First in a series
Across the table in their no-frills office in the shade of the Hayden Tract, one of the most youthful and energetic tandems in the building industry, Greg Reitz and partner Steve Edwards, forms a portrait of freshness and confidence.
But the portrait of the mid-30s Culver City men speaks.
And when it does, the language of these creative schooldays’ chums behind REthink Development Corp. of Culver City is more sobering, not quite so sunny.
“I don’t sleep as well at night as I used to,” says Mr. Reitz, who is tall and spare with a receding hairline.
He smiles easily and frequently, but it has required more of an effort since the financial markets slammed their doors shut a few weeks ago.
Neighbors in the Hayden Tract will recognize Mr. Edwards and Mr. Reitz immediately.
Residents have been speaking out for nearly a year against REthink’s innovative commercial condominium project at 8665 Hayden Pl. as inappropriate for the neighborhood.
Mr. Reitz and Mr. Edwards listened and reacted.
Their strongly edited building comes before the Planning Commission at City Hall two weeks from Wednesday night, on Oct. 22.
Meanwhile, the gentlemen who have been green sensitivity in the forefront of their ventures are dueling with far broader worries, the global financial crisis that has affected their business with the same subtlety of a cement truck crashing into a wall.
Money has dried up for them.
They say they are swimming fast and, so far, effectively. But, like all of their colleagues, they have been forced to re-think and to retool.
“Everything is more challenging now,” says Mr. Reitz, “getting loans, getting investment. People are worried. They don’t know where the market is going.”
Question: At what stage in the loan process are you?
“For the Hayden project,” said Mr. Reitz, “we are in a period where we have gotten our initial loan and our initial investment. We have a ways to go before we will need an additional loan and investment. So there is no real rush there.
“But it’s hard to project what we are going to need because of the uncertainty of the market for this project.
“As for other projects, the answer would be different because we are in different phases. We are having more difficulty with those because of the current situation.”
How recently did you realize that a crisis was gathering?
“We haven’t gone out to get a loan or tried to sell anything right now,” Mr. Edwards says. “So it hasn’t truly affected us. Where it has affected us is looking for potential new projects. We have stopped doing it completely because there is no equity or debt capital out there that will do new projects.
“They are looking at broken projects or projects that are already built, and you can buy them for below construction costs.”
Did REthink see the storm coming before it became a national story?
“We expected the residential market would correct,” Mr. Reitz said. “We have a project under way now that is mixed-use, residential and retail. All of our projections were below market when we were going out to raise money and get loans for it. That’s because we could see it was just a really overheated residential market.
“We built in some cushion into that project so we didn’t disappoint our investors. What I mean by ‘cushion’ is, we said we could sell it for X dollars per square foot. All the while, the market was saying we could do it for 120 percent of that number.
“We were trying to be conservative all along because we had a feeling that prices just couldn’t hold the way they were.
“But it’s even worse than we expected. Unfortunately, the thing has kind of fed on itself.”
When did you start to pull back, realizing that this kind of crash was inevitable?
“Last August we all saw it coming,” said Mr. Edwards. “We saw the effects, though, before that. We were hopeful we could get a couple of our projects going. We have one project in construction and three, including this one (8665 Hayden Pl.), in various stages.
“We are kind of debating now whether to let one project go because of the area it is in — which a lot of people are doing.
“But we saw it kind of coming. It really kind of hit at the beginning of this year.
“You could still get loans in 2007. But from the beginning of this year, we pretty much knew you couldn’t get loans for any kind of construction projects.
“It just has gotten worse. We foresaw a difficult time in trying to sell or lease property. I am in the residential field. But we did not foresee what is happening in these capital markets. The credit crisis. It is just ridiculous, what’s going on out there.
“All the banks we have worked with just stopped doing loans completely. Just stopped. “
Mr. Reitz spoke up. “Equity investors, same thing,” he said.
“With that,” said Mr. Edwards, “everything has been put on hold.
“Hopefully, that will start to change within the next couple of months.”
To be continued
