DOWNTOWN LOS ANGELES - The year was 1997, and a Downtown diamond dealer named Naty Saidoff was offered the chance to buy the International Jewelry Center at 550 S. Hill St. for $20 million.
Saidoff, who had already built a successful side career as a real estate investor outside of Los Angeles, was looking to buy in Downtown. He was seriously interested in the IJC.
Some associates, however, urged him to wait on the deal. He listened, and shortly after the building was sold for slightly more money to developer Judah Hertz. A decade later, Hertz sold the IJC — published reports said it went for $144 million.
Saidoff was devastated.
“I was so upset with myself for not having pulled the trigger, I went as far as possible within Southern California and I wound up in the Inland Empire market,” Saidoff said.
Sixteen years later, Saidoff has more than made up for the squandered Downtown Los Angeles opportunity. In the last 12 months, his Bel Air-based holding company Capital Foresight has quietly acquired 10 area buildings, making him one of the community’s biggest and most mysterious property owners.
The first Downtown acquisitions by Capital Foresight were three Skid Row residential hotels — the Baltimore, King Edward and Leland — purchased in partnership with Historic Core developer Izek Shomof. They also snatched up the Santa Fe Lofts, a two-building complex at Sixth and Main streets, and the Binford Lofts at 837 Traction Ave. in the Arts District.
Additionally, the firm is planning adaptive reuse conversions at three other recently acquired properties: the Title Insurance Building at 433 S. Spring St., the Maxfield Building at 819 S. Santee St. and the Capitol Garment Building at 217 E. Eighth St.
It also bought 419 S. Spring St., the structure adjacent to the Title Insurance Building, where a separate entity has an option to develop a hotel.
Saidoff’s spree is likely not over. He said the firm is considering additional Downtown purchases.
While Saidoff’s interest in Downtown is tied to his mistake with the IJC, it also aligns with his general investment strategy. He has bought housing properties in Denver, Austin, Tx., Orange County and Long Beach, almost always at the bottom of the cycle.
Capital Foresight does not usually do adaptive reuse, but it does have one such notable project under its belt. Saidoff financed the transformation of the Walker Building in Long Beach in 1999, turning the old department store into high-end condominiums with developer Bill Lindborg (who is now among five Capital Foresight staffers working in the Santa Fe Lofts).
Despite Saidoff’s burst of acquisitions, he remains largely unknown in Downtown real estate circles. The firm usually declines media interviews (Saidoff would not consent to a photo shoot for Los Angeles Downtown News). An array of Central City property owners and brokers were aware of Capital Foresight’s buying spree, but said they knew little about the company or its staff.
Saidoff, who lives in Bel-Air, was born in Israel and raised on a kibbutz before immigrating to the United States. He graduated from UCLA with an economics degree.
Saidoff is widely known for his work on behalf of Israel. He sits on the board of two Israel advocacy organizations, a group called StandWithUs, and the Israeli Leadership Council. He and his wife, Debbie, were presented with the American Jewish Committee’s 2006 Service Award.
While Saidoff said he prefers to stay under the radar, Capital Foresight’s growing stake in Downtown will likely force the company to engage more area stakeholders, if only through the public approvals process for its proposed conversion projects.
The two Fashion District projects alone make Capital Foresight a critical entity when it comes to the residential development of an area still dominated by garment-related business. The Capitol Garment and Maxfield Building projects together would deliver 173 housing units to Eighth and Santee streets, just south of the Santee Court apartment complex. Plans call for new stores on the ground floors.
“As soon as they finish, that entire area is going to change,” said Dan Daneshrad, a broker with Daum Commercial Real Estate Services. “People living in that area will be walking. The tenants, which occupy the ground floor, will change to become more friendly to residents in the area.”
Back in the Historic Core, the proposal to convert the 13-story Title Insurance Building into more than 200 residential units is both obvious and challenging. Although residential demand in Downtown is outpacing supply and the structure will be across from the recently opened Spring Street Park, the 1928 building likely presents construction related hurdles that seem to arise with every large-scale adaptive reuse project. With land values rising, several veteran Downtown developers have backed off the adaptive reuse game.
Saidoff too once swore he was done transforming old properties. When he and Lindborg were overseeing the Walker Building, Saidoff said the money he plunged into the development would have turned a better profit in a traditional, easier to manage investment. He also lamented the complicated regulations in dealing with the city of Long Beach.
Nearly 15 years later, Saidoff’s company is about to embark on three Downtown adaptive reuse conversions at the same time.
“It’s like a woman who gives birth: She might say she never wants to go through that again, but through the passage of time, you forget the pain and you have a beautiful child to look at,” he said. “It’s part of the creative process.”
Saidoff’s road into Downtown has not been perfectly paved. After he and Shomof partnered on the deal for the Skid Row hotels, their relationship soured. While Saidoff said he had long been interested in investing in Downtown, Shomof maintains he essentially introduced the investor to the area. Shomof, who has since sued Capital Foresight, says he was cut out of deals that he brought to Saidoff, including the Title Insurance Building.
In his legal complaint, Shomof alleges a partnership agreement with Saidoff that would have resulted in a 50-50 ownership of the Title Insurance and Capitol Garment buildings. Shomof needed Saidoff to pay for the properties upfront, with the understanding that Shomof would pay his equal share later, as the complaint says he did on the Skid Row hotels deal.
In a court filing, Capital Foresight indicates that the two investors never had a written agreement. The case is ongoing.
“If his allegations are correct he’ll have a chance to prove it,” Saidoff said. “Obviously, if I agreed with him, I would not be opposing it. Obviously, we have a different perspective.”
Come With Cash
Shomof’s reliance on Saidoff’s access to funds is symbolic of what has given Capital Foresight an edge in the local market: money and the ability to move quickly.
“They close most deals with cash, no loan,” said Daneshrad.
Take its acquisition of the Binford Lofts at 837 Traction Ave. The 36-unit building fell out of escrow with another buyer. At 11 o’clock that night, Saidoff and Capital Foresight staffers toured the property, said broker Laurie Lustig-Bower of CB Richard Ellis, who represented the seller and Saidoff.
The next morning Capital Foresight paid a non-refundable deposit of about $500,000 and closed the deal by the end of the day, Saidoff said.
The quick turnaround is rare in the real estate business, Lustig-Bower said.
Typically, buyers need a 30- to 60-day due diligence period to ensure that there aren’t any hidden problems with the property. Capital Foresight’s willingness to close quickly, with non-refundable deposits, makes it more likely to win competitive listings, she said.
“[Capital Foresight] is very entrepreneurial and nimble,” she said. “They have a very good sense of the market and look at the big picture when they’re at the property and not get hung up on every detail. They can also potentially buy properties for less than what a typical buyer might pay because of their strategy to be able to move very quickly.”
The firm’s nimbleness came into play with its acquisition of the $35 million, 132-unit Santa Fe Lofts. In a press release timed to the sale of the property, Brian Eisendrath of real estate company CB Richard Ellis, which helped arrange financing for part of the deal, recalled that Capital Foresight got the building “based on their ability to go non-refundable and close quickly.”
While the residential market has been heating up over the past year, the bulk of Capital Foresight’s recent acquisitions came when the stove was just warming. It bought the 1925, 12-story Maxfield Building, which it plans to convert into apartments, for $6.2 million, or about $66 per square foot.
The firm bought the 12-story, 1926 Capitol Garment Building for $5.1 million, or $62 per square foot.
“When we got into the market a year ago, there wasn’t that much activity,” Saidoff said. “There’s still old skeletons around and they were in shadowy areas, but side-by-side with buildings that had already been gentrified. You didn’t have to be really smart. You just had to have cash and we had it.”
Contact Ryan Vaillancourt at email@example.com.
Capital Foresight’s Downtown Holdings
Title Insurance Building, Address: 433 S. Spring St., Project: The company is still in the planning phase for a proposed residential conversion of the 1928 building. It expects to submit plans to begin the entitlement process in the coming months.
King Edward, Baltimore and Leland Hotels, Address: Fifth and Los Angeles streets., Project: The company bought the property with Izek Shomof, who is overseeing a gradual renovation of all three residential hotels. The property includes the recently renovated King Eddy Saloon.
419 S. Spring St., Project: The building, which is adjacent to the Title Insurance Building, is envisioned as a hotel. A separate entity has an option to develop a hotel, though the timeline for that project is uncertain.
Maxfield Building, Address: 819 Santee St., Project: The firm is planning to convert the old building into a 96-unit apartment complex, with three retail spaces on the ground floor.
Garment Capitol Building, Address: 217 E. Eighth St., Project: The 1926 Capitol Garment Building is slated for an adaptive reuse conversion into a 77-unit apartment building.
Santa Fe Lofts, Address: 121 E. Sixth St., Project: The firm is planning an array of cosmetic upgrades to the 132-unit Santa Fe Lofts, a two-building Historic Core complex it purchased for $35 million.
Binford Lofts, Address: 837 Traction Ave., Project: The mostly occupied loft building in the Arts District was acquired by Capital Foresight last year. The firm is planning cosmetic upgrades of the 36-unit property.
©Los Angeles Downtown News.