GPI's Lee Wagman On $300M Equity Raise, Amoeba Controversy

It has been an eventful couple of months for GPI Cos.

A West Los Angeles-based developer and investment manager, GPI recently received a $300M equity commitment from an undisclosed pension fund and is fighting a lawsuit over a mixed-use project that replaces what some call a landmark in Hollywood.

Founded by Cliff Goldstein and Drew Planting in 2008, GPI currently owns and is developing more than 1M SF of commercial and residential real estate in and around Los Angeles.

Bisnow caught up with GPI partner Lee Wagman to get his thoughts on the recent equity commitment from the undisclosed pension fund, what the company plans to invest in, the ongoing topic of a possible recession, and the future of the high-rise, mixed-use 200-unit residential with ground-floor retail development planned on the site of the Amoeba Music building on Sunset Boulevard in Hollywood.

Bisnow: What is the name of the pension fund? 

Wagman: I'm really not at liberty to make that announcement. We have had a multi-year relationship with this same fund. (The unnamed pension fund previously allocated GPI $200M. Along with this recent investment, the firm now has $500M from this pension fund.)

Bisnow: What's driving this investment? 

Wagman: Public investors/pension funds are interested today in aligning themselves with the actual developers and operators rather than going through a fund, which then allocates to investors and operators. It avoids what's called a double-promote. 

It is a trend in the investment world today in real estate to align themselves directly with operators.

Second, there is an expectation we are one of a few local experts in sourcing, evaluating and then executing complicated investments in Southern California.

They are looking for partners that have institutional credibility, a long track record and have an ability to invest capital wisely.

Bisnow: What are you planning to invest the money in? Is there a certain asset class or submarket within Los Angeles or Southern California that your company is eyeing?

Wagman: We are geographically focused on Southern California — throughout Los Angeles and San Diego. The asset classes are broad. We invest in multiple asset classes. We are investing in office space, in particular, creating new office space by adaptively reusing other buildings. We've adaptively reused department stores, warehouses and manufacturing facilities and created office space out of it. Usually these have an industrial feel with high ceilings and large windows and [are] in areas of the city that are well-amenitized for office space.

We've invested in medical office space, in particular buildings where we can improve it physically and the quality of leasing. We invest in mixed-use projects, primarily multifamily with some retail amenities and flex-industrial space that [is] being used as high-productivity office and warehousing.

Bisnow: You've received this large equity investment at a time when there's so much talk about a recession either happening later this year or next. Do you/your company have any fears of a recession?

Wagman: We are very cautious. We always invest with a mind to potential downside risk. What that means is we always have multiple business plans for an asset and conservative underwriting. We are very conservative in our financing and the leverage we put on in a project. We are concerned.

Overriding that though is a fundamental belief in the long-term strength of Southern California. In particular, the continued in-flow of foreign capital, growth of certain key sectors in the market [especially] the convergence of technology and the media. Look at Netflix, Hulu, Apple and Amazon in the last few years. That has really been driving a lot of growth and helped regenerate a lot of neighborhoods.

Bisnow: So are you one of those people who believe a recession is coming?

Wagman: I believe we need to be cautious and be prepared for it.

Bisnow: Are there any plans of keeping the Amoeba Music building? What are your company's future plans for that site?

Wagman: We created a really responsible and beautiful plan for that building. It's a relatively new building and we bought it directly from Amoeba because they felt that it was more important to them to relocate. So we weren't in any way dislocating them. They chose to sell.

We put a plan together to provide more affordable housing [that is] more energy and water efficient — 15% more than required by code. 

It's a plan that we are very excited about developing. It's a shame given the tremendous need for housing we have in LA that responsible projects near transit are getting slowed up.

Bisnow: So what is the current status of the project? 

Wagman: We have been approved by the [Los Angeles] City Council. There was a lawsuit that was filed [by AIDS Healthcare Foundation and the Coalition to Preserve L.A.]. We will contest the lawsuit. And when we succeed, we'll pursue the development.