Now the challenge begins for Ventus Group President Scott Gale and his company.
After the city of Los Angeles approved his company’s large mixed-use project in south L.A. last month, Gale and his Irvine-based real estate development group are now looking for a joint venture partner to begin pre-development and construction on a $450 million proposed project.
What You Need To Know
- Scott Gale is looking for a joint venture partner to begin construction on a $450 million proposed project in Los Angeles
- The Exposition Point project will consist of a hotel, student housing units, mixed-income units, and roughly 90,000 square feet of office, retail, and restaurant space
- Gale is optimistic that the market will turn by the time Exposition Point is slated to be completed in 2024
- Finding a joint venture partner during the pandemic is challenging, since the coronavirus has upended the economy
The Ventus Group’s Exposition Point project will consist of a 252-room hotel, 252 student housing units, 78 mixed-income units (66 of which are designated for low-income units), and about 90,000 square feet of office, retail, and restaurant space on a 4.4-acre site at the corner of 39th Street and Figueroa Street. The development sits right across the street from the Los Angeles Football Club stadium and the University of Southern California campus.
Gale calls the project, “the gateway to USC and south Los Angeles.”
But in the age of the coronavirus, finding a joint venture partner could be challenging, Gale said. The company has raised $32 million to date.
“It’s still early," Gale said. "We just got approved in June. We still have a lot of strong interests. It’s just in this environment you have to be careful and flexible. There are pitfalls and opportunities. From my standpoint, I just want to make sure that when we align ourselves up with a partner that it’s all for the right reasons.”
Gale is among several real estate developers trying to raise capital and adjusting to a new way of conducting business in an uncertain financial time.
The coronavirus has upended the economy. The mandatory shutdowns of nonessential businesses have led to tens of millions of people now out of work. In California, more than 9.7 million unemployment claims have been filed, according to the state. Commercial real estate assets – especially hotels, retail and office buildings – are seeing their values fall due to the coronavirus-catalyzed economic fallout.
However, Gale is optimistic that the market will turn by the time Exposition Point is slated to be completed in 2024. The current drop in value of certain assets is occurring in today’s market. In a few years, the demand for retail, hotels, office and student housing could rebound from the current financial turmoil.
In a way, Gale said, the coronavirus downturn has been a blessing and a curse in the commercial real estate market. Prior to the pandemic, nonresidential construction prices rose steadily every year since the Great Recession. In June, construction costs fell for the first time since 2010, according to Construction Dive. Interest rates are also at historic lows.
“There’s some real opportunity to come out of this,” Gale said. “Construction pricing has evened out and could further go down, and that’s huge. There’s also reduced interest rates that will probably hold up until the end of the year and we should be moving this project by then. We’ve got a lot of retail and in a few years, we’re going to be one of the first projects to be built in the new world.”
Gale said that if everything falls into place, the Exposition Point project could break ground sometime next year and be ready for the 2024 school year. If completed, the project would complement the other attractions and current on-going projects in the Exposition Park area of Los Angeles, he said.
Exposition Park features the California Science Center, the Natural History Museum, the California African American Museum, the Los Angeles Memorial Coliseum and the Banc of California stadium, which is the home of the Los Angeles Football Club. George Lucas’ The Lucas Museum of Narrative Art is also under construction in the area. Additionally, USC has completed a $270 million renovation of the Coliseum.
“This place has been long overlooked,” Gale said. “As Exposition Park goes through this staggering revitalization, [Exposition Point] is going to complement everything here and give it a platform. People could stay at our hotels. There’s going to be a vibrant street scene.”
There is, however, a “but” in his voice, especially when it comes to finding a capital partner in the midst of the pandemic.
“The hardest part in all of this is that no one knows for sure when things will go back to being normal,” Gale said. “We’re trying to plan in an environment that is changing so quickly so it’s really imperative that we make good decisions, because a bad decision can really hurt in this type of environment. We’re just doing everything carefully. We’re making sure we’re getting good information and managing our budget. We’re focusing on what’s most important and making sure we give ourselves a full chance to hook up with somebody and make our construction start.”