Below-the-line entertainment workers continue their effort to get a federal investigation into the legality of subsidies offered by Canada that lure away domestic television and film production. While the Film and Television Action Committee has not been high profile about the petition they plan to file with the U.S. Trade Representative, the group has been busy behind the scenes drumming up support. Backing the committee in its effort is the national Board of Directors of the Screen Actors Guild, the city councils of Burbank and West Hollywood, and various unions representing so-called below-the-line workers who are the technicians and artists that don’t get top billing in productions.. “We’re trying to get our fundraising program up and going with a target to file in the early summer,” said committee member Tim McHugh. “That is our goal. But getting money from people out of work isn’t easy.” The Studio City-based FTAC seeks to have the U.S. Trade Representative investigate whether subsidies offered by Canada is in violation of World Trade Organization agreements signed by the United States and 42 other nations. In the past, the Motion Picture Association of America, the Encino-based trade organization representing the seven major film studios and distributors, has come out in opposition to the petition, claiming that an investigation won’t keep jobs in the state and fear that foreign countries will close their markets to American films. Attempts to reach a representative of the association were not successful. As the committee readies to file its petition, it also waits on other ammunition it can use to bolster its cause of keeping jobs in Southern California. In April, the Center for Entertainment Industry Data and Research, based in Encino, will release its first new report on runaway production in five years. The report will include information on film, scripted and reality television program and movie of the week production, said center Executive Director Stephen Katz. “It will show what’s going where,” McHugh said. “It will be interesting to see, and my guess is the projects are following the money.” The center’s 2001 study concluded the U.S. economy had lost 25,000 jobs and an estimated $4.1 billion in economic benefits since Canada introduced its subsidies in 1998. But more recent studies also show that production continues to go out of state as well as to other countries. FilmLA Executive Director Steve McDonald said the greatest threat to the state’s filming industry comes not from Canada but from other states, of which 20 now offer some type of incentive program with more being considered. “Generally people want to stay in the U.S. if they can,” McDonald said. “If they are getting a tax incentive, all the better.” The state’s response to the actions taken by other states was Assembly Bill 777, which would provide tax credits for motion picture productions. No action has been taken on the bill. A study in August 2005 done by the Los Angeles County Economic Development Corporation for the California Film Commission detailed the economic loss to the state from runaway production. The study showed that the state stands to lose between $215,000 in taxes on a low-budget film to $10.5 million in taxes on a big-budget film made outside of California. Losing a movie-of-the-week costs the state $640,000 in taxes, while 12 episodes of a one-hour drama generate $3.1 million in state taxes, according to the study. Los Angeles Mayor Antonio Villaraigosa is supporting the Assembly bill and is backing incentives the city can make to keep film and television production within its borders, such as eliminating fees for filming at city-owned properties. The city and state is learning from the aggressive steps taken by other states, Villaraigosa said Feb. 22 at a launch party for FilmLA, the agency formerly known as the Entertainment Industry Development Corp. that promotes filming and works to expedite the permitting process. “We can no longer think the jobs will stay here,” Villaraigosa said. “It is without question (production) is a job creator in the state and we have to keep those jobs here.”

It’s hard to believe that just four years ago when we did our first Special Report on Commercial Real Estate it was jam packed with stories about brokers who had leased huge amounts of office space. The slowdown in leasing that would characterize the next few years was just beginning, and many brokers were still doing what they had done since the end of the last real estate recession: showing still-plentiful office space and cutting deals. Each year, when we begin to develop the story content for these special reports, we try to tap into the dynamics that define the market of the moment. And in the four years since our stories all revolved around leasing there has been a 180 degree turnaround in the local real estate market. Sure, leases continue to be signed, but what really defines the current market is a frenzied pace of sales activity, not just the handful of large, trophy office buildings that every so often are passed from one real estate investment trust to another, but buildings of all sizes, types and conditions sought after by just as divergent a group of buyers. It may seem as though developing, selling or buying properties or transacting those deals would be easy in a market where prices and demand are sky high. But as I spoke with the various players in the market I learned that is not the case. The scarcity of land and the rising activism of community groups have made development especially tricky. A developer today has to be first and foremost, a detective to find a suitable parcel. Today’s infill developments often require assembling different parcels from different owners. So developers also have to be accomplished mediators and salesmen to make the parcel they envision come together. They also have to be politicians who can successfully navigate their way through the various community groups that hold sway in the neighborhood where they are working. Finally, they have to be fortune tellers, successfully predicting where materials prices will be in the years it will take to get the land under contract and their permits in hand. Things aren’t much easier for investors who have to decide whether the prices they’re being asked to pay will still make sense two or three years from now. Will the economy continue to grow? Where will interest rates be when they have to renegotiate their loans? Will there still be a market if they want to divest their expensive assets down the road? It was interesting to learn that many of those involved in real estate sales and development are fairly serious athletes, weekend and otherwise. How else do you cope with the stress from the unknowns that are part and parcel of the job? As I usually do when I embark on these special reports, I learned a lot of things about surviving and succeeding in real estate. Today’s market is not one for brokers who like to parachute in, transact a deal and move on. Prices are too high, the risk is too great, and those that are taking the plunge want to make sure that the guy or gal at their side really is on their side. Many of the brokers we’ve highlighted elsewhere in this special report (and there are others we simply didn’t have the room to highlight) owe their successes to long standing relationships with both buyers and sellers. Those relationships helped them both to identify properties that came on the market and to tap into buyers that, in some cases, bought several properties this year. The practitioners I spoke with over the past few weeks also taught me a little more about real estate cycles. No one is bucking the basic idea that what goes up must come down, that real estate is cyclical and there are good times and bad times. But the real art to predicting how those cycles play out lies well beyond that basic premise. In the last big real estate recession of the early and mid-1990s, the aerospace and defense industry crashed, and, arguably, another important industry sector in the greater San Fernando Valley could experience the same downturn. But even if that happens, one important element that drove the last down cycle will not be present in the current day. When the economy crashed in the early 1990s there was a great deal of development underway, so much so that the additional space coming on the market alone may have caused a recession in the real estate market. That cannot happen today. There simply is not enough land available for building. The many developers, investors and brokers I consulted for this report are largely convinced that there is no bubble in the current commercial real estate market and, while the pace of activity is likely to slow down, it is not likely to come to a screeching halt. That doesn’t mean, however, that there are no underlying causes for concern. It was disconcerting, at the very least, to learn that so many developers had so many projects underway in other states. Unable to find parcels of land or properties that work within their business models, they are looking elsewhere to ply their trade. All those opportunities for businesses to expand, hire new workers and pay taxes will be lost to our local area. Some developers told me that they think city officials are becoming aware that, without new development, the economy becomes stagnant, and they are taking steps to correct some of the policies and procedures that have limited opportunities in the local area. But I’m not so certain that the solution to these problems lies entirely in the government arena. As it has in the residential sector, the market is creating an environment where only those with very deep pockets can afford to build here, and what they build will only be affordable to a small slice of the economy. Just as smaller, independent developers and investors are going elsewhere, so too might the independent businesses and entrepreneurial ventures that helped to build the Valley follow. That, rather than a potential bubble, may just be the cloud in this silver lining.

No one ever admits they’re wrong anymore. Have you ever noticed how rare it is for labor unions to admit it when their own tactics are over the top? Or for media pundits to discuss publicly (other than in their own trade journals) the reasons for their diminished reputation for objective reporting? Or for elected officials to regulate lobbyists’ influence over legislation and government largesse? Not that there’s anything wrong with that. So, not fearing to go where fools rush in, I dare to use this space in a business publication to write about executive compensation. Oh, I’m not talking about those members of management teams who make $100,000, $250,000 or $400,000 a year I’m talking about the really big bucks. The SEC has just proposed a series of restrictions and mandated disclosures of executive compensation and pension plan grants. Seems like the federal government might actually mandate what boards of directors should have been enforcing all along. One of the biggest knocks on business generally is the outsized compensation packages bestowed upon corporate leaders. Government officials and the media love trumpeting the outlandish packages some executives take home. They forget the long hours, including weekends; the fact that businesses rise and fall based on those executives’ decisions; the burden of dealing with numerous constituencies; and the many other challenges. But let’s face it, some corporate leaders are getting fat (monetarily, and perhaps even physically) when their companies are struggling and layoffs of good people are implemented. Valley salaries Here are the top five Valley-based public companies’ CEO compensation packages for 2004, according to the Business Journal’s most recent Book of Lists. Any of these seem excessive to you? Angelo R. Mozilo (Countrywide Financial Corp.): $23,187,000 R. Chad Dreier (Ryland Group, Inc.): $19,858,000 Michael D. Eisner (Walt Disney Co.): $8,312,000 Mark R. Goldston (United Online): $6,518,000 Larry C. Glasscock (Wellpoint Health Networks): $5,599,000 Mr. Mozilo, reported the Los Angeles Times, is also eligible for an executive pension that will be worth up to $3 million a year for life. In just the past few weeks, the Los Angeles Times, the Wall Street Journal, Fortune magazine, and many more, have published lengthy articles on how out of whack the compensation of senior American executives is, compared both to those of other nations and of our own workforce. Options, pensions, a broad array of perks these all add up to packages that shareholders don’t know about and almost never have an opportunity to approve. Last month, the Wall Street Journal reported that the ratio of the average Fortune 500 chief executive to that of the U.S. President’s salary in 1960 was two-to-one. Today, it is thirty-to-one. I don’t think our Presidents have gotten any worse, but I also don’t think our corporate leaders have gotten any better. The average American CEO’s salary is 475 times greater than the average worker’s. “In Japan,” the Journal reports, “it is 11 times greater; in France, 15 times; in Canada, 20; in South Africa, 21; in Britain, 22.” Are our CEOs really more than 20 times more effective than those of Great Britain? Of course, there are many executives who have their compensation tied to the success of the company. Allowing it General Motors’ CEO just announced that he is cutting his salary by 50 percent (but don’t worry, he’s not living in a Detroit homeless shelter yet). Another approach is that of John Mackey’s, CEO of Whole Foods Markets, who limits his pay to no more than 14 times that of his average employee. So, what’s the point of it all? Well, as long as boards of directors are willing to pay outrageous salaries to their senior executives; as long as CEOs can avoid having shareholders know how much they’re taking home (or should it be “mansion”?); and as long as the SEC lets those executives hide pensions, perks and Porsches, the situation won’t improve. There’s another problem with off-the-charts compensation packages: they have become the most visible and obvious example of executive greed. And no one enjoys positioning outsized executive salaries as the jutting tip of an iceberg of corporate excess more than media columnists, anti-business bloggers, elected officials, and others who need a convenient scapegoat for business generally. I’m not against big salaries for those who earn them and deserve them. I’m against the rewarding of mediocrity at the top, the opportunity these excessive salaries provide to those who criticize all business, and I’m against leaders of public companies who remember that we the ones who buy the stock are the real owners of the businesses. There is hope, however. Just last week the Wall Street Journal reported that boards of directors may be paying attention to the outcry over inflated and often inappropriate compensation. According to the Journal’s research, last year 30 of 100 major US corporations based a portion of their CEOs’ compensation on meeting performance targets, up from 23 in 2004 and 17 in 2003. Maybe we should all work toward relating senior executives’ compensation here in the Valley and across the nation to the success of their enterprises. By the way, Angelo, my grande nonfat latte at my Encino Starbucks has gone up from $3.05 to $3.15 brother can you spare a dime? “Executive compensation is the acid test of corporate governance.” Warren Buffett

Chatsworth-based Image Entertainment, Inc., a licensee, producer and distributor of home entertainment programming has signed an exclusive distribution agreement with Revolver, a hard rock magazine. On behalf of Revolver, Image will create a series of compilations, consisting of 4 CDs which is expected to be available in stores by June. George Steele, vice president of Image Music Group, said in a press release that the CDs should help Revolver build its publishing brand. Tom Beaujour, editor-in-chief of Revolver said in the press release that Image understood Revolver’s readership and would not compromise the magazine’s relationship with its readers. The compilation is expected to draw in loyal fans of the Revolver brand. Revolver is a New York based monthly publication of Harris Publications, Inc. with a circulation of 150,000.

There is perhaps no name more closely associated with development in the San Fernando Valley than Voit. It was Voit Development Co. that took a vast expanse of land in what was, at the time, a remote burg and built a 2.9 million square foot business park that has become a major commercial hub. The Warner Center Business Park remains the core of a West Valley business district that has drawn businesses of all sizes including members of the Fortune 1,000 to the region. Since its inception in 1971, the face of Voit has been its founder, Bob Voit, an entrepreneur with a reputation for pioneering new markets as he did at Warner Center. But in recent years, a second generation has taken the lead in guiding the company’s Valley efforts. Since joining the company in the late 1990s, Timothy F. Regan, Voit’s vice president for development and acquisitions, has presided over the development of the $41.5 million Marvin Braude San Fernando Valley Constituent Service Center and the $55-million Burbank Airport Commerce Center in Sun Valley, a development that so tapped into the demand for small industrial space that it has been fully sold even before construction is complete. More recently, Voit has acquired Wheatland Commerce Center with plans to build a $14-million industrial condominium complex and a 10.5 acre site in Sylmar where the company will develop a $32-million industrial park. At the same time, the company, along with Selleck Development Group, is completing the final leg of its Van Nuys Center at the Plant development, an 800,000-square-foot industrial park in Panorama City. The final phase is a $57-million development that will include two build-to-suit facilities for existing tenants along with two additional speculative buildings. Regan joined Voit nine years ago, working out of the firm’s Phoenix office and moved to the company’s Woodland Hills offices about six years ago. These days, Regan is dealing with development issues that are a far cry from those that occupied his mentor, who remains the company’s president. With a virtually built-out Valley, the focus of the company has changed from the development of suburban business parks to rehabilitating urban infill sites to meet the demands of businesses. Question: Until the Burbank Airport Commerce Center came along, it seemed as if Voit had pulled back from development in the Valley. Why was that? Answer: The market was changing so much. I think we’re in the ninth year of the real estate cycle, the longest cycle that many have seen, (so developers are wondering) when does the party stop. I think there are several developers that have been around for 30 years thinking it would have stopped a couple of years ago, and you don’t want to be the last guy in at that high land basis holding all the chips when the music stops. I know that when we were working on the GM project we had looked at industrial land that was $8 a foot and we said, how would we ever make that pencil out. Those are Antelope Valley prices now. Then the next piece of land we looked at was $16 a foot. Then we see land that’s $18 a foot and $20 a foot. In Orange County industrial land is going for $30 and $35 a foot. It’s just crazy. We did a great job on the Airport Center. But timing is everything and thank goodness prices continued to rise as all these construction costs were rising and squeezing us. Q: The Burbank Airport project is among the first to include industrial condominiums. What role will industrial condos play going forward? A: This was first industrial condo project we did. There were some done out in the Valley many years ago. I think it’s all a function of interest rates. If an owner can go get an SBA loan at today’s low rates, their monthly mortgage payment on one of these buildings is lower than what they would be paying in rent. So their occupancy costs are lower. As soon as interest rates get to the point so that their occupancy costs would be lower to rent, then it changes the whole game. When those interest rates go up, I think that’s also going to trigger increased rents throughout the Valley. Q: How much higher do interest rates have to climb before we start to see that shift? A: Prices have gone through the roof. On this (Burbank Airport) project we started off at $105 a foot and ended at $160 a foot (for condos). That’s over two or two-and a-half years, and I’m still getting calls from people who want to be out here. When is it going to stop? I don’t know. What’s interesting here is we had two or three buyers that bought in the first phase and came back and bought a second building in subsequent phases. Q: So are they speculating? A: One is. One has already got theirs back on the market. Other guys bought a property and they are leasing it. Bob Voit will tell you he was developing when interest rates were 20 percent. So when people get excited about interest rates going from 7percent to 8 percent, he still thinks that’s a very healthy environment. Q: Industrial vacancy rates have been tight for years now and rents have not changed much. Why do you think rents will go up for industrial properties? A: They don’t have options. They can’t run out to Santa Clarita anymore to get a lower rent. You’re either going to be pushed farther out to Antelope Valley or stay here and pay the rents. Q: As a developer, do you think that the city entitlement and permitting process has improved over the past few years? A: I think the city is working on it. But they’re overwhelmed. There is a tremendous backlog in the city of Los Angeles because there’s so much going on, so much rezoning, parcel-ization, entitlements, so the city is busier than ever. When we completed the Marvin Braude project, the whole idea was to make it a one-stop shop. They have more business than they ever expected. People are going to Van Nuys now instead of downtown, and I think the city was surprised at the volume of work that came through that building. I think the city is recognizing, I know they are, that for them to be able to create jobs there needs to be development and they need to make it easier for developers to get through that process. Q: How do you think you and your generation differ from the Bob Voits and Jerry Katells who were pioneers in commercial development in the Valley? A: What I have to do is focus on infill. As opposed to seeing land as far as you can see and having this vision that this is where the next frontier is, we have to look at it a little differently and be more creative and look at properties and buildings that we wouldn’t have looked at before. I also think this new younger generation of developers is spoiled. We think everything works. The Bob Voits and Jerry Katells and Jerry Snyders have seen the cycles. I was lucky to experience a down market, but I think there are a lot of guys that have yet to experience a down market and realize how bad things can get. But I’ll do it myself. I will look at a deal and I’ll convince myself we will get $250 a foot or $300 a foot for an office condo. And I’ll convince myself we can work through difficult site issues because I’ve had such a good run. I’ll convince myself, sure it’s going to work out. And I can spend a couple of weeks going through that analysis and Bob Voit will come in and in 10 minutes tell me all the things that can go wrong. And as frustrating as that can be, two or three weeks later I sit back and I say he’s right, he’s so right. Q: How did you get involved in the real estate business? A: I majored in corporate finance and real estate at Arizona State University when Phoenix was going through its real estate boom and the savings and loans were loaning all sorts of money. I graduated in 1985 and I started in development in ’89 with this developer in Phoenix. We had this beautiful little two story garden office, and I remember one of the partners saying we’re going to move to one of the spaces in our shopping center on the other side of town. And I said, this is such a beautiful office, why should we move? And he said because the bank is taking it back. Q: What is it that has kept you in the real estate business? A: It’s different every day. Challenges come up all the time and it’s just a matter of solving them. And at the end of the day, getting a piece of land, creating an industrial complex or an office complex that adds to the community, that makes it better, you see your efforts come alive. Timothy F. Regan Title: Vice President, Development/Acquisitions Born: Feb. 4, 1962, Phoenix Education: Business degree from Arizona State University, Phoenix, 1985 Career Turning Point: Seeing all the development underway in Phoenix when I was in school. Personal: Married. One son and a baby due in June. Most Admired People: My parents and my wife.

Ask investors or developers about their San Fernando Valley activities, and you’ll likely get an answer like this: “I’m looking at a property in the Valley now, but I can’t tell you about it. I don’t want anyone else to know.” As more buyers train their sites on the region, finding properties for development or investment has become a game of stealth and cunning. A staggering volume of sales activity over the past few years has taken many properties off the market, and those that do come up for sale attract fierce competition. Some investors, particularly smaller firms, have simply moved their efforts out of town where they can still find bargain properties. Those that want to buy locally are paying top dollar and hoping that the market will continue to rise in value. Consider Agora Realty and Management, whose last local acquisition was an 80,000-square-foot shopping center in Chatsworth, which the company finished renovating a little over a year ago. “There were 18 qualified buyers for that property,” said Cary Lefton, CEO of the Sherman Oaks based development company. “We had the competitive edge because we knew the marketplace so we were bolder in the price we were willing to pay for the property.” After that deal, Lefton directed his efforts to Hawaii, where he said there were still opportunities to buy properties at rates below what it would cost to build new ones and reposition them. The company currently has $190 million worth of development projects underway in Hawaii. The median price for a retail property in the Valley rose 14 percent to $200 per square foot last year, according to the latest data from Marcus & Millichap. With demand outstripping supply, the story is similar for all property types. The relentless escalation in pricing means lower returns for investors, but that dynamic is apparently having little effect on demand. In 2005, the Los Angeles area ranked second in the nation in office product sales volume, according to research by Arden Realty Inc., second only to New York City. Nationally, a survey conducted by Marcus & Millichap and National Real Estate Investor, found that seven out of 10 private and institutional investors plan to increase their real estate holdings in 2006. “A recent property I bid on, the asking price was $8 million, and I came in at full asking and somebody offered $1 million over that,” said Mark Ossola, president of M.W. Ossola & Associates Inc. “I felt I was pushing the envelope as far as offering the full asking price. To have somebody come in and offer 10 percent above that means there’s just so much capital chasing product. Like Agora, Ossola has moved into other markets and now has $250 million worth of developments under construction in Seattle and Utah as well as the greater Valley region. Pension funds and other institutional investors have always apportioned some of their investments into real estate, but as stock market returns began to lag early in 2000, they increased their real estate holdings. And while institutional investors have not traditionally targeted the Valley, that is changing. Last year, although the vast majority of properties were traded by family trusts and small, local investors, UBS Realty Investors LLC, for instance, acquired the Warner Marketplace shopping center and late in 2004, J.P. Morgan Flemming Asset Management acquired 21st Century Plaza in Woodland Hills. In addition to those who see real estate as a sound alternative to stock investments, there are others small manufacturing companies and other businesses that want to take advantage of low interest rates to buy properties to house their businesses. Using SBA funding, they may find their costs lower than the cost to lease a property. Ideal location These groups are contributing to a burgeoning demand by businesses and investors who see Southern California, in general, and the Valley, in particular, as an ideal location. The population is growing, there is very little land to build new property and the economy is strong, all indications of continued low vacancy rates and continued strength for the leasing of properties of all types. Meanwhile, the supply is continuing to tighten. “In some sense last year may have been driven by the fact that the three-to five-year hold players could get out of investments earlier than they thought,” said Thomas P. Bohlinger, senior vice president at CB Richard Ellis, who specializes in office property investment sales. “Now a lot of properties were purchased by folks planning on seven- to 10-year holds, so it’s unlikely those will come to market for a while. As far as the Valley is concerned, there do not appear to be that many properties that are going to be available for sale this year.” Institutional investors tend to hold properties for a longer term, seven years or more. Some private investors do tend to take advantage of market conditions and sell when the selling is good. But many more private owners are reluctant to divest properties that, in many cases, they’ve held for decades. There can be substantial taxes on a property that’s appreciated, and, for those who are inclined to invest the proceeds in another property, there are few options. Adding to the pressure for potential buyers, there appears to be little in the way of new product on the horizon, especially in the San Fernando Valley. With the exception of Westlake Village, where at least 750,000-square-feet of office space is expected to come on line in the next two years, land for new development is virtually non-existent, and when developers do find it, they won’t find the process easy. Entitlement savvy “It used to be that you’d put a site under contract and have the seller come along with you for the entitlement ride and close on the property when you get your vote at council,” said Larry Scott, senior vice president at AvalonBay Communities Inc., which builds and holds multifamily apartment complexes. “The biggest change is sellers not wanting to take that risk. That limits buyers substantially to those that are very experienced in the entitlement process and those that are internally financed so that they can stomach taking on the site deal prior to the entitlements.” What development does occur along the Valley floor is likely to be focused on smaller users both because the land available will not accommodate large campus developments and because there is ready demand from that market. Some, like Voit Development Co., have already moved to take advantage of the demand for small users, and are constructing industrial condominiums on infill parcels. Many think that office condos, on similarly-sized parcels, will not be far behind. “I think the trend is going to be gearing toward office condos where smaller users can go in and buy their office space,” said Ossola. “I run into dozens and dozens of people who use Starbucks as a conference room and (FedEx)Kinko’s as a business center, and nobody wants to go into an executive suite situation. I think condos are the answer to that.”

INDUSTRIAL 3935-3934, 3990 Heritage Oak Court (Two industrial buildings) Simi Valley Sale Price: $38.2 million Square Footage: 331,574 Price Per Foot: $115.21 Buyer: INVESCO Seller: The Prudential Insurance Co. Brokers: Barbara Emmons, Darla J. Longo, CB Richard Ellis MULTIFAMILY 4500 Woodman Ave. Sherman Oaks Sale Price: $74.1 million Size: 372 units Price Per Foot: $276 Buyer: Archstone-Smith Seller: PCS Development Inc. Broker: Greg Harris, Marcus & Millichap OFFICE Tower Burbank 3900 W. Alameda Ave. Burbank Sale Price: $167 million Square Feet: 473,000 Price Per Foot: $356 Buyer: Blackrock Inc. Seller: Tishman Speyer Properties Broker: Secured Capital (Brokers unknown) 505 N. Brand Blvd. Glendale Sale Price: $108,750,000 Square Feet: 319,864 Price Per Foot: $339.99 Buyer: LaSalle Investment Management Seller: SP Glendale LLC Brokers: Thomas Bohlinger, Doug Marlow, CB Richard Ellis RETAIL 5430 San Fernando Road Glendale Sale Price: $22,300,000 Square Feet: 200,000 Price Per Foot: $11.50 Buyer: Target Corp. Seller: 5430 Glendale LLC Brokers: Hamo A. Rostamian, Ielen Sarkisian, Gregory Barsamian, Jerry A. Wacker, CB Richard Ellis LAND Westlake Park Place Westlake Village Sale Price: $27 million Square Feet: 1,176,120/27 acres Price Per Foot: $22.96 Buyer: Steadfast Business Properties and Amstar Group Seller: Richland Communities Broker: Michael Foxworthy Sr., GVA Daum

Ernest Doud has seen the good and the bad in the family business world from children of business owners who had drug problems that were costing the business money to a family that was smart enough to hire outside management and now own a multi-billion dollar company. Starting and growing a family business makes for a tough life under any circumstances, but Valley experts say the toughest part of a family business owner’s life may be giving it up and passing it onto the next generation. Earlier this month, Doud, a family business consultant and attorney William Staley presented a seminar to alert family business advisors, accountants, attorneys and others, to the obstacles that those companies often encounter. Doud, president of Doud Hausner & Associates, said that working as a family business consultant requires psychological knowledge as much as requires business acumen. In fact, several of his partners have backgrounds in psychology and therapy. Such expertise comes in handy when people have a hard time separating business and family decisions. The most successful family businesses, he said, have founders who recognize their limitations as managers and have a reasonable long-term plan for the company. “One that comes to mind, they’re just a second generation business, the dad died fairly early, the business was about half a billion dollars in sales. They built it up to about a billion and a half and the owners, the family, got together and said ‘we don’t have the talent to keep this going,'” Doud said. “They brought in outside executives, they created a fiduciary board with a majority of outside directors. It’s now a $2.2 billion company owned by six brothers and sisters.” Things do not go that smoothly for most businesses, however. “It has not been unusual for us to get a call occasionally from an attorney who says something like ‘Ernie, six months ago I just completed the world’s finest buy/sell agreement for one of my family business clients. It’s been on their desk for six months and nobody’s signing it,'” Doud said. “Those kinds of blockages are good indications of something wrong in the system.” Waiting too long Doud said that the mistake that many family businesses make is waiting until problems are well out of their control before seeking any help from consultants, attorneys or other advisors. About 80 percent of the businesses in the country are family-owned, and over half of the country’s employees and the half of the gross domestic product depends on them being run intelligently. Most family businesses want a successful business and a tranquil family life along with some personal well being, Doud said. Too often they end up with under-performing businesses, family conflicts that never get resolved and uncertain personal well-being. Scary statistics back up Doud’s premise. Only twenty five percent of family businesses survive long enough for the second generation to take over, and thirteen percent are around long enough for a third generation to take the reigns. Sixty six percent of them have no written strategic plan, and although between one third and one half of family business CEOs are expecting to retire in the next five years, they have not chosen a successor. It’s a dangerous position for business owners that do not want to see their business leave the family. Without serious planning and discussion in the family, owners often end up unprepared and forced to sell a business for much less than it is worth in order make any money. Owners forced to sell because they have no plan to take a business to its next stage end up dealing with what Doud calls “bottom feeders.” “People like us, with a little bit of money who are trying to buy an income. People who look at a family business that’s in stage one and say ‘they haven’t taken advantage of the opportunities, but I see them. It’s not worth very much, I’m going to buy it cheap and I will take advantage of the opportunities.” Families that could not find a way to move from owning a relatively successful small business need to find ways to invest in independent, income-producing assets, Doud said, which starts from making sure a business is run by the right family members after the first generation retires. “I had a phone call yesterday with the advisors of a family business in Orange County. For about 10 years Dad, who was second generation, has been promulgating the myth that his first and second can work very well together, and that his first son is going to be groomed to take over the business,” Doud said. “And the reality is that the best candidate to lead that business is the number two son, and the worst possible candidate to lead that business is the oldest son.” No equality Family heads think that the idea of equality is just as important in running a business as it is in raising a family but, Doud said, the opposite is true. “Interestingly enough, equality has no place in family businesses,” he said. Meanwhile, said Staley once the business reaches a point at which there is income flowing into owners’ hands, parents should incorporate giving money to their children as they think about passing on the business. “Give to the kids until it hurts,” Staley said. “Paying gift taxes is better than paying estate taxes on some assets.” After 2008, tax exemptions on gifts are increasing, so Staley said business owners should be sure that financial advisors should be abreast of all the relevant estate law changes. Parents can also make sure that a business is taken care of and that all of the children are happy, by splitting up business and property interests. Giving ownership of a business to the right heir and real property holdings to another can save a family’s emotional and financial well-being at the same time.

Comcast Corporation, which offers cable services to various parts of Los Angeles County, announced an agreement to offer IFC in Theaters. For the first time, certain independent films will be available in customers’ homes through Comcast’s On Demand service the same day they are released in theaters. Starting in March, IFC in Theaters will debut two independent titles a month through Comcast On Demand. IFC In Theaters plans a simultaneous distribution of at least 24 films theatrically and on demand in 2006.

Encino Chamber, Network Plus Breakfast 7:15 a.m. Encino Glen Restaurant, 16821 Burbank Blvd. Encino 91316 $12 members, $15 non-members Contact (818) 789-4711 Sherman Oaks Chamber, Installation of Officers 6:30 p.m. Courtyard Marriott, 15433 Ventura Blvd., Sherman Oaks $65 Contact (818) 906-1951