← The Kirsh Connection
The Kirsh Connection
Why the Westside Always Wins: Ron Smith & David Berg on LA Residential Real Estate, Relationships & the Future of the Pacific Palisades
00:51:59
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- [00:01]
A
Hi, I'm Andrew Kirsch, co founder of Sklar Kirsch. On this podcast, I interview industry leaders. You'll hear their real time opinions on today's market, their background, unique career highlights and guidance for newcomers to the industry. This is the Kirsch Connection. Welcome to another edition of the Kirsch Connection. Thank you for all of your kind feedback on the the new set design, the new branding, the new name. A lot of great feedback on our recent guests, so keep it coming. Truly appreciate it. On this week's episode, we've got Ron Smith and Dave Berg of Smith and Berg, a division of Compass. They are one of the top real estate realtors in the residential market on the west side of Los Angeles. We have a wide ranging conversation of the rebuild of the Palisades and how the residential real estate market is in general on the west side and what the future holds of the residential brokerage business. I hope you enjoy my conversation with Ron Smith and Dave Berg. Welcome to another edition of the Kirsch Connection. I am here with Ron Smith, Dave Berg, Smith and Berg of Compass. What is Smith and Berg division of Compass? What is the actual title?
- [01:22]
B
It's actually the Smith and Berg Property Group.
- [01:25]
A
Excuse me.
- [01:25]
B
Yeah.
- [01:26]
A
Okay. Well, good to see you guys in studio.
- [01:29]
B
It's great to see you as well.
- [01:30]
C
Good to be seen.
- [01:31]
A
Usually it's either at Brentwood Country Club or touring houses throughout the west side. And this guy, you know this guy Dave. Did we meet at In Wild Di or did we know each other before?
- [01:47]
B
I think we might have met each other before, but. But we got to know each other
- [01:50]
A
in Wild extremely well through that program. Great week in Israel, Ojai, if I recall.
- [01:59]
B
Yeah, we've been around the world together.
- [02:02]
A
And then Ron, we met through.
- [02:05]
C
How did we meet?
- [02:07]
A
I'm gonna assume I'd say through this day.
- [02:09]
B
Through Osmosis.
- [02:10]
C
Yeah, through Osmosis.
- [02:12]
A
So I would say most of my podcasts focus on the commercial real estate business and today we're going to focus on residential. So much of, you know, every. Everyone is. Most people are going to have a residential real estate transaction or more than one in their lifetime. So it's good to hear from hopefully multiple. Yeah, well, for you guys, hopefully.
- [02:38]
C
Hopefully with us.
- [02:39]
B
Well, it's, it's, it's always refreshing to lean the conversation towards residential. It's something that Ron and I are both very passionate about and so what do you want to talk about?
- [02:52]
A
The LA Kings losing game one.
- [02:54]
B
Well, we're going to move on from that because there's still six more games in the series, and by the time
- [02:59]
A
this podcast airs, they will have already won The Stanley Cup.
- [03:01]
B
100%.
- [03:02]
C
True story. And we'll see how it goes Thursday night.
- [03:04]
B
That's right.
- [03:05]
A
So let's get first your backgrounds and then we'll talk about the market in general. Let's start with Mr. Smith and that amazing shirt that you're wearing today.
- [03:18]
C
It evokes the confidence that we have. Okay, it definitely does. Dave starts out mild, and then we just. We bring in the salsa. I probably been in the business a little over 40 years. David and I met when we had a company called Partners Trust. And David, it's interesting, he's got a. He'll have a different perspective on this. But as I recall, David was brought in to run the commercial division apartments, and was doing very, very well. Market started transitioning and then he decided to dip his toes into residential. We had one transaction we did together, we did another. This is when we were in the Beverly Hills office and we ended up being partners. It's worked out beautifully. We sold Partners Trust to Compass and then ended up taking over the marketing space that we have in Brentwood. It's on San Vicente, across from Whole Foods. Beautiful location, super happy there. We both reside in Brentwood and we've put a team together. We've got a great staff. It's very enjoyable.
- [04:34]
A
We'll get into all of that. Dave, how about your background?
- [04:38]
B
So I got into real estate by accident. I actually intended to be an attorney. And when I graduated college, I graduated in December because I transferred. So I was four and a half semesters in college, took my LSATs, got ready to go to law school and took a series of jobs in between the time I graduated. And when law school was supposed to start, one of those was as a assistant to a real estate broker. Broker. And, and I decided to. I decided to punt on law school and give real estate a try and somehow ended up, you know, with an apartment directory in front of me, cold calling for apartment buildings and. And built my own business doing commercial property, primarily apartments, some retail, a little bit of industrial. And then. And then, as Ron said, you know, made a pivot in. After the financial crisis or during the financial crisis in a residential. Just somewhat out of necessity. And then also it just kind of being one of a few commercial people in an office of primarily residential. Like it, it felt like it was a great fit for me. You know, I saw a lot just kind of by being in the soup, so to speak. And, and, and I Made the pivot and it was, it was a smart choice.
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A
And so what areas, locations within LA do you guys focus on?
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C
Well, I'd say we're pretty agnostic. We're more client based. We both reside on the west side in Brentwood. David.
- [06:12]
B
Probably, I mean, look, we sold just in last year. We sold probably not probably, roughly about 180 homes. So the overwhelming majority of them are on the west side. However, you know, many of those transactions are in the Valley. You know, Venice, Mar Vista, Beverly Hills, Cheviot Hills, Palm Desert. I mean, you know, if. If it's attached to the ground or if it's just land, you know, we'll. We'll go there, but. But mostly on the west side,
- [06:46]
C
you
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A
know, I would assume.
- [06:48]
B
Or.
- [06:49]
A
What percentage of your deals are you representing both sides?
- [06:55]
B
Less than 15%.
- [06:57]
A
Oh, it is that small?
- [06:58]
B
Yeah.
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A
Okay.
- [06:58]
B
Yeah.
- [07:00]
A
Because there oftentimes brokers are on both sides of a deal. As a lawyer, I can't be on both sides of a deal. And I would imagine in the commercial world you see it quite often where brokers on both sides. It just seems challenging as to where your allegiance is.
- [07:20]
B
You know, it's a delicate dance. I would say that it depends on the parties and the circumstances. There are certain circumstances where I would highly recommend against it, and there are other circumstances where I think it's probably mutually beneficial for both parties. So I think having the wherewithal and the understanding of, you know, who you're dealing with is probably the premise of how you should make a decision on whether or not you're getting into a transaction with dual agency.
- [07:49]
C
I agree with that. I think it's a case by case. We've had instances where it's been a perfect fit with buyer and seller, and we're there. Our ability to work through the nuances oftentimes will accelerate the transaction. And our goal the entire time is how can we put our client in the best position possible? Meaning if we've got the listing on a property, we want to maximize the sale price, but we also want to maximize the terms. You know, we want to eliminate, if possible, you know, retrading on the property. We want to make sure that, you know, we eliminate 2am moments, and to David's point, 15 to 20% of the time, if we're representing both sides, it's more organic.
- [08:45]
A
So I feel like maybe other than the Great recession, say from late 07 through 2010, 11, that in LA, specifically the west side of LA, it has been a seller's market, even through Covid Palisades fire. There's so many different headwinds that you would think, okay, the market is going to turn. How about just the exodus of a lot of businesses from LA to red states, Texas and Phoenix and Nashville and Vegas. But yet I still think there is this limited supply in West LA where pricing keeps going up. Is that a fair statement?
- [09:34]
C
I think it's spot on. But the thing that we find amazing, and it's been the same way over the last decade, each year you've had fewer and fewer properties that have traded. And regardless of the economy, Andrew, the West side is a pretty cool place to live. And you've got a finite number of homes that are ever going to be available. And it's not like we're in, it's not like we're in Orange county, it's not like we're in Texas, it's not like we're in Miami where you've got an unlimited amount of land. You know, you're really, you're more vertical in Miami, Texas, you know, Arizona, Houston, Dallas, you know, you've got, it's very sprawling. That's not the case on the west side. And because of that, I think there's a, there are a dearth of properties and because of that, we're going to have great stability in pricing. And based on the uniquity of each of the homes, you're right, the value is going to go up.
- [10:30]
A
But do you feel that as LA as a whole is going through some challenges from homelessness to jobs to the entertainment industry? I mean, I can rattle off so many things. Have you seen an impact on residential real estate?
- [10:49]
B
I mean, in our markets? Not, not particularly, I'd say, like, I feel that the, you know, there, even when we've had more inventory at times, it's not quality inventory. Quality inventory is very sparse. And so homes that are, homes that are highly desirable are always going to have activity on them because you're in a limited inventory environment. Even if you have little bumps along the way, you know, there, there's still just very few amazing great homes. So what we're, what I feel we're, what we work hard at is representing great opportunities, great homes. We have got to a point in our business where we're okay saying no to homes that, that might not fit within our, our profile. But at the same time, we do have a lot of legacy clients that we want to serve. But we really, we really aspire to have quality inventory.
- [11:44]
C
And the thing is fascinating, you left out interest rates as a challenge I should have. You left out. Yeah, you left out ula. Ula, the current political climate, you know, we've got an election coming, coming up,
- [11:59]
B
but you're not gonna get political.
- [12:01]
C
We can't. I was, I was told not to get political, but I'm going to. You know, we've got, we've got horrible choices and it's, you know, it's just through, through sheer optimism and our glass is always half full and believing that we're going to course correct, that things are going to get better. ULA is not going to go away. There's a looming billionaire tax that could evolve into a millionaire tax if that comes together. But all that being said, a lot of our dear friends and clients, it's a quality of life tax that we're paying, and it's a weather tax that you're paying.
- [12:43]
B
It's the resort fee.
- [12:45]
C
That's it. It is a resort fee. And so that's the way you got to look at it.
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A
A very expensive resort fee.
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C
Yes, that will continue to go up.
- [12:53]
A
So when you're representing clients, what are the hot button issues that obviously the seller wants the highest price. Right. Maybe they want certainty of closing and they're not as concerned about price, buyers, location, neighborhood schools. Talk about, I guess, just sort of the mentality of both your sellers and buyers and how you help them with, with these needs.
- [13:24]
B
Well, you know, the biggest, the biggest obstacle that we see now is just is, Is the commute, right? Is like, is your office east or west of the 405?
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A
And hence I move my office from Century City to just west of the 4 or 5.
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C
Exactly.
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B
Cross. We call it the river. You know, you got to cross the river.
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A
I call it the Berlin Wall.
- [13:41]
B
The Berlin Wall.
- [13:41]
C
There you go. I like the river better.
- [13:43]
B
Okay, but, but, you know, listen, I mean, as, as your family evolves. I mean, I, I have three children. Two of them go to school in Santa Monica. One goes in Bel Air. My office is in Brentwood. We have another office in Beverly Hills. It's, you know, it. We got to be mobile and move around. But, but, but for the most part, I mean, that's usually where most families are thinking is like, is like from a location standpoint, it's like, where's my daily life? If you have the means to be able to live close to work and close to school, like, that's a priority. And then beyond that, it's really just about honing in on what their family needs are. How many children do they have? Are there any sort of Special desires that they have. For instance, we have a lot of clients that are looking for one story homes or homes with elevators because of mobility issues. And so we're just trying to, we try to be great listeners and really hear what they're looking for and then hone in on it and find the right, the right choice.
- [14:38]
C
And I think all that being said, we also like to think a little bit outside the box, try to. Try to show a property or two that is on the fringe of what they're thinking about or might even be in a different neighborhood that they hadn't
- [14:53]
B
considered to open their mind up.
- [14:54]
C
To open their mind up. So that's on the buyer end. And I think probably our sweet spot over the last three or four years has been really, really focusing on, you know, how can we simplify the process for a seller? Okay. And you know, we've got a. We've really. David has worked really hard in putting together, you know, a staff that you've experienced that is really, really. Each member's got their lane. They're all cross trained. And our goal, our goal is to make sure that you, the clients don't have any 2am moments and that they know every step of the way, you know, what's going on in the process.
- [15:40]
B
High level of communication.
- [15:41]
C
High level.
- [15:42]
A
Yeah. I mean, look, in all transparency, a client of yours and I, after, I mean, all my listeners know of my situation with the Palisades fire. And you know, one day my wife woke up and had us moving to Nashville and the next day had us moving to, I don't know, part city, Hawaii. Hawaii anywhere. Right. And then, and then she.
- [16:05]
C
It's good you explored.
- [16:06]
A
Yeah. And we moved back into one of our apartments off Montana. And then after a couple of weeks of living there, she felt really comfortable of being back near Montana Avenue in Santa Monica. And you guys cajoled us. No, you showed us this house that we have now been. Would you believe on April 30, it will have been a year since we closed? I can't believe how time flies. But what I wanted to talk about was how I was blown away where I thought the main function of a real estate broker is sourcing the house, negotiating the price, and then you wipe your hands clear of the transaction until the closing date. And it couldn't have been further from the truth. And the number of people. It was. There was a text message chain that was set up immediately. It was team, you know, my address and the number of people that were walking me through this process. I felt Like I had an entire law firm at my disposal and it wasn't my law firm, it was someone else's. It was great to see. Maybe talk about just all of those steps that people don't recognize that you need assistance in today's. In a transaction.
- [17:23]
C
Well, start us off.
- [17:24]
B
Okay, we'll start us off. Well, first of all, we don't do legal work, so. But we do appreciate being compared to a law firm. I think that, you know, one of the things that, that, that inspired a change in the way that we do business is I'd read and I, I can't even find out where it was. I've tried to find it, but I read in like US News or some off site that it was like the rating, some of the most stressful times in one's life. And up there was moving and selling a house. And I don't remember where they ranked in the, in the profile, but. So we've really, we've really thought about how to make that part of the transaction easy for somebody. And, and you see now over the last 15, 20 years, there's a lot of real estate teams. The word team in real estate is a very, that's a. We could do a whole other podcast on it because qualifying of being a team is, is you could just bring a bunch of people together.
- [18:24]
C
But it's a very loose expression for us.
- [18:26]
B
What it means is that there are people in our group who have specific functions to work in tandem to make the sales process or the purchase process seamless. So one person on their own cannot do multiple transactions at the same time. It is just humanly impossible to do a heavy lift of expert work and be doing it all on your own,
- [18:54]
C
to be high touch and to keep that line of communication 100%.
- [18:58]
B
So that means for us is that we have somebody who is expert in handling all of our paperwork. We have somebody who is expert in coordinating and facilitating the inspections and coordinating that paperwork. So that. Because it's a lot to digest. I mean now on any given home they're anywhere between six to nine inspections that are taking place, sometimes more. It's a lot for a consumer to handle all at once. So we handle the coordination of that and also the digesting that information and putting it in a way where somebody really understands what they're buying. You know, you have the lender, you have title, you have all of these different outside influences in every trans escrow, you know, in every transaction. So we just try to put it into a funnel that makes it digestible for the consumer. And I think we've succeeded in that. It's. It's a work in progress. You know, we're always fine tuning it, but it's, it's something that we take a lot of pride in. And I love that you've. You've had the experience and it's a positive enough one that you've invited us on your podcast. So it's a.
- [20:02]
A
By the way, even a year later, I still go back to that.
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B
Your wife text me this morning.
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A
I know. And I need a fence for my lot in the Palisade.
- [20:12]
C
And I think the, of. Part, part of, part of the intangible also is, you know, even, even when we're initially walking through the property, you know, I love landscaping.
- [20:20]
A
I. I know that.
- [20:21]
B
Yes, he has a, he has a nickname, by the way, which we should tell the, the fine people out there. It's the. It was given to him by a client of ours. He's the silver fox with the green thumb.
- [20:32]
C
True story. Yeah, true story on both. Yeah, true story on both. The colorful shirt, you know, the color shirt, a colorful shirt. But the thing is, I love being able to say, you know, once we connect, you're stuck with us forever. And yeah. DAVID LAUGHS and for better or worse, you truly are. Because it's, you know, we think being able to walk through a property, our whole goal is there's a high likelihood you'll never retire in that property you buy. So we want to make sure that it's a great asset and we want to find out what is it about that property that really, that really rocks your world, you know, what would you like to see? So we walk through for you all. You go in the backyard. How can we expand that? How can we create a barbecue area? Is the pool really going to work? You know, and create yard around it, you know, and having that, having that conversation and having that vision, you know, and we've got the ability to. We've got the ability to. To give you images to see what it would look like. And it's also walking through the house. And the thing that's so amazing is that we really have a crazy, crazy Rolodex of vendors to every level, just to simplify things for you, because it's very stressful. It puts financial stress regardless of your resources, and it puts, you know, emotional. Right. Emotional stress. And so what we want to do is minimize that and try to make it fun. At the same time, I want to
- [22:07]
A
pivot the conversation a little bit about AI technology. I mean, today I Can't go a single day without somebody asking, what do you think the future of your law firm business will be with AI? Do you think your clients are still going to need you with AI? I go back years prior, maybe a decade where people ask that same question with, with respect to residential real estate brokers, when Zillow and Trulia and Redfin all came out, where we all have access to the same information MLS in terms of sourcing, which local, which houses are for sale, the price for those houses comps. But yet it seems like the residential real estate brokerage industry is as robust as it's ever been. So I guess my question is for someone who has to deal with the, you know, AI and clients of mine telling me how to do my job, essentially because this is what I spit out. How were you able to incorporate those technologies several years ago and still be valuable to your clients?
- [23:34]
C
AI has been a pretty amazing tool. Dave can talk about it on the. As far as emails, scripts and being able to really look at contracts. When I'm talking about designing, we can use AI now to walk through the house and come up with specific designs in real time. You can throw out an idea, we can go back to the office and get it back to you within hours. The thing that's so amazing about that, I think back about maybe six, eight months if we had a conversation about redesigning the landscaping or redoing a room, Dave and I would talk. We would have to go to our marketing department and we'd oftentimes deal with somebody overseas to get that done. We can get that same work done literally within minutes of having a conversation.
- [24:35]
B
It might not be the same quality though, but it gives you a good
- [24:38]
C
enough, it gives you a good enough idea. Because the reality of it is that for the most part, agents definitely, and a lot of buyers and sellers have got a limited imagination. It's very tactile. You have to see it. And so I think AI has been instrumental in helping us do that. But it is not going to be able to step in and have that one on one conversation to be able to make sure that everybody in the room is comfortable. We can take facts and then apply our secret sauce to being able to, you know, to connect the dots.
- [25:17]
B
I think, you know, we look at AI as a tool. I don't, I don't actually look at it as a threat. I don't think that you like. And I think the same is true for your industry as well. It's like you have, you have special specialized knowledge and that's what you get rewarded for. That's why you have a job and that's why people hire you. And when it comes to real estate, you know, there, it's so nuanced and every home is different. If you, you know, using Zillow as an example there, if, if your home, if you put your home on the market today and your home hadn't sold in 15 years, Zillow probably does not have the accurate information on the size of the home. If you, let's say you did an addition or whatever, the dynamics of your home change, they could say your home is worth 50% less than what it is the second you put it on at a new price. Their little calculator changes to calibrate to what you've put your home on the market at. It's a, it's a, it's a very flawed system. I think maybe in subdivisions, you know, throughout the United States where you just have like a reputation, the same house, it probably works, you know, in a West side market. It's very nuanced. I mean there are, there are major streets where, where we have clients will say, oh, well my Zillow says my house is worth this. But it doesn't take into account that their house might be on, you know, a street that gets 150,000 cars a day, you know, like Sunset Boulevard or something like that.
- [26:41]
A
So you're, or lot size or 80% of the lot is hillside.
- [26:45]
B
Correct, so.
- [26:46]
C
Correct.
- [26:46]
B
So, so having that knowledge, having understanding past transactions. Also, you know, when you talk about, when you talk about high value deals, like they're, they're not, it's not always what you see on the paper. Right. So it can be, it takes that specialized knowledge and having an understanding of what's going on in various transactions to really assess value. And, and I don't think, I don't think, I think AI can be a tool for that. I don't think it ever replaces what we do.
- [27:14]
C
Well, that's good to know.
- [27:15]
B
Yeah. You heard it here first.
- [27:18]
C
Reassuring, David. Thank you.
- [27:19]
A
Yeah. All right, let's get into some micro markets within west la. Let's start with the Palisades, right? Talk about the aftermath of the fire, like the first several months of what it was like in your industry and what is it today? So let's start, you know, take, Forget the first 60, 90 days, let's go. Unless we want to talk about that. But like, what, what, how were you helping clients and where was the, where was most of the activity?
- [27:56]
B
So, you know, after I'D say about, we're starting three, four months in.
- [28:03]
A
Yeah.
- [28:04]
B
Once the, once the first transaction took place, I think there were a lot of people just on the sidelines looking to wait and see what would happen. Right. And trying to emotionally wrap your head around. I didn't lose my home in the fire, but having lots of friends and clients and just people that we know in the community, you know, just through being part of their experience, I think that, that there were a lot of people just like yourself who were trying to determine, you know, what, what's next for me. Am I going back? Am I moving to Hawaii or Texas or wherever your wife wanted to take you? And that process took some time for a lot of people. I think there's a number of people who relocated to adjacent neighborhoods like the Palisade, like even other parts of the Palisades or Brentwood in Santa Monica Mar Vista, who said, hey, you know what? Like this, this feels pretty good. It's an established neighborhood. I don't know if I have the bandwidth to deal with rebuilding and going back and, and up until recently, maybe now, and I'm not fast forwarding, I'm just giving you this projection is like, up until recently, it didn't really feel like there was a lot of progress. And now all of a sudden, particularly in the Alphabet Streets parts of the Huntington, the bluffs, you're starting to see quite a bit of construction.
- [29:24]
C
The critical mass is coming together. Yeah. And you're seeing dozens and dozens of homes being built.
- [29:31]
B
There are some homes in the, there's some blocks of the Alphabets where you have six, seven homes being built at the same, same time. So that's very promising for a lot of people. And it doesn't feel maybe as raw now as it did then.
- [29:44]
C
And I think Caruso is doing a phenomenal job with the Village as well as with the park. And I think there's a serious push. And as with you, and as with a lot of clients, this has been an opportunity. The last two years have been an opportunity of reflection to figure out, you know, okay, this has happened. So let's make something, let's make something positive out of this. So evaluating whether they want to, whether they want to relocate in LA or another part of the country. And it was. Dave and I spent an inordinate amount of time in the office, probably the first two to three months. I think we helped 50 plus families with leases, you know, with leases, and just, okay, let's move quickly, let's get that done. Let's get a Roof over your heads, where you're comfortable. And one of the things that we leaned into that early on with clients insurance, you know, it's if. Who would have thought, who would have thought the number of nuances there were in an insurance policy. I guarantee a number of people have gotten an MBA in that. Oh, yes, we're experts.
- [30:59]
A
I'm now an expert. Are you representing clients who had not. Who weren't in the Palisades, but now they feel this is their opportunity to move into the Palisades and they're buying lots and they're building homes.
- [31:15]
B
So yes, for perspective, if we're somewhere within the top two, three groups that are selling lots in the Palisades, it's kind of an ever changing mode. But we're, we're. So we've had a lot of exposure to the market.
- [31:31]
C
We're in the soup.
- [31:32]
B
Yeah. So there you're now seeing more of it. You're also seeing a process where people are exploring it and not pulling the trigger after they kind of learn about the economics of it. You know, it sounds great until, you know, I've built a home before. So you know what the, what that procedure's like.
- [31:53]
C
It's a fabulous, it's a fabulous test on your marriage. Okay.
- [31:57]
B
But we've sold a number of lots to, we call them home sites. We've sold a number of home sites to people who are either moving from within the community or from adjacent communities. Now you're starting to see more developers step in, which is which from a landowner perspective, home site owner perspective is starting to drive values up. So we've seen a very interesting, you know, we have some graphs that we can share with you that, that might be interesting for you to absorb. But the market dropped and is now very steadily recovering. And the amount of inventory, good inventory is, is, is very sparse. So if you're looking for a lot now in the Alphabet streets, it's appropriately priced, it's getting multiple offers on it. If you're looking in the Huntington and it's appropriate price, it's multiple offers. So you still have a, who are these buyers? It's a, it's, it's a mixture of people who are upgrading from within the community, they're coming from adjacent communities or this is their finding. Like I'll give you an example. We have a client that bought a lot in the El Medio Bluff that came from the, from the highlands. So, you know, that was their opportunity. They felt like they were upgrading, they wanted to be in a different location and they chose a great site and purchased there. But then, you know, then we've seen a number of neighbors buy their lots as well. So we've sold, we've sold lots to neighbors who just want to expand their footprint. And we just sold a lot on Musk and Gum where I believe the neighbors purchased like three lots in a row. And he's going to have an awesome yard with ocean views and a lot of greatness. So, you know, it's a very mixed bag, but it is a market that we see has action. And I think for me personally, Ron and I spent a lot of time up there is that we're see the progress is very promising.
- [33:59]
A
And what about just the time to get permits to build?
- [34:05]
B
It's not so bad. I mean if you have a pretty straightforward site, it's taking place pretty quickly.
- [34:14]
C
Nothing's changed. So if it was, it is taking the same amount of time, Andrew, in getting permits as it did two years ago, three years ago. So, you know, the current administration saying they're fast tracking it. That has just not happened. However, I'm going to be positive and the positive note is that as long as you're working within the parameters of allowable, buildable square footage, you can get everything taken care of within 60 to 90 days and get permits done and a lot of changes you can do over the counter. So that's positive. And we've had the pleasure and the privilege of working with some really, really good builders that are very efficient and can get things done quickly.
- [35:02]
A
And how long would you say it would take once you have a ready to issue permit to break ground till you get a CFO for a house that doesn't have a basement?
- [35:16]
B
It depends on the size of the home. But let's just use a 4,000 square foot house as an example. Should be like from the day you demo till, till the home is ready to have a CFO and then you're waiting on the city to get utilities? Because that's a whole other question. But probably about less than 12 months and then, and then however long it takes the city to hook up per minute power.
- [35:37]
C
Spot on.
- [35:38]
A
Yeah. So when you drive through the Alphabet streets today, which is where my house was, I mean, I think I joked with you, you need a military grade Humvee vehicle to, to drive on the streets. So, so what is the timing of. I mean you've got, you see these homes that are almost ready to be lived in or a few of them. How are people? I almost feel there needs to be a specific day where Moving day. Yeah, moving day where 100 people are going to go in. Because who is going to be first? Where they're going to live in the Alphabet streets and not have any neighbors.
- [36:13]
B
There are people living there already. We know somebody living.
- [36:16]
C
Correct. You got.
- [36:17]
A
I should have that person on the podcast.
- [36:19]
B
Yeah.
- [36:19]
C
You know what? It's the pioneer mentality.
- [36:21]
A
Yeah.
- [36:22]
C
Because this is. It's no different than a gated community in Orange County. In Palm Springs, you're just one of the first moving in. You know that in the gated community there can be 500 homes and you're just going to, you're, you're just, you're just dealing with that process.
- [36:36]
B
Yeah. I think, I think that, you know, come this summer, I think there's going to be a lot of people, not a lot quantify that. There's going to be people living in the neighborhood and, and hopefully they can repair the streets so you don't have to go buy and buy a Hummer. Yeah.
- [36:51]
A
Well, you don't want to repair them too quickly because you're right. Repair. You know, you're building all these homes.
- [36:57]
C
They'll wait. And then we just got, we just got green. There was a green light on bearing the electrical lines, which is fantastic. And so that we know that for sure.
- [37:08]
B
Ron.
- [37:09]
C
It's been, it's been approved. You're hearing it now by me.
- [37:14]
A
By the Silver Fox at the green.
- [37:19]
C
They are. It's been. I've heard some rumblings it has been approved. But like many things in this city, they've got to figure out who's going to pay for it. Okay. And so it is a critical element. And where it's going to be most relevant is for people. People on streets like Las Casas and Elevated, where you've got views and you've got, you know, the power lines. And with them, with those being buried, it'll, you know, they'll be. I think when we look back at the end of this journey, it's going to be a beautiful, beautiful community.
- [38:01]
A
No, I know it will. It's just a matter of how long. Yeah. Before the fire. Walk me through what a new house would trade for price per foot. Yes. Every sub market within the Palisades would have a different price per foot. Use the Alphabet street, since it was completely decimated.
- [38:24]
C
You get two different numbers.
- [38:25]
A
Okay.
- [38:26]
C
What.
- [38:26]
A
So pre Fire price per foot. And what do you think that. I don't know what in three years what that house will trade for? Because I think in. For people who are doing. And no, I said it's an unfair question.
- [38:42]
B
I forgot my crystal ball today because
- [38:44]
A
the, the issue that so many of us, including myself is having is when you had transactions pre fire, how many were there in the Alphabet streets per month? A couple, three, four, five. And now post fire, two, three, four years from now of finished houses. If you end up having 20amonth or 30amonth, maybe that's unrealistic and there won't be that many. But my concern is you have so much supply, will that depress pricing? And so your residual value is an unknown figure. And I'm a little concerned for these developers.
- [39:25]
B
So let's start with the pre fire pricing.
- [39:29]
A
Yeah.
- [39:29]
B
Okay. So a new home about 4,000ft would give or take trade within the, I'd say within 5% of $1500 a foot. Yeah.
- [39:42]
A
And this is an Alphabet stream in the Alphabet.
- [39:44]
B
Yeah, yeah. Give or take
- [39:48]
C
Today.
- [39:49]
B
We don't know what that is worth. We're about to find out. We just signed our, we just signed a listing in the El Medio Bluff. We have a few listings where we've signed for the, for the alphabets. We're just waiting on kind of timing and feedback.
- [40:05]
A
But these are newly constructed, brand new homes. You can walk through them right now.
- [40:09]
B
We can go walk through, absolutely. They're.
- [40:12]
C
And finishing up, I think that's at 12, 1240 a square foot.
- [40:16]
B
They're, they're at varying prices depending on where they are. But you know, we will, I think that, that we're going to see, we're going to have a lot more data that will make this a more tangible conversation in the next, you know, and probably in the next six months we'll see a number of homes go up for market. I think that if you are a buyer and you want a house that's, you know, that's 4,000ft ish on a 6,500 foot lot or a smaller home on a 5,200 foot lot, you're going to have some choices. I think there's, it's going to boil down to the quality of the build. I think there's going to be some homes that are pretty vanilla. I think there's going to be some builders who put a little bit more, a little bit more flare on their homes to attract buyers. So there's going to be varying degrees of where, of where these things trade. At the end of the day is that if land values continue to go up at the rate that they have, you know, I think that, that they're going to have, we're going to have to end up at pre fire pricing sometime within the next seven years. It just, it's just going to be, it's going to be when and for. I know you want to say something, but for people like yourself who have, who have a lot that they're considering selling is that it's the question of what's the cost of me carrying that lot for an extensive period of time as it goes up in value versus if I unlock the equity. And for a lot of people who have their insurance proceeds tied up in an escrow account, so I unlock my equity plus the insurance proceeds, what could that money do for me in the interim? And that's the, that's the calculus. That's the calculus.
- [41:59]
A
And by the way, you probably end up pretty close to each other.
- [42:02]
C
I think it's a push. Yeah, I think it's a push. And so it's.
- [42:06]
B
Nobody knows.
- [42:08]
C
Right. But what we're looking at now. And I'll go back to the new community analysis. It's. You're buying in a new community and typically first in, first in, get a better deal than people because the prices will go up. I also believe and you know, support David's theory that it really comes down to today's value of money. If you can get your money out of the property and invest it or make another acquisition or buy a new house, it's a win win. And so you really do have great choices. Do you want to go back to the Palisades or do you want to, do you want to build a new home or do you want to buy a new home, you know, in another location?
- [43:01]
A
So let's talk about some of these other locations. We, you know, when I was starting out of shopping for homes, I don't know, 15 years ago when Courtney and I first got married, it was Brentwood Glen community or the. Is it called Sunset park around Ocean park in Santa Monica South Santa Monica. Yeah.
- [43:20]
C
Right.
- [43:21]
A
Are there other communities that have sprouted over the last couple years where, I don't know, first time home buyers, granted, west side home buyers are looking to make an entry point.
- [43:34]
C
I think Mar Vista has just exploded. I think Playa del Rey is doing incredibly well. Marina Del Rey is doing incredibly well. There's a renaissance there and there is a, there's a food scene in Playa and Marina that is phenomenal. I definitely think there are pockets in Venice along the canals and the triangle. And the triangle that are doing really, really well. And one of the things that a lot of people don't realize in Brentwood, you know, if you just head a little bit, a little bit north on Kent or on Bundy, on Mandeville. It's a country, you know, it's a country oasis that's just right off Sunset or right off San Vicente, you know. And I think the prices are, the prices are still quite a value in Brentwood relative. And we, you know, we left out Santa Monica, north of Montana. But to your point, Ocean park and Sunset park. Phenomenal. I. That was, that was our, our second house was at 1421 Hill Street. You know, you know, in Sunset park. And Sunset park is, is doing beautifully.
- [45:02]
A
Yeah, it's. Well, you talked about north of Montana. That's where I ended up. And as much as I love the Palisades, I love this community that I'm in. Just, I want to say just as much. You know, there are pros and cons to both.
- [45:15]
C
Yeah, you can't go wrong.
- [45:17]
A
You can't go wrong. I shouldn't even say there are cons. There's pros and pros. They're just different pros.
- [45:22]
C
You got a three block walk to get to Montana. And then if you guys want to venture east, you got the Country Mart. I mean, you know, life is good.
- [45:30]
A
All right, so final question. Talk about the business side of the residential real estate brokerage, you know, industry from there was that, was it the Supreme Court or lawsuit a couple years ago that, that impacted cooperation?
- [45:49]
B
Yep.
- [45:50]
A
From, from.
- [45:51]
B
Oh, you're talking about the. Clear cooperation was not a Supreme Court. You're talking about the, In August of 24, the commissions.
- [45:57]
A
The commissions. Talking about just the growth, almost like the corporate growth of perhaps your guys parent company to other real estate companies. Where do you see the industry on a macro level over the next five to 10 years?
- [46:24]
B
It's a layered question. I think I'll start with Compass because Compass acquired Anywhere Real Estate several months ago, which Anywhere real estate owns. There's so many brands, but I'll give you a couple of the big ones. They own Sotheby's, they own Coldwell Banker, they own Better Homes and Gardens, which is not prevalent in la, but in other parts of the country. I thought that was a magazine, I believe.
- [46:51]
C
And they have a magazine.
- [46:52]
B
I guess they have a magazine too. And many, many more. And so now I don't know the exact number, but they are the largest real estate company in the United States. I'm sure they have aspirations beyond North America. What's interesting is that Compass has, when you talk about AI, Compass has incredible technology which I think gave people a compass, a competitive edge. If they utilize the technology, I think that probably everybody will have access to it at a certain point. So the nice thing is, is that you've created a level playing field for anybody who's within any of these major companies, is that they have access to the best technologies. I think that that's paramount if you want to be an effective broker, is access. What I think ultimately it will do is that. And the pendulum always swings and what ends up happening. And I think the probably the same thing is true in the law firm industry, is that you have firms that will acquire a lot of little smaller firms or groups from those small firms. They go in and all of a sudden these new entrepreneurial lawyers like yourself pop out of the ground and start their own little boutique firms that have specialties like, like real estate or whatever it may be. So I think, you know, we saw that happen about 15 years ago. A lot of those companies, you know, like Compass acquired many of those companies. Many of those companies blended into the agency. You know, we're, we'll probably see something interesting happen with Keller Williams and ReMax. You know, there's, if you read about all these different companies, some of the large companies are not doing so well. At the end of the day, you know, I think that you're going to find we're going to see some more independents pop up. You know, Ryan Searhant is just arrived in la. You have some small, smaller, when you compare them to something like Compass, like the agency, which have, you know, great footprint and great brokers. So you have, you have a lot of, you have a lot of interesting things happening in our industry. There's some firms that have been around for a long time that have survived as boutiques, like Normand and Associates. It's a great brokerage firm. So it's always going to be an evolution. And I don't know if that answers your question, but it's an answer.
- [49:20]
C
It's the answer. I think one of the interesting things is with the acquisitions of the boutiques, it was a lot easier to start a small company, a boutique real estate. You know, when I look back when we started Partners Trust, you know, the fundamental difference now is because of the, because of the financial structure that David and I have within Compass, we would be hard pressed to duplicate that going out on our own because of the way that we have structures, support.
- [49:53]
B
I mean, it's not just a financial arrangement.
- [49:55]
C
Yeah, it's, it's back office support. It's, as David said, the technology which Works out beautifully. So I don't know I'm going to challenge David on that. I don't know that we're going to see this proliferation of boutiques as we did before in being cyclical.
- [50:17]
B
I don't know if I used the word proliferation, but I did. But I did say that you're always going to have little independents pop up out of the ground and some of them will be successful. I mean, you will.
- [50:28]
C
But I listen, when you get down to, you know, when you, when you're looking at the P and L statement, I would challenge somebody. There is a way to. There is a way to work within the structure of a large company and create a, you know, a boutique like your own brand, like David and I have.
- [50:47]
A
Well, regardless of the size of the company or a law firm, it goes to service. And who are your brokers, who are your attorneys? You could have a 10,000 broker or agent company. You have a 10,000 lawyer law firm. It doesn't really matter.
- [51:06]
B
It's.
- [51:07]
A
Who is that individual broker?
- [51:08]
C
Exactly.
- [51:09]
A
Who's that individual lawyer? I truly appreciate you guys coming onto the show. I can attest, as a client and, and as a lawyer for some of your clients, the service that the Smith and Berg team is just literally second to none. And so thank you.
- [51:27]
C
Thank you.
- [51:28]
A
Absolutely. Thank you for providing me that service and the clients that we've gotten to work together on. So best of luck going forward.
- [51:37]
B
Thank you.
- [51:37]
C
I love.
- [51:38]
B
Thank you. And best of luck to you.
- [51:40]
A
Thank you. And that is another episode of the Courage Connection.