italy. They are selecting boutique wines and creating craft drinks to complement the food. They are targeting a December opening.

A few blocks away, Skylar Tourigny is close to starting her build-out for Decadence at the former Establishment location. She will “open up the space with an inviting patio.”  She wants to create a “fun place to go out” and is working with a top design firm for an “industrial sexy” vibe.  She is also bringing in a “well-known chef in LA” to help her realize her vision of “fresh, rustic California food with Asian influences.”  She hopes to open in early 2018.

Jon Mesko, the owner of five Rock & Brews locations, is opening Serve Kitchen at the former Tammie’s Corner House Café location on at Second Street and Hermosa Ave.  He has teamed up with a design partner to create a space that “feels like home.”  It will be “comfortable and welcoming” and feature patios and a firepit.  They visited several favorite restaurants for design ideas. Mesko said he is bringing in “the best chef he has ever met” to create a menu with “fresh sharable fusion foods” and “old school comfort classic dishes.”

Sister’s Barn owner, Barbara Reger, is nearing completion on her remodel of the former Snow Zone along with an adjacent space on PCH in South Redondo for her “crafted barbeque eatery and market.”  She will have “chef-inspired seasonal menus” and their market will offer food and retail products that complement the restaurant. They plan to open early next year.

In the Riviera Village, Sara Gabriele is creating Gabi in the former Zazou space, which was opened by her father Guy over 20 years ago. They are working with a consulting chef to come up with a menu that will feature “Spanish fare with flavors of our family in the South of France with a South Bay twist.” They also have an “amazing design and build team.”  Gabriele is a sommelier and her husband Adam Aro is an authority on beer.  They are bringing in Vincenzo Marianella for signature cocktails. They hope to open in December.

 

As seen in the Easy Reader / Photo by Brad Jacobson (CivicCouch.com)
Photo: Skylar Tourigny, former owner of Marine St. Cafe in Manhattan Beach, is opening Decadence in downtown Hermosa Beach in the former Establishment location on Hermosa Avenue.

Beach Food – Here Comes Hermosa

Hermosa Beach’s rising incomes over the past 20 years, combined with advances in social media, changing dining habits, city regulations and risk-taking by well-funded restaurateurs have had a profound impact on the city’s dining scene.

Pier Plaza came to life in August 1997 when Pier Avenue was closed to automobiles from Hermosa Avenue to The Strand in what one city official characterized as a “social experiment.” It propelled city sales tax revenues to an all-time high in 2000. Revenues for businesses that collect sales tax were just shy of $300 million, with about 40 percent of this coming from eating and drinking establishments.

Michael Santomieri, owner of Greenbelt on Pier Plaza, was the manager of the popular Sangria restaurant during this period. He recalled the plaza being “packed with people, shoulder-to-shoulder. Justin Timberlake, Britney Spears and Scottie Pippen all showed up and sometimes the entire Lakers team would hit up the plaza after a game,” Santomieri said.

With few exceptions, the downtown dining scene was more about bars and entertainment than about food.

Unfortunately, not all the results were positive. With crowds come problems, among them public urination and fighting. Residents living near the plaza pressed the City Council to address the problems through stricter regulations.

The city regulates businesses with Conditional Use Permits (CUPs). CUPs are location-specific and can be used to curtail hours of operation, limit entertainment, and increase enforcement of the so-called “50-50” rule. This latter rule requires an equal balance between alcohol sales and food sales, and may have been a factor in some bars closings.

Greg Newman, co-owner of Tower 12, Palmilla and Sharkeez on Pier Plaza, said, “From about 1997 to 2004, the crowds were upwardly mobile locals and tourists.” This shifted when the rules changed. “It became less fun for people who lived here to go out here.” Business started falling off, which hit city sales tax revenues. These revenues have stayed below the peak of 2000 for 16 consecutive years.

The early business successes after the plaza opened and the subsequent shake-out of bars from new city regulations through 2007 prompted a number of new restaurant openings. Alfredo’s, Passport, Martinique, Blue Pacific, Sabor Brazil, Hama Restaurant, Dragon, Eat at Joe’s, Los Muchachos, and several others would all come and go. Among the few still open from that period are Poulet du Jour, Crème de la Crêpe, Fritto Misto, Ocean Diner, Oki Doki Sushi and Chef Melba’s.

Surprisingly, as the financial crisis started pummeling the country in 2007, a significant number of brave restaurateurs tested the Hermosa market. Zane’s, Barnacle’s, Silvio’s Brazilian BBQ, Gum Tree, Chelsea, Rok Sushi, and Waterman’s would all hit the scene and make it. However, at least a dozen others would open and close over the next few years, including Hibachi, Jitter’s, and Brix.

Tyler Gugliotta, the former chef of Brix and now the executive chef of Baran’s 2239, said of that period, “The food scene in Hermosa was pretty abysmal. Most places offered only tacos, burgers and bar food.”

The re-opening of Upper Pier Plaza in October 2010, after an impressive redevelopment, coincided with the beginning of a recovery in home prices and triggered a renaissance in the dining scene. Gugliotta singled out a handful of restaurants that continue to shake things up, including Abigaile, Greenbelt, Tower 12, Hook & Plow, and his own Baran’s 2239.

The Upper Pier project quite possibly has had more of an impact on downtown Hermosa than any other development. With the opening of the 200 Pier Avenue retail and office complex and the completion of the redevelopment project, more than 50 new businesses would gain a presence on Pier Avenue and another 50 or more would rebrand, remodel or be replaced.

There have been other forces at play during this time, as well. Home prices in Hermosa have sustained a blistering average annual appreciation rate of 8.5 percent. Forbes’ 2016 list of most expensive zip codes ranks Hermosa 119th, with a median home sales price of $2.2 million, up from $540,000 in 2000. Hermosa Beach homes are more expensive than over 99.5 percent of zip codes, nationwide. Median household incomes have also outpaced the rise of incomes nationally.

Easy Reader food critic Richard Foss, noted, “Social change has magnified the importance of dining well. Those who live in affluent areas can exercise their food and drink experimentation more frequently than those who have to scrape together rent, but the food is such a part of aspirational California living that it is part of the caricature of our state.”

People, in general, are eating out more. Restaurant related expenditures recently exceeded groceries expenses for the first time. People also like to eat close to home and there is an increasing awareness of the benefits of organic, locally-sourced, and sustainably-farmed food. Even cocktails and beers have become crafted.

The Newman family took risks with both Palmilla and Tower 12 because they reasoned there were “enough bars already” and they could see what was going on with the increasing number of upscale restaurants in Manhattan Beach.

Jed Sanford, owner of the downtown Hermosa Abigaile, followed a similar line of thinking when he opened the upscale Dia de Campo and S&W restaurants.

“The demographics here are changing. More families want to make Hermosa their home,” he said.

Baran’s 2239 is relatively new on the scene but has already garnered 4-1/2 stars on Yelp and countless accolades. Los Angeles magazine listed it as one of LA’s 10 best new restaurants. Only one other South Bay restaurant has achieved this in the past several years.

“We wanted to do fine dining in a casual atmosphere and offer a menu with strong global influences. Ingredients are local and seasonal,” Gugliotta said,

Greenbelt’s Santomieri said he wanted to create a menu “with fresh ingredients coming daily from local farmers market produce.” They also wanted to offer items favored by women, who now make up 65 percent of their patrons.

Other notable Hermosa restaurants that have opened since 2010 include Source Café, Locale 90, The Standing Room and Hook & Plow.

With minimum wage hikes, rising lease rates, and high acquisition costs, restaurant owners are going to find it increasingly more difficult to bring new concepts to the market. Seasonality is a another issue. It takes more work in Hermosa to fill the seats during the winter months, especially since Hermosa has two to three times more restaurant seating capacity per capita than Manhattan Beach.

The consequences of Hermosa’s “social experiment” on Pier Plaza, though unforeseen, have been a significant plus for local diners. Chef-driven and professionally-managed restaurants with high quality ingredients are becoming the norm. Tower 12, Playa Hermosa, Rabano’s, Casa Vincenzo and Laurel Tavern are the latest examples of this and soon we will see Decadence, Radici and Serve Kitchen hit the scene with the same mindset. The opening of at least two hotels over the next several years will no doubt reinforce these trends.

 

As seen in Easy Reader / Photo by Kevin Cody
Photo: Greenbelt owner Michael Santomieri has seen Pier Plaza transform from an “elbow-to-elbow” bar destination to upscale dining.

Manhattan Sand Section, South Redondo Lead Home Appreciation

The gap between the average home price in the beach cities and the national average has grown significantly since 2000. In 2000 you could buy a home in most parts of the country for $120,000 compared to $532,000 for the three beach cities and El Segundo. Since then, our blistering appreciation rates have resulted in a substantially higher gap. The National Association of Realtors estimates that the selling price of a home in the country is about $250,000 while here the average home price for all home types exceeds $1.4 million. This has had a huge impact on local businesses and on property tax revenues for the cities.

In 2016, the total sales volume of single family home, condo and townhome sales topped $2.4 billion from 1,601 sales. Assuming that the total cost of all transactions related to a sale is 6 percent, this sales volume represents $142 million in broker fees, escrow costs, and other expenses. An additional $71 million makes its way to the four cities in the form of property tax revenue.

The numbers were quite different here back in 2000. For starters, the total number of transactions was 34 percent higher at 2,421. Total sales volume came in around $1.3 billion, which when adjusted for inflation would be about $1.8 billion in today’s dollars.

With respect to the number of transactions, we would hit a post-2000 peak in 2002 with about 2,600 sales. Not surprisingly, the number of homes sold would plummet to just under 1,200 in 2008 when the national financial crisis had a firm grip on the economy. The number of annual sales has held steady at about 1,600 for the past five years. Affordability and a fall-off in turnover probably explain why we haven’t seen over 2,400 home sales in many years and may not for years to come.

At the city level, average annual appreciation rates have ranged from 4.5 percent to close to 7 percent for the four cities since 2000. The local Multiple Listing Service (MLS) for the South Bay further breaks down the cities into 17 total different areas in El Segundo, Manhattan Beach, Hermosa Beach and Redondo Beach. Every single area has had average annual appreciation of at least 5.6 percent to 6.9 percent with one exception, the Manhattan sand section. Median sales prices in the Manhattan sand section have increased an average of 9 percent per year every year since 2000. This can be partly explained by the fact that 26 percent of homes sold near the beach in this section during the first six months of this year were built within the past two years and sold for a median price of $4.5 million.

All 17 areas were hit hard in 2007 and 2008 during the credit crisis and median sales prices took a big hit. With the benefit of hindsight, we now know that the market would start to recover a few years later. Average annual appreciation rates become far more impressive from 2011 through the first half of this year for every area with a range of 5.6 percent up to an incredible 13.6 percent.

Of the 17 areas, six have experienced average annual appreciation rates over 10 percent. The Manhattan sand section leads the pack at 13.6 percent. South Redondo west of PCH came in at 13 percent. The others include the tree section of Manhattan, both areas in east Manhattan, and the area in south Redondo Beach north of Torrance Blvd.

In spite of a few tough years since 2000, homeowners here have enjoyed a tremendous ride with respect to home appreciation rates.

 

As seen in Easy Reader

Manhattan Beach Developer, Matt Morris

The Joint Center for Housing Studies of Harvard University tracks leading indicators in the remodeling industry.  In just the past two years, national spending on improvements and repairs have increased 19 percent and are projected to increase another 6 percent over the next year. Drive down any street in Manhattan Beach and you can see this trend of personalization playing out in a significant way.

This year the Manhattan Beach Community Development Department will issue about 170 new housing permits and an additional 980 remodel permits. They handle about 80 visits to their counter daily. Some of these visits are from architects and developers who team up to build spec homes,, a trend we have seen here for several years but that has been recently slowing down.

The number of full build-outs peaked in 2007, when 27 percent of all homes sold in Manhattan were developed within the previous two years, compared to just 18 percent of homes sold in 2000. Last year the number dropped off to 12 percent.

Matt Morris of Christie’s Strand Hill Properties and Matt Morris Development has had an impact on local custom-building for over 20 years. What started as a desire to do “something totally different in development” has led to a spirit of “taking risks” and creating some of the area’s more innovative homes.

Morris grew up in Dallas, Texas and knew “since junior high school” that he wanted to be a builder. His father was a commercial developer and his brother would become one as well. He went to University of Arizona to play football and after graduation moved back to Dallas to build homes for close to 18 months. In this time he went from doing mundane errands to becoming the top builder for the company.

His brother needed help after relocating to the South Bay and so Morris moved to the beach cities to work with him for what he planned to be a brief time. He recalls being 24 years old and living by the Galleria. Those early years here were tough to the point that “he was barely scraping by.”

He felt compelled to do make a shift and teamed up with some investors to do custom build-outs. They had some early successes. He rolled his profits into the next deal and the pattern continued until he made it. Along the way, he got a real estate license to make it easier to find potential lots to develop. He attributes a lot of his success to being “lucky in terms of timing.”

Over the years, Morris refined his “eye for looking for detail” as part of his process to capture his “client’s taste and personality in the design.” Long-lasting bonds have been formed as a result of this.

Morris collaborates with architects and designers to produce the best fit for a given property. He recognizes that every lot offers unique design opportunities. Each design begins with “letting the property dictate what to do” and a “lot of things are worked out in the field.” A recent example is a development on the corner of 1st Street and Manhattan Avenue in Manhattan. He took a risk with “a different look with a lot of glass to maximize the views,” among other unique design features.

Our community “wants more personality and sophistication in their homes and not cookie-cutter designs,” he said.

 

As seen in Easy Reader
Photo: Matt Morris, Matt Morris Development. Photo by Brad Jacobson (CivicCouch.com)

Blackhouse’s Jed Sanford Cast Wide Net

Nearly half of the 85 full-service restaurants in the Riviera Village and the downtown areas of Manhattan and Hermosa Beach are part of locally-based restaurant groups. Though a few of these groups started out over 40 years ago, the majority of the group-owned restaurants have been on the scene for fewer than six years. This trend has had a big impact on beach cities dining.

It is not surprising that these groups are better-financed and tend to have more efficient operations. What is a surprise, however, is that these generally financially conservative groups often lead the way when it comes to taking the biggest risks with respect to untested concepts.

Blackhouse Hospitality Management, created by Palos Verdes native Jed Sanford, has pushed the envelope with each of their several concepts. They are one of only two groups that have locations in the Village and in downtown Manhattan Beach  and Hermosa Beach. If you live in the beach cities, you have no doubt eaten at one of their innovative restaurants.

Sanford, like so many other successful restaurateurs, did not start his career thinking that he would one day own a restaurant. He became a CPA after graduating from college and later parlayed an MBA from USC into management consulting.  It would be several years before he partnered with his brother Allen to establish Union Cattle in Hermosa as a “fun project.” It worked out well and led to the opening of Saint Rocke.

Spin forward a few years and the brothers decided to “do their own things.”  Sanford had an unexpected itch “to push things” and converted Union Cattle into Abigaile, which was about “getting people in Hermosa to think about food in new ways.” He took a huge risk with the concept, brought in a strong culinary chef partner in UCLA graduate Tin Vuong, and arguably reset the course of the dining experience in Hermosa.

The duo of Sanford and Vuong knew they had a hit and wasted little time bringing other edgy concepts to the market. Blackhouse now has restaurants in Los Angeles, Culver City, Manhattan, Hermosa, Redondo and Huntington Beach. Of their eight restaurants, seven are original concepts. Abigaile, Little Sister, Suburbia, Dia de Campo and S&W are their beach cities brands. They chose Culver City and Huntington Beach for Wildcraft and Bluegold & LSXO, respectively, and added a Little Sister to downtown Los Angeles to great success. After much introspection, Sanford concedes that concentrating on one to two brands may simplify their business model and be the path forward for them. With this in mind, Sanford says “they will continue to focus on expanding the Little Sister brand outside the beach cities.”

What began as a side project for Sanford to energize the dining experience here became a fever to really make an impact. As the dust has settled with their rapid local expansion, he has had an opportunity to contemplate where to go from here.  It appears this path just might be to join the select few local groups, including Rock and Brews and Veggie Grill, who have crossed state borders and taken steps to become nationally-recognized brands.

His advice for restaurant owners considering expansion is to “focus on your specialization and pick your second location carefully.”  He adds it is imperative to “be thoughtful about your growth and really understand your concept.”  As for financing, he suggests a good starting point is with “friends and family funding with limited debt.”

Risk-taking restaurant groups such as Blackhouse have enhanced the local dining experience here and helped forge the identity of the downtowns.

 

As seen in Easy Reader
Photo: Jed Sanford by Lanewood Studio

Sackley’s Sepulveda Blvd. and the Fun of the Deal

Most beach cities neighborhoods have median home prices at or near all-time highs. Many are in the top 1 percent for homes, nationwide. Not surprisingly, commercial properties here have become increasingly valuable, as well. Lease rates have doubled in just five years. It stands to reason that investing in local property, especially in commercial and in multi-family units, makes great business sense.  However, good luck getting in on the action.

At this writing, there are only six commercial properties being marketed online for sale in the beach cities. A market rarely gets much tighter than this. Clearly, the vast majority of property owners are holding on to their properties for the long haul.

Manhattan Beach resident, Stuart Sackley said he “definitely takes a buy and hold approach.” He has been engaged in both residential and commercial properties here for over 40 years. He speaks passionately about living and investing here. “I was lucky to find the El Torito property on Sepulveda Boulevard this year after selling a property in Orange County. Nowhere out there would be better to buy than in Manhattan or Hermosa,” he said.

Sackley owns over 200,000 square feet of property on Sepulveda Boulevard. In addition, he has properties and related investments in Las Vegas and Daytona Beach. But the true treasure may very well be in the lessons that he has learned along the way.

It started in 1974 with $3,000 and the desire to live on the Strand.”  He started competing for probate deals in Hollywood and in one transaction former soap star Richard Mulligan paid him $10,000 to walk away from a deal worth $80,000. He parlayed this into a multi-family unit in Hermosa Beach, which ignited his passion for real estate. It also got him on The Strand, where he retains three of the five homes he has accumulated over the years.

Forty years and countless deals later, Sackley relies on instinct and reflex more than spreadsheets or computer models to make a buy and sell decision. He classifies himself as “a value-add buyer.”  By this, he means properties with “low rents, low vacancies or an opportunity to improve operating expenses.” Over the years, he has also managed to develop lasting relationships with First Choice Bank and key real estate agents.

He has made costly mistakes but laughs them off. He sold off properties in 2005 thinking it was the peak of the market and bought properties in Florida and Indiana.  He thought,“If it didn’t go up there it couldn’t go down. I should have just paid my taxes”.

Sometimes the asking price of a coveted property might be higher than what he wants to pay. Rather than retreat, Sackley gets creative. His property on 10th and Sepulveda in Manhattan was priced at $2.9 million, but his limit was $2.1 million.  When he offered to throw in a gold Cartier Panthere watch and a Jaguar XKE V12 Roadster, the deal was closed. Likewise, he stopped the foreclosure of a note on a property by accepting a 23 window VW bus for back interest and property tax payments.”

When asked how long prices for properties here will keep rising, he offered, “It really depends on interest rates. If they go up, there will be a big impact on the market”.

Sackley shows no signs of slowing down.

“I have never wanted to get out of real estate. I will probably be making deals on my deathbed. It’s all about making deals.”

 

As seen in Easy Reader / Photo by Brad Jacobson (civic couch.com)
Photo: Manhattan Beach Strand resident advocates a buy and hold strategy for real estate investments.

Manhattan Village Remodel May Produce $500,000 in New Manhattan Beach Revenue

By virtually every measure, the beach cities offer retailers compelling reasons to have a presence here. Whether looking at home values or median household incomes, which are two to three times the national average, the beach cities are a sweet spot for retailers.

Manhattan Village owner RREEF clearly recognizes this and, after overcoming legal and other challenges, has launched a wave of enhancements, which include offering more retailers the opportunity to establish a presence here.

The demand for retail space is so strong that the addition over the years of new development projects such as El Segundo Plaza, The Point, and the upcoming Apollo Landing has actually yielded higher lease rates. The benefits to local residents have been several noteworthy restaurants and other shopping options as well as major popular brands such as Whole Foods and Best Buy.

RREEF’s plans to enhance the mall may seem counterintuitive at a time when both the number of retail stores and mall visits across the country have been on the decline. A Cushman and Wakefield study concluded that mall visits dropped by 50 percent between 2010 to 2013. Credit Suisse estimates that 8,600 stores will close nationwide this year, significantly more than the record 6,200 stores that closed in 2008. Additionally, online sales continue to accelerate, but they still only account for about 8 percent of all retail sales.

Nonetheless, the International Center of Shopping Centers emphasizes that the occupancy rate for regional malls stands at a healthy 93 percent. Part of the reason for this is that many malls have been repositioned or have adapted to changing consumer interests. Phil Friedl, Senior Vice President for JLL, the Manhattan Village development manager, said, “In today’s shopping center environment, it’s all about getting the experience right. Today’s premium shopping centers borrow from the hospitality industry to help create the experience”. Restaurants are an example. Restaurant sales are increasing at a much faster pace than retail sales. “Restaurants bring energy and activity to a shopping center,” Friedl said. For a similar reason, malls are adding fitness centers, movie theaters, and other specialty retail outlets.

Manhattan Village enhancements are already underway. The buildings with Ralph’s and the former Coco’s space are being remodeled and updated. The Macy’s expansion has started development of the northeast parking deck. The interior center court of the main mall is also undergoing an impressive transformation. These changes will all be completed within a year.

The biggest changes will come with the addition of the Village Shops, which will add approximately 65,000 square feet. The Mall Plaza area will become an open-air environment with several fountains open spaces. Construction has been started on a new CPK. The first phase will be completed in 2019.

Seven of the top 25 sales tax producers in Manhattan Beach reside in the mall. The enhancement efforts might add upwards of $500,000 in additional annual sales tax revenue for the city.

“We’re working hard to complete the construction as quickly so we can to deliver the premium quality shopping center the community deserves,” Friedl said.

 

As seen in Easy Reader
Photo: The N Manhattan Village Plaza area will have fountains and public gathering places.

Cream’wich in Manhattan Beach Reinvents the Ice Cream Sandwich

The best-selling cookie of all time is the modest Oreo with its two chocolate wafers and sweet cream filling. It was created over 100 years ago as an imitation of a competing product made by Hydrox and now generates over $3 billion in annual sales. Even though Oreo wasn’t the first company to sell these types of cookies, it combined formidable marketing, packaging and production strength to dominate Hydrox in sales. The owners of Cream’wich, created in Manhattan Beach five years ago, have similar aspirations with their increasingly popular product.

The ice cream sandwich also first appeared a century ago. Today, over 1.5 billion ice cream sandwiches are consumed in the U.S. every year. Cream’wich co-owners, Jessica Jordan and Zac Rothman set out to improve on the sandwich that Rothman enjoyed at a bakery in Westwood while attending UCLA as an undergraduate.

Jordan and Rothman met in early 2011 while working together to open of FishBar in North Manhattan Beach. Months later Jordan, who served as FishBar’s executive chef, was also tasked with overseeing the integration of Cupcakes Couture into Manhattan Beach Creamery by Rothman’s. Her experience as a cake decorator made it easy for her to feel at home in the Creamery. In late 2012, she experimented with combining the ice cream of the Creamery with cookies they baked. They soon had “lines out the door” for the then unnamed ice cream sandwiches. It was like having a series of affirming focus groups, for which they are “forever grateful to the residents of Manhattan Beach,” Jordan said.

For many entrepreneurs, the satisfaction of this success might have sufficed, especially if they had full-time gigs like Jordan and Rothman had with the FishBar and other projects. Nonetheless, what followed might best be described as a series of challenging events that now makes for some humorous anecdotes about the perils of trying to ramp up a business with limited experience and support.

It might be hyperbole, but they use the expression “relentless perseverance” to describe what has been required to make Cream’wich available across the country. Jordan noted, “There has been no instant gratification,” unlike the satisfaction of offering new products at the Manhattan Beach Creamery and FishBar.

They brainstormed to come up with the Cream’wich brand and then worked tirelessly to get the product out there. Boccato’s Groceries, a longtime staple in Hermosa Beach, became their first retailer. They then stretched their reach during countless trips. They hammered out production challenges and eventually shifted their distribution efforts to a third party.

A turning point was meeting with the corporate purchasers at 7-Eleven in Dallas, Texas in late 2013. They confessed that at times they felt as though they were in over their heads. The business culture of the beach cities tends to be a bit relaxed compared to corporate America. However, hooking up with 7-Eleven has merits when you consider they have over 56,000 locations in 18 countries.

Five Cream’wich flavors are now available in 1,500 stores across six states. Their small team is gearing up to get to 5,000 stores within a few years. They make thousands of sandwiches daily and attribute their success to a solid work ethic and unwavering perseverance.

“It makes it so much easier to sell something when you have such strong belief in your product,” Rothman said.

 

As seen in Easy Reader / Photo © Easy Reader
Photo: Cream’wich’s Jessica Jordan and Zac Rothman at 7-11.headquarters in Texas.

The Strand: The Most Expensive Residential Property in the United States

here is nothing quite like The Strand anywhere else. Bryn Stroyke of Stroyke properties sums it up nicely when he says, “Our small, private, beaches are the best beaches in Los Angeles.” He adds, “They are local, pristine and have great central downtowns.”

However, with fewer than 450 homes on The Strand, the demand for the homes greatly outstrips the supply. This fact is reflected in astonishingly high prices. In fact, the single family land value per square foot exceeds that of any other location in the country.

This supply of coveted homes is further constrained by the fact that the turnover rate for Strand homes is below two percent, with fewer than 40 closed sales in Hermosa Beach and Manhattan Beach combined over the past five years. National Association of Realtors data reveals that the current national turnover rate is seven percent. People who buy on The Strand tend to stay put.

Manhattan and Hermosa have median sales prices higher than over 99 percent of the zip codes in the country. Forbes annual study of median home prices in 2016 for the 29,500 zip codes covering 95 percent of the total population had Manhattan Beach at number 74. Hermosa came in at number 119, with a median price 21 percent below that of Manhattan.

The numbers for Manhattan or Hermosa would skew considerably higher if the Strand homes were isolated in the Forbes study. Newly remodeled Strand homes sell now for over $14 million in both cities and it is becoming increasingly difficult to find anything below $7 million. Interestingly, for the typical lot size in Manhattan, this translates to between $100 million and $200 million per acre.

To put this in perspective, the land cost for a square, 15-foot wide deck or a carport would be well over $500,000, which happens to be double the median sale price for an existing home in the country.

Last year, the most expensive home sale in the nation on the public record was $45 million for a waterfront home with 1.6 acres on prestigious La Gorce Island in Miami, though there were rumored private sales of over $100 million. The record for the most money paid for a home in the U.S. stands at about $150 million in East Hampton, New York, sitting on 18 acres. Scaling these properties to a value per acre yields $4 million and just over $8 million, respectively. The story plays out similarly in all of the exclusive communities across the country.

The increase in Strand property values no doubt has an impact on prices across the beach communities, which leads to higher property tax revenues for the cities. Property tax revenue for Manhattan Beach was slightly over $20 million in their 2012-2013 general budget and has climbed to $27.8 million for this fiscal year.

Stroyke had a quick response when asked if there is a limit to how high Strand property values might go. He shared the story of how his Realtor parents were the first family to pay $300,000 for a Strand home in Hermosa, many years ago. If asked then if they could see prices ever reaching $1 million or even $2 million one day, they no doubt would have responded positively. However, if asked if $10 million was a possibility they would have thought it absolutely crazy. “It’s impossible when in the moment to conceive of how high values will climb over time,” he said.

 

As seen in Easy Reader / Photo by Adrian Tiemens
Photo: The 2,868 square foot, five bedrooms “90210” Strand home at 3500 The Strand in Hermosa is listed for $16.5 million.

Competitive Athletes Show Competitive Edge in Business

Forbes and Entrepreneur are just two of several magazines that have recently published articles hypothesizing that competitive athletes make great partners in business. They highlight key attributes such as perseverance, focus, and goal-setting. Simply stated, athletes turn competitive edge into business success. Jon Mesko of Hermosa Beach, who competed in last weekend’s AVP tournament in Manhattan Beach, is a fitting example.

Mesko grew up in Michigan, where became the 1995 Junior National Downhill Mountain Bike Champion. He continued racing competitively into his twenties, traveling throughout the country. Ironically, he discovered beach volleyball in Michigan and, in late 1999, he made his way to Hermosa Beach for the first time. He cites the beaches, ocean, weather, lifestyle, business environment and mountains for hooking him in. A few years later, he made the move here.

As a teenager, Mesko spent years working “nearly every position” at Big Boy and gained an appreciation for the value added by well-run restaurant groups. He also soda during the Cherry Festival Parades in Traverse City, Michigan back, which fueled his interest in becoming an entrepreneur. When he retired from mountain bike racing, he consulted with one of his sponsors and helped them expand. This included identifying new locations and negotiating leases.

After relocating to the beach cities, he pursued his newfound passion for beach volleyball. His athleticism and 6-foot-6 height made the transition from competitive mountain biker to beach volleyball player an easy one.

Within a few years, Mesko owned a tanning salon and with a partner opened up Manhattan Denim in Manhattan Beach. They wanted to fill the need for men’s clothing and so they built a “simple, but elegant store with ridiculously comfortable chairs and a fridge so our guests can relax and have a beverage of their choice”.

There he had the fortuitous opportunity to meet Michael Zislis. Shade Hotel owner Michael Zislis had recently combined all of his best ideas into one restaurant – Rock & Brews. Zislis had also just made the decision to franchise the Rock & Brews brand. Today, five years later, Mesko has opened four Rock & Brews, has a fifth opening this month and two more later this year. He has 500 employees.

Significant financing is required to open restaurants like Rock & Brews. Mesko learned early on from a mentor “when you create or source something that is valuable, financing is no problem.” Nonetheless, Mesko had to work tirelessly to finance all of his endeavors. The persevering mindset of a competitive athlete had to kick in, but achieving great success with his first location made it an easier to finance subsequent units.

Mesko recently took full control of Manhattan Denim and will soon close escrow on the former Tammie’s Corner House Cafe on Second Street and Hermosa Avenue in Hermosa. He became interested in Tammie’s after going there twice a week for years with his son. The restaurant will be remodeled and called Serve Kitchen. Mesko hopes to have it open in the next few months.

For Mesko, the focus and goal-setting required to be a competitive athlete coupled with a persevering mindset have made it possible to achieve a high level of success in a community he truly enjoys living in.

 

As seen in Easy Reader / Photo by Brad Jacobson
Photo: Jon Mesko, of Hermosa Beach, has transferred his skills as a competitive mountain bike racer to professional beach volleyball and a string of Rock and Brews restaurants.

Bad News is Good News for SB Defense Contractors

The news this past week has been addressing the escalating tensions between the United States and North Korea. Companion stories have covered the possible increases in government spending on anti-missile systems. According to the Los Angeles County Economic Development Corporation, our county is home to over 300 companies in the aerospace vehicles and defense industry, which account for over 56,000 jobs. Increased spending on ballistic missile defense could have a favorable impact on local companies like Redondo Beach-based Northrop Grumman Aerospace Systems and on our beach cities.

The aerospace and defense industries have been playing an important part in the evolution of the beach cities for several decades. The combined population of El Segundo and the three beach cities of Manhattan Beach, Hermosa Beach and Redondo Beach was just over 63,000 in 1950. Over the next decade the Department of Defense funneled $50 billion into the California aerospace industry leading to the creation of many high-paying jobs here. By 1970, the population here doubled to just over 125,000 residents, not far off from what it is today.

State law requires that all California cities adopt General Plans with seven mandatory chapters, including one on Land Use. The burst in defense spending decades ago, which led to a jump in population as well as the creation of hundreds of supporting businesses essentially established Land Use plans for the beach cities that are more or less still in place today.

Space Park in Redondo Beach, located on the east side of Aviation Boulevard. between Marine Avenue and Manhattan Beach Blvd, opened in 1961 and would become part of TRW. Over the next few decades, dozens of historically-significant projects were developed at the Space Park campus. These include the descent engine for the Apollo lunar lander, the instrument package for the Martian biological experiments, the two Viking Landers launched in 1975, and the James Webb Space Telescope, which will be the successor to the Hubble Space telescope.

In late 2011, the American Institute of Aeronautics and Astronautics (AIAA) designated Space Park a historic aerospace site. When giving the recognition, they pointed to over 100 satellites, rocket engines, astronomical observatories, high-power lasers, and rad-hard electronics that were designed and built there.

In 2002, Northrop Grumman acquired TRW and today Space Park is the headquarters for their Aerospace Systems sector. Last year revenues for Aerospace Systems from military aircraft, autonomous and space systems, among other areas, were just under $11 billion with about 20,000 employees. Of these employees, about 4,600 work in Redondo Beach.

Space Park is the home of the Space Systems Center of Excellence and Advanced Concepts groups within Aerospace Systems. The Space Tracking and Surveillance System (STSS) is among a number of strategic programs managed at Space Park.

The Northrop Grumman website lists Directed Energy as one of the programs based in Space Park. This includes the high-energy lasers that might one day be deployed for anti-missile defense. TRW started this work in the early 1970s and it was a primary reason that I relocated to the beach cities over 20 years ago.

The business base in the beach cities has dramatically changed over the years, but the influence of the aerospace and defense industries continue to show no signs of abating.

 

As seen in Easy Reader / Photo by Kevin Cody
Photo: VOLLEYBALL DIPLOMACY: U.S. Federal law enforcement officer Mike David, of Manhattan Beach (left), goes up to block his Russian counterpart Alexei during the World Police and Fire Games beach volleyball competition, held Monday in Hermosa Beach. Russian sent five men and one women’s beach volleyball teams. Russian player Leonid Kaliuin said beach volleyball is popular throughout Russian and that Moscow, alone, has five indoor beach volleyball stadiums. In response to questions about President Donald Trump, the Russian law enforcement officer answered, “It’s too soon in the Trump presidency to offer an opinion.”

Investors Rolling into South Redondo

Like clockwork, the incredible weather has brought thousands of residents and tourists out to local beaches, marinas, and piers. Hotels and restaurants continue to fill up in areas like south Redondo Beach, with its unique and diverse offerings. When businesses succeed, investors take notice. But a limited amount of commercial property on the market has compelled investors to find more creative ways to succeed on the waterfront and in Riviera Village.

The good news for Redondo Beach is that sales tax revenues have been increasing by over 5 percent annually for the past five years. Residents are winning as well, with single family home prices south of Torrance Boulevard growing at a pace close to 9 percent annually over this same timeframe. Commercial lease rates have been climbing at an even faster pace.

Harbor Drive has changed substantially. The removal of the Herondo wall on the Hermosa border and the widened bike path have opened up access to the area. The addition of Shade Hotel and the substantial remodeling of The Redondo Beach Hotel, Portofino Hotel & Marina and the Crowne Plaza have boosted occupancy and room rates there. Chart House and Bluewater Grill continue to perform well and Kincaid’s and Cheesecake Factory remains top-performing, local restaurant.

Harbor Drive and the pier area may see even more dramatic change with the 50-acre AES power plant real estate in play and the possible redevelopment of the waterfront. It is unclear how these two projects will evolve over the next few years, but if developed, there is no overstating their impact on the business community.

The Pacific Coast Highway corridor and the Riviera Village are also undergoing changes, though incrementally. The success of Rock and Brews with their opening over four years ago appears to have been a catalyst for some of the change. Since then, the Village has seen the addition of four Italian restaurants and the popular Suburbia. Mickie Finnz rebranded to Rebel Republic with success, especially after the addition of an experimental outdoor dining deck. The Source and Chicago for Ribs will be opening soon.

Zazou has been prosperous on Catalina Avenue for 20 years. Nonetheless, they decided to make a major change after noticing that many locals go to other beach cities for dinner. Sara Gabriele, co-owner of the planned new restaurant, said they want to “tap into a younger clientele that appreciates high quality food in a laidback setting.” Zazou will close at the end of August and the new concept will open within a few months.

After over 20 years in Manhattan Beach, Chris Davidson of Mama D’s made the decision to open up at the former Thai Thani restaurant on Pacific Coast Highway earlier this year. Business has been so good for them there that he shared he “regrets not opening up in Redondo a long time ago.” Their success prompted him to start opening for lunch this weekend. Davidson appreciates the fact that “so many people walk to the restaurant from their homes,” which reminds him of “the good old days of families having fun together”.

Long-time resident Barbara Reger picked up on the desire of other locals for “something different” and decided to take over the former Snow Zone spot on Pacific Coast Highway. The remodel for this Napa-inspired crafted barbeque eatery and market begins tomorrow for an opening in a few months.

Commercial investment opportunities are limited here, but investors still find creative ways to build up their portfolios.

As seen in Easy Reader / Photo by Brad Jacobson
Photo: Rebel Republic’s Matthew Konen with a Rebel burger. The restaurant’s rebranding and its sidewalk dining have helped reinvigorate dining in Riviera Village.

North Manhattan Business on the Rise

North Manhattan Beach has a unique appeal that has resulted in substantial home appreciation over the last several years. Alex Yoffe, a partner with Yoffe & Cooper, LLP, lives and works in the area. He sums up the attraction best by saying, “North Manhattan Beach reminds me of Manhattan Beach from 20 years ago.” It has “the charm of a quiet, little beach town, where surf, flip-flops, and tacos are still the standard.” It is no wonder then that we have seen a burst in business activity along Highland Avenue over the past several years. It shows no signs of abating.

Demand for commercial space may be at an all-time high. Lease rates have doubled over the past five to six years, yet they are still half of what the rent is in downtown Manhattan. These rates will no doubt continue to increase if the rumored escrow for Veranda’s and some adjacent property actually closes and the properties are redeveloped. Though many factors have contributed to the rebound, it is the successes of particular businesses that stoke the surge. As an old proverb suggests, nothing succeeds like success. When I moved to Manhattan Beach over 20 years ago, the place to be in the evening was the north part of town. Sharkeez, Pancho’s, Harry O’s and Hillary’s Hole in the Wall would all have lines out the door. However, these early successes were diminished with the opening of Pier Plaza in Hermosa Beach in 1997. By 2011, there had been dozens of changes in the businesses along Highland Avenue in North Manhattan Beach, but these changes were gradual in their progression. Real change, on the other hand, started to accelerate six years ago when Sharkeez, a strong local brand, sold their original Highland Avenue location, at 38th Street, to the owners of FishBar and moved across Highland to their current location at 36th St. This gave Sharkeez a chance to expand their evening hours while reaching a broader demographic. Additionally, it opened the way for FishBar to explode on to the scene.

Zac Rothman, co-owner of FishBar, said his decision to open a family-friendly, seafood restaurant was easy. The combination of “a saturation of homes and young professionals who appreciate quality seafood” has worked out well. More than 70 percent of their patrons are regulars. Business has been so good, that they are among the top restaurants in the city, as measured by revenue per square foot. Rothman said that they made the decision to remodel “even though it might not increase revenues” because they want to create a proud gateway to the city.

An unintended consequence of their success was the growing number of people crossing Highland Avenue at 38th St. Public Works just completed street improvements at 38th and also at Rosecrans to address this. Successes like FishBar are one reason why investment activity has been increasing along Highland Avenue and why we may see some significant new development there in the future.

As seen in Easy Reader / Photo by Kevin Cody
Photo: Servers Alisha Ginsberg and Tionnie Baker welcome diners to the newly remodeled FishBar in North Manhattan Beach)