To further Leverage.com’s mission of democratizing knowledge about commercial real estate, we started an interview series with all kinds of CREF pros: everyone from multifamily and medical to cannabis and construction. This time we connected with Gidi Cohen, Founder and CEO of CGI+, a boutique real estate investment and strategy firm that provides personalized high-quality service and performing assets.
Here’s how the conversation went:
We saw that CGI+ identifies opportunities in “special situations.” Can you give us some examples?
Probably the best example of this is the project we took on in 2019 with the acquisition of a vacant 306-unit luxury multifamily community in Celebration, FL near Orlando. Developed in 2015, the property was found to suffer from construction defects in 2016 and was vacated by order of the Osceola Building Department that same year.
Nobody wanted to tackle this project. But our history of successfully meeting the challenges of special situation real estate allowed us to take on this project with the confidence that we could make the appropriate repairs and upgrades needed to return this Class A resort community to market.
Our first step was to immediately do an exhaustive analysis of the structures, which included stripping the exterior building down to the studs. The work, which took under a year to complete, included demolishing and rebuilding every balcony, adding steel columns to further mitigate any future sagging issues, exposing all load bearing and non-load bearing walls to verify whether they were built correctly — including ensuring that the proper blocking was installed and the appropriate nailing pattern was used — applying a new waterproofing membrane and new plaster to reduce the occurrence of leaks, removing and replacing existing windows with new windows and flashing to protect the interiors from water intrusion and adding a new roof system to prevent future leaks or issues. The construction costs were about 20% of the $43 million purchase price.
Having successfully restored the property to optimal condition, and with the Orlando market continuing to trend up, we were able to exceed our business plan in record time and sell the property for $74.5 million in June 2021. The ability of the CGI+ staff to completely overhaul and renovate the seven-building property in just over a year is a testament to our ability to successfully take on these types of challenging projects.
What’s your plan to make hotel investments succeed in 2022?
Candidly, our business plan focuses largely on the development and acquisition of multifamily projects in the Los Angeles metro as well as key markets in the southeast United States. That said, we will look at hotel development as part of a larger mixed-use project.
For example, we just received entitlements and will begin construction documents on a major hotel/multifamily/retail development at the corner of Wilshire Boulevard and La Brea Avenue in Los Angeles’ Miracle Mile neighborhood. The eight-story development is the result of nearly five years of planning and land assemblage. It will comprise three components: a 125-key hotel, 121 residential rental units and 13,000 square feet of street-level and rooftop restaurant space.
The decision to include a hotel was entirely based on the fact that there were no institutional quality hotels with more than 100 rooms anywhere in Miracle Mile/Mid-Wilshire district, and our due diligence indicated a tremendous demand for a boutique hotel. The boutique-style hotel, which is planned to accommodate both the leisure and business traveler, will offer rooms ranging in size from 320 to 415 square feet, as well as two top-floor guest suites as large as 1,200 square feet. Amenities will include a 3,500-square foot event space, a layered roof top guest deck and swimming pool offering unobstructed views of Downtown Los Angeles, Hollywood Hills and Century City. The combination of the hotel, residential and retail uses will anchor the neighborhood, which is transforming itself as a hub for dining and entertainment.
We engaged the celebrated New York architecture and interior design firm, Morris Adjmi, to design the project, which will be its first in Los Angeles. Some of his other projects include the Wythe Hotel in Brooklyn, The Standard at South Market in New Orleans, Il Palazzo in Fukuoka, Japan, and The Edition Hotel and Residences in Tampa Bay, FL. We have no plans at this time for any other hotels in 2022.
Which areas in the Southeastern and Southwestern U.S. have you been focusing on lately?
We are currently heavily invested in the West Coast, primarily Los Angeles as well as key markets in the Southeast, including Atlanta and Orlando, where we will continue to build scale. We recently completed the largest multifamily acquisition in Atlanta this year with the $144 million purchase of a two-property, 712-unit portfolio. Our goal is to increase AUM by at least $1 billion per year over the next five years in these markets.
Bread and Salt is our property management company that is responsible for the management and operation of our luxury furnished and serviced properties in Los Angeles. These properties include The James, a newly redesigned extended stay hotel residence in Hollywood, the Villa Carlotta, a fully restored historic landmark multifamily project, also in Hollywood, and 888 Hilgard, a recently renovated full-service multifamily community in the heart of Westwood near UCLA.
High End Homes is a general contracting business we’ve owned for more than 25 years. HEH provides a broad range of construction services, including ground-up construction and the renovation of $10 million to $25 million luxury estates throughout Southern California.
ECM, is our entitlement and construction management arm, offering third-party underwriting, analysis and pre-construction consulting, which we plan to launch in the future.
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