Hayden Tract Builders Working to Maintain Their Sunny Disposition

The crisis that has filled the newspapers and clogged the airwaves has come home to Culver City. These two mid-30s builders have been pondering how this will affect their vision for 8665 Hayden, a scaled-down split-level business condo project that has, almost predictably, attracted noisy protests from Hayden Tract neighbors for nearly a year.

In the beginning, several years ago, the partners, who operate REthink Development Corp. in the Hayden Tract, made greenness their rallying cry. Their sensitivity to green building with the environment in mind — not so common at the time — helped Mr. Reitz and Mr. Edwards hurdle barriers that impeded others.

Early Signs

Together, the partners recognized earlier this year that difficult times were threatening, although they were not more prescient than anyone else in gauging the astonishing scope of the fiscal emergency.

Unlike some leaders in the industry who have shifted from foot to foot when asked about the wisdom of the $700 billion bailout of financial institutions, the partners endorse the unprecedented move , not the ideal, but the best under the rushed circumstances.

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“The bailout is definitely a mixed bag,” said Mr. Edwards. “But all the banks we worked with had just stopped doing loans. Just stopped completely.”

“Equity investors, same thing,” said Mr. Reitz.

“Everything was on hold,” said Mr. Edwards. “Something had to be done, and hopefully the bailout will change things in the next couple of months.”

What will make conditions change?

It’s in the Mind

“Confidence that comes from this move,” said Mr. Edwards. “The bailout is good for confidence, and banks need confidence that they can go forward with business and be confident they have a way of covering themselves if they run into trouble. All things had ceased. It was like everything had frozen, and something was needed to lubricate that.”

In the short term,” said Mr. Reitz, “the bailout is going to cost a lot of money. But some big solution needed to happen. A lot of it has to do with confidence.”

Fully six months ago, Mr. Edwards said, the company recognized that what was widely regarded as just a Wall Street problem, until late September, was a cinch to reach Main Street — this, long before America’s pundits and investors acknowledged the fact.

“If we were trying to get a loan now, things would be worse,” he said. “But we have been at the front gate, seeing what is happening at the credit markets. This bailout was an absolute necessity. It’s about all the stuff behind the scenes where banks stopped lending to each other.

“We have heard stories where guys with lots of money, and amazing balance sheets, can’t get loans — for small things. When that starts happening, everyone should sit on the sidelines. The press finally saw this was not a stock market problem but a loan problem.

“The biggest, scariest part to me was something called ‘commercial paper’ out there. All the money market funds everyone is invested in with their 401Ks. They take those and lend money to corporations so they can make their payrolls because they have ‘accounts receivable’coming in, and they need to be able to pay their employees. That stopped. Companies seriously cannot make payroll now. Once that happens, it is a house of falling cards, one piece and the whole thing starts to fall apart.”

In Mr. Edwards’ opinion, “the market doesn’t need to get back to where it was. It just needs to get moving again.

“We are going to be in for a world of hurt the first quarter of next year when these corporations start reporting their earnings. It is going to be bad news. But, if the banks start working through their things, then the economy will start growing again.”