Hooray for Hollywood

Thanks to UW Real Estate Alumni

By Lari Fanlund

Few places in America have as strong a pull on the imagination as Hollywood. There's the famous HOLLYWOOD sign, looming atop the foothills, and the Hollywood Walk of Fame--where stars have been putting their handprints in cement for more than 45 years. Nearby are the El Capitan and Grauman's Chinese Theatres, sites of many glittering Hollywood movie premieres in the '30s and '40s.

By the 1950s, however, the reality of Hollywood did not match the fantasy. The recessions, an earthquake, Los Angeles riots and an El Nino storm or two that followed, turned Hollywood into a down-at-heels version of her former, glamorous self.

As Southern California magazine summed it up, Hollywood had earned a reputation for "tacky T-shirt shops, crime, dirty streets and a kind of night life that was unsavory at its best, outright dangerous at its worst."

Today, Hollywood is ready for her closeup, and UW-Madison real estate alumni have played an important role in her comeback. The renovation of a historic theater, the restoration of an apartment complex that originally housed famous silent screen stars and the largest mixed-use project in Hollywood, all have strong Wisconsin connections.

Among the first to come to the city's rescue was real estate alumnus Jeff Rouze, BBA '74, MS '77. The earthquake that hit Northridge, California, in 1994 was the final blow of desperation, he recalled recently. "It forced a reevaluation of the redevelopment of Hollywood that had begun in 1986 after 40 years of decline."

One of the first steps on the road to recovery was the restoration of the legendary El Capitan Theatre that began in 1987. The elaborate theater had been built at the height of the Roaring Twenties, at the then-extraordinary cost of more than $1 million. CUNA Mutual Group, the Madison, Wisconsin-based insurer of credit unions and their members, financed the partial renovation of the theater just as the City of Los Angeles was establishing a redevelopment district in Hollywood to deal with blighted property and crime.

Rouze was deeply involved in the project as a senior asset manager with CUNA Mutual. Rouze soon decided that improving one building in isolation would not pay off, that the entire area needed a step up. He and others lobbied the City of Los Angeles council to establish a business improvement district (BID). One BID, the 18-block Hollywood Entertainment District, cleaned up Hollywood Boulevard and made a variety of other improvements; more BIDs are progressing in other parts of the city.

For more than nine years, Rouze has been involved in Hollywood and its historic preservation, serving on the board of directors not only of the Hollywood Chamber of Commerce and Hollywood Historic Trust, but on the boards of the Hollywood Entertainment District, Hollywood Heritage and the newly formed Hollywood Hills West Neighborhood Council.

 

"Hollywood is such a wonderful jewel and we needed to restore its luster and sparkle," Rouze said in a recent phone interview. "I felt I had to change the perception of the area." An armed security team was hired to reduce crime in the area and a public relations firm was hired to publicize the area's comeback. "I even hired a firm to steam clean the sidewalk, alleys, curb and gutters in the whole block around the El Capitan," Rouze recalled.

Rouze credits the education he received while earning his real estate degrees at Wisconsin with helping him cope with the complex project. As an undergraduate, Rouze changed his major from journalism to real estate after talking to the legendary real estate Professor James Graaskamp. "I took every course I could in commercial real estate development, market research, soils engineering and risk management and insurance," Rouze said. He added that he has found the multi-disciplinary teaching approach of the UW Real Estate program an ideal background for tackling the ills of Hollywood Boulevard.

Today, there are many indications the area has made a comeback: Buena Vista Theaters, Inc., a subsidiary of Walt Disney Companies, leases and operates the El Capitan Theatre, which is still owned by CUNA Mutual. A Disney store has also opened in the building. This year's Oscars ceremony was held across the street in the newly refurbished Kodak Theatre. "Hollywood has a great future as the redevelopment unfolds. It currently is the most active of the 33 redevelopment districts in Los Angeles," Rouze said. "Since 1987, more than $2 billion has been invested here."

While working on the El Capitan project on behalf of CUNA Mutual from 1994 to 1999, Rouze commuted from Madison to California. He moved to California in 2000, and in 2002 a joint venture formed between Rouze and Madison-based The Great Lakes Companies, Inc. This joint venture is involved in another historic Hollywood redevelopment effort, Hillview Apartments, scheduled to open in spring 2004.

 

The project is a $10.7-million reconstruction of a 54-unit apartment building built in 1917 by movie moguls Sam Goldwyn and Jesse Lasky to house their actors. Scores of silent-film-era actors lived there, including Oliver Hardy and Stan Laurel. As director Douglas Carlton remembers, "Everyone who was anybody in the silent movies days lived there." The building was needed because movie folk were unwelcome in many apartments and rooming houses of the time.

The Hillview had been vacant since 1994, when city officials declared it unsafe after it was damaged in the Northridge Earthquake. Throw in damage from a sinkhole during nearby subway construction and an arson fire that destroyed most of the roof, and you have a distressed property, indeed. "A building that played such an instrumental part in film history needed to be preserved," Rouze said. When completed, the building will again have 54 units and retain some of the original architectural features. The building is being financed with federal tax credits designed for historic building rehabilitations.

"The reconstruction of the historic Hillview Apartments will provide much-needed housing and further our efforts to revitalize the Hollywood neighborhood," said Los Angeles Mayor Jim Hahn. Hillview Apartments has multiple UW ties, in addition to Rouze's involvement. Michael A. Conaghan, director of finance for The Great Lakes Companies, earned an M.S. from the UW-Madison School of Business in 1991, with a dual major in Real Estate Investment Appraisal and Analysis and in Finance, Investment and Banking. He and Rouze worked together on the El Capitan project when both were at CUNA Mutual. Conaghan worked on the original financing of the project; Rouze on the redevelopment.

Years later, Rouze recognized the opportunity to redevelop Hillview Apartments, and his Wisconsin ties led him to Conaghan and The Great Lakes Companies. Although Great Lakes had housing projects under its belt, Conaghan said the Hillview project was of particular interest as a chance to be involved with historic tax credit work for the first time. Established in 1992, Great Lakes had been best known for Great Wolf Lodge, a year-round indoor waterpark resort.

Conaghan said the Hillview project was particularly complicated due to the number of players involved: tax credit investor, bank syndicate, City of Los Angeles, contractor, architect and the joint venture between The Great Lakes Companies and Jeff Rouze.

Conaghan is gracious about the importance of having someone like Rouze involved who has made such a commitment to Hollywood's comeback. "Jeff has played an important role in Hollywood's renaissance," Conaghan said. "He's been an incredible catalyst for change."

 

Still another business Badger playing a role in Hollywood is Kristi Morgan, BBA '90, director of housing at The Great Lakes Company. Morgan put her accounting degree to good use, pulling the deal together and making sure it was financially feasible. Especially in the early months of the project, she traveled from Madison to California at least once a month.

Morgan said the accounting background provided by the School of Business was invaluable, especially in developing the financial pro formas. However, there were some aspects of the project that no business training was likely to provide. A major challenge in remodeling the Hillview Apartments according to Morgan was, "Trying not to tie up traffic and disrupt a major tourist landmark." She added, "We had to temporarily remove stars from the Hollywood Walk of Fame and follow specific protocols for their removal and storage. I never thought I'd be involved in Duke Ellington's Hollywood star being in storage for months." Other unusual aspects arose from trying to get the architectural details of the original apartments as accurate as possible, including Murphy beds that are built into walls to conserve space. "About 80 percent of the units have Murphy beds, which were popular in the apartments' original era," Morgan said. "Nowadays Murphy beds are rare enough that we had a hard time finding a vendor."

Two brothers, both real estate graduates of UWÐMadison, are key players in several other important real estate projects based in Hollywood. Lawrence S. Bond, BBA '84, is chairman of Bond Companies, a nationally recognized real estate development and investment firm with offices in Chicago and Santa Monica, California. Larry Bond is based in Santa Monica, and his brother, Robert Bond, BBA '82, MS '83, the president of the firm, is based in Chicago.

Their firm currently has under construction Sunset + Vine, a 625,000-square-foot mixed-use project in Hollywood at the famous intersection bearing that name. Upon completion, Sunset + Vine, will total 90,000 square feet of retail space, 300 multifamily residential units and an 830-stall parking facility. The $125-million development is one of the largest projects underway this year in Southern California. It was financed by the Canyon-Johnson Urban Fund, a group of investors that includes former basketball player Earvin "Magic" Johnson and Canyon Capital, and the California State Teachers' Retirement System.

 

There are historic aspects to the Sunset + Vine project. A façade of a building where ABC television began was preserved. And a component of the Sunset + Vine project firm is a 21,000-square-foot retail outlet called Schwab's, named for the famous Schwab's drugstore. The Schwab's portion of the site includes a lunch counter designed to re-create the look of the original Schwab's, where movie star Lana Turner was "discovered," according to Hollywood legend.

The Bond brothers have two other Hollywood projects in various stages of development. They hope to break ground by the end of the year on a mixed-use project a few blocks east of Sunset + Vine called Sunset at St. Andrews which will have 19,000 square feet of retail. A high-end supermarket for Hollywood with adjoining housing is on the drawing board.

"Our company likes to tackle challenging and interesting projects," said Rob Bond. "A lot of what Larry and I do is based on what (the late Professor James) Graaskamp taught us 20 years ago. He had a methodology to transfer risk. He also encouraged us to think outside the box, and we've tried to do that."

A group of Wisconsin real estate students got to see the results of that "outside the box" thinking recently. On a Real Estate Club field trip to California in October, the students were hosted by the Bond Companies. Larry Bond gave them an in-depth tour of the Sunset + Vine project.

"Many people have worked very hard on the cultural rebirth of Hollywood," said Larry Bond. "We've uncovered a niche -- developing in dense urban neighborhoods underserved by retail markets."

The fact that so many Wisconsin real estate alumni are playing a key role in restoring Tinsel Town to its former glory isn't really all that surprising according to Conaghan. "Wisconsin real estate alumni are a fantastic group. When I was thinking of going back to graduate school, I looked at many top schools, but the Wisconsin real estate alumni network was unmatched.

"The ability to go into any city where you are considering a project and flip open your Wisconsin Real Estate Alumni Association directory and call a fellow alum is a tremendous resource. These are busy people, but when you leave a message that says, 'Hey, I'm a Badger,' you get a return call. It's a great resource."

And that's how a group of business Badgers teamed up to provide Hollywood with -- what else? -- a storybook ending.

Lari Fanlund is the editor of UPDATE magazine.