← The Kirsh Connection
The Kirsh Connection
Real Estate Speed Dating with Kevin Donner, Executive Vice Chairman of Newmark
00:46:04
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- [00:00]
A
Welcome to Real Talk Real Estate discussions with Andrew Kirsch. In each episode, Andrew interviews industry leaders. We'll hear their real time opinions on today's market, their background and unique career highlights and guidance for newcomers into the industry. You can find this show@skalar kirsch.com and on YouTube, LinkedIn, Apple Podcasts, Spotify, Google Podcasts and more. Now here's the host of Real Talk, Andrew K.
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B
Episode 82 of Real Talk. It's October. It's the best time of year if you're a Dodger fan. Going tonight, NLDS Game three. Hopefully the Dodgers take care of business and sweep the Phillies. By the time this posts, we'll be in the middle of the NLCS where the Dodgers will hopefully be playing the brewers or the Cubs. On this week's episode of Real Talk, we have Kevin Donner from Newmark on the show. He's not a Dodger fan, he's a lifelong Yankee fan. We'll see if they are able to stave off their deficit against the Blue Jays. Kevin Donner talks about his transition from being a broker in New York to coming out to la. I give him a lot of credit for only being in LA for 4 years. I feel like Kevin Donner is one of the most prominent people in the real estate business in Los Angeles. And we also talk about how he's dealing with the aftermath of the Palisades fire, being a Palisadian resident, his rebuild efforts and his stance on rebuilding the community. Anyway, I hope you enjoyed my conversation with Kevin D. Welcome to another edition of Real Talk. I'm here with my good friend Kevin Donner, Executive Vice chairman of Newmar. Kevin, welcome to the Real Talk podcast studio.
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C
Thanks for having me. It's the most anti lawyer law office I've ever been in. So it's good to say that's a positive, right? It's a huge positive. I was shocked when I walked in here.
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B
Yeah, no, we, we're very happy with this office. 1850s Hotel. I give a shout out to Alana Boddy, my client friend and landlord and, and Jane Burbank who you met, the designer. She took a shell of a building and created three unbelievable offices for myself for Alon's executive suite is like a combination of the Amman hotel meets Gordon Gecko, Wall street and then his insurance broker Venbrook. So it's just a great building.
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C
That's cool space. Well, thank you for having me. Appreciate it.
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B
So you're, you've only been, how long have you been in la?
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C
Four years in August A little over four years.
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B
I feel like, you know more people in that four year time or have met more people in that four year time than anyone I've ever.
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C
I call it speed dating. And I've been pretty deliberate about it when I came out here, not knowing a lot of people now, a lot of institutional clients. Right. But that doesn't necessarily translate into relationships. So I spent a lot of time getting to know people. And I tried to be, I don't want to say smart about it, but just getting to know people, personality and background, rather than talking about business would have been very presumptuous to come out and say, hey, this is who I am. This is my background. Now how are we going to work together? It was 1, 2, 3, 4, 5 meetings. And my wife jokes that I've done things that people won't do in terms of driving. Like I'll, you know, go to Beverly Hills for breakfast, I'll go downtown for lunch, go to, like, San Diego for a drink, and then, you know, back up to the west side for dinner, which you have to do. And you have to get to know people.
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B
I mean, people won't even date each other if they're on the sides of the 405 Freeway. And you just, like, did 400 miles in that one day.
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C
Well, listen, you and I lived in the Palisade, so. No, you understand the virtues of never leaving that bubble, which I can totally appreciate now.
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B
We'll talk about the Palisades. You know, my wife would never go east of Burlingame, So in. I should say, she wouldn't go east of Amalfi when we were in the Palaces.
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C
Well, that's like when we lived in, in New Jersey and people tried to make up all these towns as to, like, where good restaurants were. And we just said we had a rule if we got on the highway to go to New York City. And that's what we realized here. It's like, you know, why leave the Palaces? And there's like four or five good restaurants.
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B
Yeah, true. So talk about your background.
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C
Yeah. Where'd you grow up?
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B
College.
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C
Yeah. Background is a little bit different. I grew up on the East Coast. Grew up in New Jersey, went to college in Vermont after school, came back and worked in. In New York.
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B
Is it the Vermont Bears?
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C
The Catamounts? Okay, I'm wrong. We won the national championship in soccer last year, which was a shocker.
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B
In Division 5.
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C
D1. D1, D1. So it was on a golden goal, which, you know, we'll be living off of that lore for the next hundred years.
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B
And that gives you. That gives you school pride, that you're.
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C
We have a national championship. That's not skiing, which is great. So graduated in 98. And I was always, you're one year
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B
younger than I am.
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C
All right, well, you look a lot better than me.
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B
I'm like, nah, I don't know. I like your hairline.
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C
So, you know, when we graduated, everyone either got into banking or they were a lawyer or a doctor. And so I did what I thought I had to do, and I got into banking. I always interned in the summer in New York City for banks. And I went at a school. I worked for the New York Stock Exchange, corporate. Then I worked at Goldman Sachs in New York City for two years. In San Francisco at Goldman for two years, and then came back and worked at Credit suisse. And at 29, decided the luster of working at banks kind of wore off. And I was fortunate enough to meet, who ended up being one of my partners, Doug Harmon, who I'd met him years before when I was living in San Francisco, asked if I wanted to come in and interview at eastill, which was then eastill, not eastill Secured. And they took a chance on me. They would never hire someone like me today because real estate is, you know, it's an asset class and it's an industry people really want to get into. At that time, you know, it wasn't the case, and it was very fortunate, right? Oh, a lot.
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B
So you weren't doing any real estate?
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C
I had no real estate experience whatsoever. So I had. When I got in there, I was auditing classes, NYU at night, taking ARGUS classes, and was a little bit older. Right. So was able to take on maybe a little bit more workload and was building the models, writing the oms, doing the tours. And it was a great experience. Experience. And on the east coast, especially at east still, you're a generalist. So that's why we've always worked on all asset classes across the spectrum of equity. So I was there for close to 13 years at east still, then went through the East Still Secured, and was very lucky at the time in 2005, that's when we were part of the EOP transaction. I was one of the junior people on that and part of a lot of other fund transactions. More structured than just typical sales. The GFC happened, so we learned about UCC foreclosures.
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B
Before we get into that, just curious, like, what would you say the life of a real being in the real estate brokerage world Versus you know, typical corporate finance investment banking.
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C
It was actually really similar. Like my, my, my schedule and my workload is very similar.
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B
And again, how about dynamic of personalities?
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C
Very similar. Right, because remember Eastill was considered a real estate investment bank with, I mean you're an advisor so you have the ability to work on different types of transactions. I'd say the personality is very similar. Now the lead brokers and you like to say advisors, maybe that personality is a little bit different than like an M and a banker or someone who's leading like a merchant banking group, you know. But the transactions are pretty similar. Right. We were fortunate to work on very large deals. So the scope of it, you know, was, was not dissimilar to like traditional banking. But at that time, remember you couldn't work remotely. Right. So you're going into the office on Saturdays and Sundays getting, you know, getting in the office at 8 o', clock, work until 2, 3 in the morning. And what I tell junior people now is I wouldn't trade that for anything like the time of like eating in the boardroom with your colleagues at nine in the morning. I mean there are brutal, great times.
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B
You mean nine at night.
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C
Not, sorry, nine. Nine, sorry. Yeah, nine nights. So those were brutal times. But, but you appreciate the camaraderie, right?
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B
I slept under my desk at Latham and Watkins too many times. And I don't think any associates would ever do that today.
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C
No. When I talk to, and I go back to business school at the University of Vermont, I talk to a lot of the kids that are graduating, I give them advice. You know, number one is like don't ask what your work schedule is.
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B
Right.
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C
Is it flexible?
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B
Yeah.
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C
Right. That's the first thing you talk to them about. Right. Because they want to know what it looks like, you know, if it's, you know, is it a four day workweek? Yeah.
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B
What's the work life balance?
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C
Yeah, I mean that's a terrible indication, I think. You know, you also played a sport in college. I played lacrosse in college. You always like hiring athletes and you always look for that whether it was a college athlete or they did in high school. Cause it's a different type of work ethic.
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B
Totally agree. So anyway, continue. You were getting to the gfc.
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C
So it's just with every cycle you learn a different skill set. Yeah, right. So then the GFC came and we learned about the whole UCC foreclosure process and that really kept the lights on for us in New York for a long time. You know, that market's A little bit different out here in terms of the capital stacks. So, you know, you take it for granted when you say capital. You don't really understand what that means. I mean due to some sense, a little senior mortgages and a mez in the equity, but you really learn what cash collateral is, you know, quickly and why that process is such. So we did a lot of that and then the market took back off in 2010 and we were really fortunate to be in the middle of some, some really large transactions in New York and across kind of the Northeast and maybe a little bit further south on, you know, we call the Amtrak corridor kind of Washington up to Boston. Um, and then our team Left east in 2016 and went to Cushman Wakefield, which was a great move for us. It was a partnership. Those five of us who left like to say you gambled on yourself, but we were, we were pretty confident in going as a team. And that's, you know, the important thing in our business is really to be part of a team. Right. You can't do it on your own. And listen, I saw the one that came out here that you can't do it on your own. You need to be part of seasoned, you know, veterans is a loose term, but people who are in the market and are like minded. So we left in 2016, which ended up being a really good move for us. And then fast forward, I moved out here in 2021 as part of Cushman and Wakefield because while they had some people in Los Angeles, the idea was to really expand on the West Coast. In Los Angeles and New York are very similar in the sense that they're kind of hub and spoke markets where kind of center and then you work with all the regional markets and hopefully there's that interplay between all the partners there to help generate business. So moved here in August at 21 and then our team, myself and the New York team left and went to Newmark in February of 23. Just saw the opportunity and it's impressive what Newmark has built over the course of my career. And it's become kind of the pristine shop now across the spectrum of capital markets, whether on the debt, on the equity or structured finance. And that's where I'm today. So I've been here for close to. It'll be close to three years.
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B
Yeah, no, it's amazing. I can't believe you only arrived here in 2021. I feel like you've been a fixture in the LA real estate market for decades.
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C
I appreciate that. Thank you.
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B
So why the move from New York to LA?
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C
We realized after we left in 2016 that you started to see a lot of capital coming to the West Coast. Not to say it wasn't in New York. We were starting to see a lot of the groups that we were close with in clients that are more national in scope, spending a lot more time on the west coast. And you saw a lot of other, you know, a lot of big opportunities. We just didn't have an institutional business at Cushman at the time. Now that's not to say anything disparaging about people that are here. It's just, you know, the large business that we were used to and a lot of the clients and we wanted to have someone out here and we were flying cross country and pitching business and a lot of the clients said, listen, we'd love to hire you, but you can't be flying in and out of the market, which I can totally appreciate now. It's not. I think New York is a lot easier of a market to understand than Los Angeles, because Los Angeles is so many different micro markets in a small area that you need someone who's actually physically in the market and it's different. Right. You don't have the big trophies. Right? You have campuses, you don't have the big trophies like New York. So you have to really understand the market here. And what we were trying to do at Cushman was not dissimilar to what we had at eastil of this collaboration, this capital markets team. Team, not siloed brokerages. But how can you tie it all together? And by having one of the partners on the west coast for the team, we could actually help kind of bridge the gap there.
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B
So you mentioned that you noticed in 2016 a lot of capital wanting to go to the West coast, specifically LA. Is that still the case in 2025?
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C
I don't think you're not seeing as much. Not to say that that's permanent, but I think there's definitely been a sense of a pause on the institutional side, maybe on the multifamily, but we all know the issues with office. You're not seeing as much institutional capital coming to the west coast unless it's a unique situation. For example, if you had a Century City Office Tower for sale, you'd get wide spectrum of institutional and international investors. But other than that, it's still kind of on pause.
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B
You said you were a generalist at eastill. Are you still a generalist? Are there certain asset classes that you personally focus on?
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C
I try to be.
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B
How is that possible? I mean, so many brokers, you know, most brokers are so specific as to asset classes. How have you been able to maintain?
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C
Yeah, I'd say over the course of my career, probably did more office than anything than multifamily and retail. And retail, by virtue of being New York, it's more high street. But you know, like I was mentioned before, we all learned argus through building mall portfolios, so. Or more mall models. So I've done a fair amount of that over time. But office and multi, probably the two largest that I've done. But it's, it's, you know, from a high level when you're talking to clients understanding, you know, equity allocations, what people are looking for. Now, I've worked on hotel deals. I'm not a hotel specialist. Right. I've worked on a fair amount of industrial. I'm not an industrial specialist. So if we were to bring in deals like that, we bring in those silo teams, but it's working with those specialists to help generate business.
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B
When you are pitching to win deals to be their broker, does it help to be a generalist so you can talk about other asset classes or are clients looking for just sharpshooters and they just want a specialist in that particular asset class?
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C
Well, they definitely want the specialist. But it's also helpful when you're pitching the business.
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B
Right.
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C
Because it's not. It's like when you do an om, right, you go macro to micro. It's exactly what you were getting at. You want to talk about what's happening in the market. Right. If you're pitching the industrial deal, like why is this capital source looking at industrial versus office and how's that being allocated? So you really want to speak to the themes in the market at the time and then you drill down into the specific asset class. And that's where it's important to have someone who's day to day working within that. You know, whether it's industrial or office or retail or, you know, data centers, obviously a big alternative right now. We love to work on data center deals. However, you bring in a specialist and a team and infrastructure team to work on that. Yeah.
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B
So what is your perception sitting here, what, almost October, by the time of this launches? Probably mid October of 25 of the market. You know, the Fed reduced rates by 25 bips, likely to, excuse me, decade raise. Lower, lower rates by 25, probably another 25 to 50 before the end of the year. From my perspective as a lawyer at Sklar Kirsch, Transactional volume over the last four or five months has been just steadily increasing in transactional volume. Yet another segment of my client base has been frustrated that they can't get deals done. You know, that capital is unrealistic with the returns that they're looking for, wanting a net 18 or a gross 20. And my clients are saying that's just impossible. Or if it's a construction deal capital wanting a return on cost of a 7 and developers are saying impossible. So what are you seeing out there?
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C
I think you're still seeing that sense of pause, right? It is, I don't want to say unrealistic because I think investors have been so conditioned over the last three to four years as to what returns are. Right. Yield cost is a perfect example. Development, when you can buy a trophy deal or a minus deal and it stabilizes at a five and a half. Say you buy a multi deal at a high fours stabilizes a five and a half. Why would you invest in development capital? Right. Unless you can get to a 7 yield on cost or something like that. Untrended. Now that used to be a five. Right. So yes, rates came in 25 basis points. There's still a far ways for that to move, right. Before people adjust their return expectations. Yeah. There's that gap, that bid ask spread. And I think that remains at least until 2026.
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B
Yeah. Lou was sitting in your chair just before you last week and I asked about.
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C
Lou's much smarter than me.
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B
Well, he loves his, he loves escape rooms, he loves pickleball and he loves his sports memorabilia.
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C
Yes.
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B
And maybe he makes a unique wager every now and then. But I asked him about the recent 25 dip, you know, reduction in rates. And I said is that really gonna do anything? I was surprised by his answer. He said he thinks it will. And I said, and I asked him, I said why? He said it just, it, it to, to just talk about it is one thing, but to see it in action changes people's mindsets, even if it was just 25 basis points. So I don't know if you've seen a change over the last, what is it week or two since we've had the reduction of people now wanting to transact because the Fed actually reduced rates and indicated another 25 to 50 bit.
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C
I think that was already assumed. But, but I agree that you're saying it's, it's, it's a conversation like what's the result? There was this anticipation leading up to it. And then what does the Fed say in their comments and how does that translate into future action? Now the financing market has been incredibly robust. You've seen it over the last two years and it continues to happen. And spreads are presumably coming in, the base rates coming in. So from a financing standpoint, it's a great conversation. But to what you were saying, we've yet to see required returns come in at this point. Right. Because it's not just yes, cost of capital is important, but it's also fundamentals. Like what are the fundamentals look like? Okay, if you look at multifamily, it's great for multifamily because people still can't buy homes, right? Because it's still, yes, mortgage rates have come in from seven in your low sixes, but it's still prohibitively expensive for first time homeowners to buy homes. So that helps on the multifamily market. Right. So yes, California underserved, no one's building new market rate apartments, so that helps with that. But it still hasn't translated into cost of capital requirements changing. You're still not seeing core core plus and that's the huge gap that we're missing in this market. There's no real core core plus capital. If you have that capital, you really can have your pick of transactions. It's still kind of what's your value? Add what your opportunistic returns. Like when you say 18, that's pretty common. People are looking for 16-18s. It's tough to say I'm out there with a good 12 or 13.
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B
Yeah, no, and I have clients that, I mean we help clients with introductions to capital as well. And you know, they'll present a deal that has a 12, 13% return and they're expecting there to be capital for that type of core type product. And it's, it's crickets.
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C
Listen, I think optically that plays into how you value an asset, right? You may still get to the same value, but say there's a multi family deal, right. And there's in place rents. But you may underwrite lower in place rents with some growth rates to get to a higher rent year two or three, just so you can show that value add return versus if you market today, it's more core. Right. You're probably ending up the same value, maybe get a little bit higher. But optically you want to show that teens return versus the 11 or 12.
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B
Yeah. Let's talk geography and location, especially west coast. I do have a couple clients that have transacted recently in downtown la, but the majority of my clients won't even touch it. Portland hear about Trump wanting to bring in the, you know, federal government to clean up Portland. Most of my clients, I would say probably all of my clients won't touch Portland. Seattle, you know, maybe more people are interested in Seattle. Just closed a three pack of multi family for a client recently. Getting more traction. I was recently in San Francisco. I was blown away. For three years we've been hearing of how unsafe it is. Homeless problems, people going into a Walgreens, stealing shampoo, whatever the case, hotel rates on a Tuesday or Wednesday night, fifteen hundred dollars a night for a Hyatt Regency because a couple of conferences were, were in town, people walking about the streets, you know, maybe a homeless person or two, but nothing of the epidemic that we've been hearing. And so the perception is that San Francisco, the bottom was what, 12 months ago and it has been roaring back. Curious of what your perceptions are of sort of the main west coast markets.
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C
Yeah, you're absolutely. I mean San Francisco is, I don't think it's a surprise, right. I mean obviously the availability rate, you talk about office, right? The availability rate I think for there that's like 25, 30%. But there was a catalyst right there. There's always a catalyst as it relates to technology or kind of like ancillary industries. And you're seeing that now with AI and that was a market that the institutions were waiting to invest in. Right. At a basis just for the right entry point. So I think the end they had a shift in their political landscape. Right. And you have a mayor there who's a big family who came in and was listening to the local businesses and is really taking action now. It's not a slow process but you're starting to see that evolve. You've yet to see that in those other markets. I mean I think seatt there's a little bit of a political shift that'll probably be a little bit more positive. I think LA is, I hate to say it, it's still, as you talk to people from the outside, there's still this super negative connotation about the political landscape here and that's really difficult. And Portland is not dissimilar. Now Portland, you won't see people necessarily buy office but the multi family market, you've seen some transactions, you're mentioning downtown la, most of these trades office, it's private capital on the multi side, it just has to be so cheap. And we've had a couple of deals down there, we know a few things have traded. You will see institutional Investors on the bid sheet. Right. But you know, that is a real discount to replacement cost. We look at me like jeez, it's you know, 700,000 a unit to build and I can buy this at 300,000 a unit, you know, what am I missing? Or 3 to 400,000 a unit. So you will see on the multi side, downtown select, the institutional investors go in there on the opposite side. Be very difficult to do.
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B
But what do you think capital is more concerned about? The political landscape of a Los Angeles or a West coast market. But it's still a supply constrained market. They know that it's very difficult to build in these markets. Or are they more concerned about an oversupplied Sunbelt market where maybe the political. You have political support but yet you could build to your heart's desired and you know, declining rent, declining absorption, endless supply. Where are they more concerned?
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C
Yeah, I think, you know, it's interesting about the Sunbelt because I remember we were selling deals in 2020, 2021, 22 like we worked on. I remember a big deal in Orlando. All right. It was like 1200 units of I would say B multi, which is generous, really generous but it was a value add return. And we sold it at like a 28 cap. Right. What year this was probably 22. All right.
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B
So it's like price spring of 22
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C
height of the market before it was, it was like, it was like a, you know, I said like a 28 cap and they finance it. You know it was like a, you know, 25 floating rate debt. You wonder where that is right now. Right. And that's a lot of you.
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B
I can tell you where that is.
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C
Yeah, no, I know. Yeah. So I don't think you, you've heard about the pain just yet on the multi side. But I think that that will come because your point there's. There was a lot of dollars who went into the sub belt. Yes. The oversupply. But I think people are, whether they talk about red or blue states. Right. People are focusing on the more getting back to politics. That's really a driver of where you have business running environment and where people really want to go and live.
- [24:48]
B
So what I've been seeing more capital flowing is business minded areas of blue states. So supply constrained markets but in a business friendly micro city. So maybe not city of la, but Orange County, South Bay, El Segundo or like Ventura up Newport. Yeah, Newport and then parts of Seattle. Same thing, you know, in that metropolitan area.
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C
Well, I think for Seattle. Right. Yes. You have the huge Monster technology companies there. Right. That kind of hit pause. And I can't speak exactly to it, but I do think a lot of the news out there probably wasn't 100% accurate about the Amazons and Microsoft's. Yes, they're probably on pause kind of reconfiguring their space needs, but they weren't pulling out of the market. Right. So they're still there. So the office market in certain pockets will come back because those tenants aren't leaving those markets. So when you talk about other micro markets around la, you're right. Like I love El Segundo, like and maybe I'm a little jaded because I first moved out here. That was an area that I really focused on. It just made a lot of sense. Right. The single story, the multi story. You saw the infrastructure that was in place and the affordability of the employees who are living around there and the accessibility. You know, even people traveling from say like the Palisades are Malibu. I know it's far, but being able to go down the west side. Right. And those office buildings to me made sense. Now some of the other pedestrian office buildings where you have 20, 30% vacancy, like who fills those again in other markets like downtown, unfortunately not to beat on that there's going to be like four or five buildings that really survive of the big institutional buildings. Now there'll be families who will buy and they'll have four to five. I'm exaggerating. I'm talking about like the big towers.
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B
Sure, right.
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C
But you look at City National Plaza, like that's, I think it's like 100% lease now. You know, the Commonwealth owns or US Bank Tower, which you know, Silverstein owns and you're seeing traction. So some of those bigger institutional buildings. But there's going to be an opportunity like these cycles for. That's why families are buying because they look at the long term benefits of owning real estate.
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B
Yeah, well, I mean they especially families that are from Southern California who saw downtown and what it was, you know, even after Staples center was built. I mean that, that like, you know, 10, 15 year period downtown was where all the offices wanted to be. And there was a migration to downtown from the west side from Pasadena with the restaurants and the sports and, and living and grocery. And then Covid just, you know, it lit the fire. Probably shouldn't say that to a Palisadean. We could talk about that. And then it just. The exodus was nothing like I'd ever seen.
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C
Yeah, yeah. I mean it's funny, I remember coming out here with conferences and I'm again, I'm from New Jersey, my wife's from la and I remember going around like downtown LA live and calling me like, this place is great. She's like, I've been there three times in my life. It's great because you know, to me, someone who's coming from like a city, like New York. Yeah. To me that's a city, right. And that's where I would move if I was young. And you know, you have, it's walkable and you have restaurants and it was affordable. Right. And you're right, it was unfortunate because also a lot of deals that we worked on, remember even at Easel, we were selling a lot of funds, you know, for like Broadway Partners and like Beacon Capital and they all own big buildings downtown. And to me that was like what L A was.
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B
When are New Yorkers going to realize that L A is different than New York? Louisiana is about? You can go to the beach, you can hike, you can have a home and a pool and still be within 15, 20 minutes. All some people of their work. It's just different. We're not a dense.
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C
Well, I do appreciate it. My commute used to be was like an hour and a half when I was in New Jersey, New York, and
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B
the fact that I'm mass transit or.
- [28:48]
C
Yeah. I would go to the train, take the train in, walk, take the subway, walk. It was a process. I like love driving now. Like even, well, we're a little spoiled in the Palisades, right. Because Century City was like a 30 minute drive now. The fires were a little different because I would have to then go back west to drop my kids at school and it was like a Formula one race on Sunset every morning. But I appreciate the non commuting aspect of getting onto a train now. A lot of people love it because, you know, it's your process, it's your regimen, it's thoughtless. I like being on my own schedule.
- [29:19]
B
Yeah, no, absolutely. I've said if you can, if you can live within, let's say a 30 minute commute of where you work in LA, you've made it and your whole, your whole existence, your whole love of the city just changes when, when it goes 45 minutes to an hour, you know, but it's not as easy, it's expensive to, to, to live near where all the jobs are.
- [29:45]
C
I wanted, I was thinking, I want to get back to like your question before about the interest rates because I don't think it's as straightforward. Right. Because There's a lot of factors, right? It's. It's cost of capital combined with fundamentals. Right. So you have to look at various markets where underwritten returns have not changed. Right. But the biggest question, certain asset classes. And I don't want to pick on office because if I was as a generalist and if I was an investor, I would be focusing on office. Because the biggest question is, what's the residual? These assets are big. There's a lot of capital. Eventually people are going to transition back into office just because they have to do, and there's going to be a lot of money made there. But the question is, it's not necessarily the interest rates. It's like, what do the fundamentals look like, right? What is the new paradigm? Like, I remember when I first started, when I was underwriting office deals, even 20 years ago, as a joke, you'd put in like $55 for TIs and 25 for renewal. Like, when is that ever the case? Like that? The TI's are. But people bought off on it in certain growth rates. Right. Just to buy the deals. I think people have become a lot more cerebral in their approach and how they look at deals, and they're sensitizing them a lot differently. So it's how they're looking at the fundamental composition of the deal versus, you know, am I getting an 18? And what's my cap rate? What's my per pound? It used to be, you could point to one metrics. There's four to five metrics that you look at now to buy deals. And I think cost of capital is just one that plays into it.
- [31:08]
B
Sure. I would be doing a disservice to our fellow Palisadians if I didn't talk about the Palisades. Given that you live there, I shouldn't say you're from there. You're from the East Coast. Gosh. Of all the places you could have chosen to live in la, why did you have to choose the Palisades?
- [31:25]
C
So, yeah, well, twofold. I decided to move a little late in the year and I needed to go to public schools. Yeah. So the Palisades are the best public school system. And I happen to know a lot of real estate people that lived in the Palisades. So, you know, when I would go and visit and we were looking around. And then lastly, it's the closest thing to an east coast suburban, like where we came from, where I grew up in the town that I lived in for 10 years before, it was a community. Right. And like, it was Walkable. Like, you lived close to the village. I lived close to the village. Our kids would walk, they'd go to Garden Cafe. You knew where they were. They'd ride bikes. And my wife grew up in the Hollywood Hills, and she's like, this is not Los Angeles. And when you got the sense of that community, that's exactly why we moved there. And it was a really special place. So it was that together with the schools and we. I thought it was great. Like, I'm gonna move to LA and my three kids are gonna go to public school, and this. Put the taxes aside. I'm not paying for school. And it's fantastic. So those were all the reasons. And, you know, so I hope the community comes back.
- [32:26]
B
So talk about your. We don't have to talk about January 7th and that whole ordeal.
- [32:32]
C
We can. I was. We were total idiots because we didn't take anything.
- [32:35]
B
Kevin, you're not the only one. You're looking at an idiot.
- [32:38]
C
I was at my house till 4
- [32:39]
B
o' clock because we know. Here's what I said. And look, I'm sure my audience is tired of hearing my story. I did a whole podcast on my story. But most of the people who lived where we lived in the Palisades, close to the village, not hillside. Never in our wildest dreams thought the fire would have gotten to us. And I said to my neighbor that if the fire gets to our house. This was about 1pm yeah, if the fire gets to our house, the entire neighborhood is gone, and that won't happen. And sure enough, 10 hours later, the whole neighborhood was gone. So I beat myself up that I didn't take more things. I literally had my wife's jewelry box in my hands. And she said. She said, put it down.
- [33:29]
C
How about my wife's like, should we take petty cash? Like, not just leave it there?
- [33:32]
B
Like the $2 million of cash?
- [33:34]
C
Yeah, exactly. Not a lot, but it's like an envelope. And like, I'm like, I don't want to be that. She's like, how hard is it?
- [33:39]
B
Bring cash, jewelry, necklaces, whatever.
- [33:42]
C
Well, the funny thing is, like, I had so much stuff on external hard drives and for the reason if you have a fire. But like, if a fire house is burning down, not if, like, maybe it happens. So I had boxes of. My parents sold the house I grew up in, and I had stuff from my. From my childhood. I. Boxes of stuff from college that I had from VHS camcorders that I never put. I never digitized by Google. And it was in a box for A reason. And you look at that stuff and that's. That's the bummer. Absolutely.
- [34:11]
B
My bummer. It's for video.
- [34:12]
C
Me too.
- [34:15]
B
How about my high school football games where I was a kickoff returner for Beverly Hills High School turning those kicks. Yeah. It's those things that I want to show my kids. And how do you get that back?
- [34:27]
C
No, I. I know. And I had this. And my wife actually had. Put everything from tapes on discs, and I had them on discs, and I meant to put them on the cloud. Yeah. And. And I never did.
- [34:38]
B
I tell everyone now, if you have old photos, digitize. Not just that you have to get them on the cloud. Everything. Talk about your rebuilding plan.
- [34:49]
C
Yeah. So we are one of the few that's pretty far along.
- [34:54]
B
I saw the picture. It was amazing. So we totally framed house.
- [34:57]
C
Totally framed house. Well, we had. We had a spec house, which is good and a bad. I would never buy spec house again. But on the good side, we had original plans. So the plans that were stamped, can't say it was totally smooth. It's not like they expedited right away. We had a couple bumps with stamp plan. So we are where we are.
- [35:14]
B
Your house is basically.
- [35:15]
C
So now we move quickly. I'm using the same contractor who built the house. Not the company, but the contractor. And I really had insurance. It was more lucky than smart because, you know, I don't. I didn't really know the composition of my. My insurance policy, but it happened to be, you know, pretty good. And I had a 2% mortgage. So, you know, with combination all that, like the mortgage, probably the best asset I have. So I wanted to move quickly. And I have one kid who's in college now. I have a freshman. I have a seventh grader. And we went through. We all also went through. Covid went through the move. My kids have gone through a lot. And I just wanted into the house at this point. And we are living in an apartment, West Hollywood, renting a house right now. We're going to be. And we joke, we're going to. I mean, we're definitely going to be the only house in the neighborhood for a while. But I'm okay with that as long as my kids are like their own bed in their own room.
- [36:03]
B
That's. That was the issue for us of being. If you want to win every race you compete in, do you want to win this race for you? You want to win this race? You want to be first? I mean, yes, you'd rather have more neighbors, but psychologically, it's okay. For you to be one of the
- [36:20]
C
first on your street, I probably reacted more than thought. Right. And you're right because we talk about that and on our street, we still. People have included their lots and we are going to be the. We may be the only people there for a long time. And I wonder, is there going to be a supermarket? Right. Are they gonna be the things we're used to? Like, you know, some of the things we took for granted, like the farmer's market, which is amazing, and the community and seeing everyone there. I have to be okay with it. Like, am I 100 okay with it? Absolutely not. Right. I need to probably get different tires on my cars, right? Because they're going to be like, you know, military grade. Because of all I heard.
- [36:55]
B
Yes.
- [36:56]
C
I'm just thinking through that.
- [36:58]
B
No, I heard the roads are just, they're torn up.
- [37:01]
C
And on top of it, like, when all the materials come through, what's going to happen? And I joke that, you know, we're going to have amazing water views and ample parking for a long time. Right. Which what you do with the problem
- [37:11]
B
and then you're going to be upset when those neighbors build their houses because the views and the sunlight is going to be diminished totally.
- [37:18]
C
But I'm just, I just wanna, I. I wanna, I wanna home, right? We're in a house now. I want our home back, which we're missing. And I need for my kids in particular, have been moved around so much at this point. I just, I just want them to at least my daughter, who by the time we're finished, we'll have two and a half, three years left and my son will have four plus years just to live out like that. Childhood versus just being, you know, nomadic.
- [37:43]
B
At this point, there are no right answers or no wrong. I should say there are no wrong answers. There are all right answers because it's whatever is right for you and your family. And there's going to be 5,000 different decisions that are made.
- [37:55]
C
I think what we're all going to miss is the charm. Right? And I think that gets lost on a lot of people who are not from here who think of the Palisades as a certain type of place. Not understanding the combination of the old and new, which was like so nice of the people that have been there for 75 years and then the new people like us. Right. So it doesn't look like one big housing complex. Right. It looks like kind of like this, you know, mosaic of people that have been there for a long time.
- [38:24]
B
Well said.
- [38:24]
C
Yeah, yeah.
- [38:25]
B
Absolutely. Well, I can't wait to. If I'm invited to go check out the house. We're going to open a house.
- [38:34]
C
January, you know, January, you know, February 27th. Hopefully have a party, maybe on an open field open lot. Borrow somebody's, you know. No noise complaints. I love it.
- [38:45]
B
No, I can't wait. Are you ready for the world famous lightning round of Real Talk? Now, you have not seen these questions?
- [38:54]
C
No.
- [38:55]
B
Right. You can confirm that, Mr. Kevin Donner, you have not seen these questions.
- [38:58]
C
Yeah. I thought you were going to talk more about baseball playoffs, but that's fine.
- [39:01]
B
Well, let's just start. Who's going to win the World Series? Yanks, Yankees?
- [39:05]
C
I still have season tickets. I won't give them up.
- [39:06]
B
Yeah.
- [39:07]
C
All right.
- [39:07]
B
So revenge on last year? Yankees, Dodgers, or you don't think the Dodgers are coming out of the National League? The. The more challenging league, I should say.
- [39:16]
C
Wow, that's interesting. I think we get it. I think we get a repeat of it, too. And I think the Yankees win. Okay.
- [39:23]
B
All right, you heard it here. I was gonna say east coast or West Coast? What's better?
- [39:26]
C
Living East Coast.
- [39:29]
B
Okay.
- [39:29]
C
I'll tell you why. Four seasons. I missed the four seasons. Yeah.
- [39:34]
B
Not the hotel, but four.
- [39:35]
C
Yeah. Listen, you can't. I mean, there's. There's no substitute for how awesome the weather here is. But I'm like a skier. I'm an outdoors person, and I. I miss the fall. But I mean, the weather here is spectacular.
- [39:46]
B
I mean, yeah, 72 degrees and sunny most days, I agree with you. But when it's below zero in January in New York, I think you prefer living here.
- [39:58]
C
But you know what? Before you go, the one thing that surprised me, I was so used to Memorial Day symbolizing summer and everyone getting so excited. I was so shocked. Like, my first year out here, Memorial Day came. It was just like another day.
- [40:09]
B
Yeah, we don't. The holiday. Fourth of July is a big day here, but you're right. It's when summer is year round.
- [40:17]
C
Yeah, exactly.
- [40:18]
B
I was in Chicago for seven years, and the summers were electric.
- [40:22]
C
Yeah.
- [40:22]
B
You know, all the bars go outside in the beer gardens and. And the beach. Yes, there are beaches in Chicago. On Lake Michigan. Everyone's playing volleyball. It's just more fun.
- [40:31]
C
It's just the same. It's a different vibe.
- [40:33]
B
Yeah. All right. You've been at eastill, Cushman, Newmark Brokers are legendary for their boondoggles. What's the best boondoggle you've ever been on?
- [40:46]
C
Best Boondogo. Best I'm biased towards skiing, so we do. We used to run a small trip to not say small, to Snowbird, which I think is a great.
- [40:57]
B
I want to take my daughter.
- [40:59]
C
Awesome. Yeah. And listen, it's no frills, but I love the mountain. You get guides, you stay right there. It's a great way for people to spend time together. And you're isolated.
- [41:06]
B
Yeah, it's true. It's right there. Tucked away. And best airport, I think. Salt Lake City.
- [41:12]
C
Everything's 45 minutes easy.
- [41:14]
B
Celebrity childhood crush.
- [41:18]
C
Alyssa Milano.
- [41:19]
B
I like that one.
- [41:20]
C
Yeah.
- [41:20]
B
Who's the boss?
- [41:21]
C
Yeah. Only person I ever had. My wall.
- [41:25]
B
We'll leave it there. Favorite podcast, besides Real Talk,
- [41:33]
C
I'd say the Early Days of Smartless.
- [41:35]
B
Yeah, I don't listen to it anymore.
- [41:36]
C
Early days.
- [41:38]
B
I agree with you. How about the best show you're currently watching or just finished?
- [41:44]
C
Oh, I binge watched a lot of content recently. I really like Plutonic.
- [41:51]
B
What? I've never heard of it.
- [41:52]
C
Oh, Seth Rogen. Yeah. Apple. Yeah.
- [41:55]
B
Platonic.
- [41:56]
C
Yeah.
- [41:56]
B
Okay.
- [41:57]
C
More funny. I mean, I went through this summer. I'm by myself because we have a beach house in New Jersey. My wife's there all summer. The amount of content, I mean, I've ripped through a lot.
- [42:04]
B
I just watched last night with my wife, the Charlie Sheen documentary.
- [42:08]
C
Unbelievable.
- [42:09]
B
It's nuts.
- [42:10]
C
It's incredible. And I mean, the fact that he's still alive, but how candid he was, too.
- [42:13]
B
And then he flew a commercial airline or drunk.
- [42:15]
C
Yeah. Maybe we should take those. The handle back from you. Yeah.
- [42:21]
B
The market that gets the most positive response from Capital
- [42:27]
C
Miami. Yeah.
- [42:31]
B
Still. Still hot.
- [42:33]
C
Yeah.
- [42:33]
B
How about the market?
- [42:34]
C
And I think also what you're going to, you know, with what's expected in New York, you're going to see people reinvigorated of flocking down there.
- [42:41]
B
Oh, after the mayor election, huh?
- [42:42]
C
Yeah.
- [42:43]
B
What about the market that gets the worst reception.
- [42:52]
C
Downtown la? I'm keeping it tight. Tight. Yeah. Not because it'd be.
- [42:57]
B
It'd be.
- [42:57]
C
It'd be unfair to paint a broad brush.
- [43:01]
B
If you weren't in the real estate business, what would you be doing?
- [43:06]
C
Sports reporter.
- [43:08]
B
I like that. Yeah. I always tell people, sports executive, and
- [43:11]
C
then hopefully parlay it into something in sports business. I actually had written a business plan about, like a sports show focusing on. On athletes who are in various sports businesses. And this is like 25 years ago. And obviously it happened.
- [43:23]
B
You could have been like George Costanza and Seinfeld who ran the Yankees.
- [43:27]
C
So, by the way, it's really funny. After. After the fires, I'd reach out to the Yankees, and it was kind of disappointing. I was like, listen, I'd lost 30, 40 years worth of memorabilia, including seats I had from the original Yankee Stadium. Like, I have all these shirts, all these hats and jerseys. Can you send me something? It was actually pretty disappointing. They didn't send me a lot, but they sent me a bunch of bobbleheads. One is a Castanza bobblehead. Which of anything. That was worth it.
- [43:49]
B
Well, they send you something, so that's nice. Yeah. All right, last question. How long before the Palisades returns to normal?
- [44:05]
C
Seven years? Yeah, I wanted to say five, but that'd be unrealistic. And I want to say 10. That's too conservative.
- [44:14]
B
2032. That's a long time.
- [44:16]
C
Yeah.
- [44:18]
B
Look, Kevin, I know I started at the outset. I'm amazed that you've only been in LA for four years, because I feel like you are a figurehead in the real estate community. And so kudos to you for penetrating our region and our industry here. But knowing you for the last few years, I have no doubt that you have become one of the kings of LA real estate. So I appreciate you coming on and thank you for your time.
- [44:46]
C
Well, I thank you for saying that. I mean, not yet, but listen, I will say, when people ask me the difference between New York and la, and I'm not saying anything bad about. About New York, I really liked all the people in our industry. You know, generally, you know, you get a very good feeling. And we all came up in the business with people from the time we were 22 to where we are now, you know, 50 years old. But you also knew what people were like then and what they are now, and see how people have changed. I've truly enjoyed meeting new people here, and I thank you. And I know, you know, we have a group of friends and we're in the Palisades, and we'd all get together, and I know you and I tried to do that a lot, so I appreciate that. You know, everything you're saying, I have a long way to go, but I'm here for a long time and hoping to continue to build and evolve. I love it.
- [45:35]
B
Well, thanks again for coming on. I appreciate it. Best of luck. And that's another episode of Real Talk.
- [45:43]
C
Thank you.
- [45:45]
A
You've been listening to Real Talk Real Estate discussions with Andrew Kirsch. You can catch prior episodes@skalkirch.com and on YouTube, LinkedIn, Apple Podcasts, Spotify, Google podcasts, and more. Thank you for your positive reviews, comments and for sharing the show with others.