From the L.A. print issue: There are few in commercial real estate in Los Angeles who haven’t interacted in some way, shape or form with David Lee, the largest private office landlord in the county, who has rapidly launched into residential development in the past two years as the demand for housing has ticked up.
Although the former doctor stopped practicing medicine in the early aughts, he’s still known locally as Dr. Lee. His firm, Jamison Services — named after his daughter, 31-year-old Jaime Lee, who now heads leasing for the company — owns more dated Class B office properties than any other landlord by a landslide. Most of them sit in Koreatown, and Lee acquired them on the cheap during the 1990s recession and amid the L.A. riots that hobbled the neighborhood. His holdings, which also include retail and multifamily properties, have an estimated value of $3.8 billion, according to Real Capital Analytics.
The doctor, who moved to the United States from Seoul, South Korea, as a teenager, is notoriously press-shy and secretive, to a degree that baffles many who have positive relationships with him. Lee and the two of his four children who are involved in the business — Jaime and Garrett Lee — declined to be interviewed for this article.
“Dr. Lee is a private person who does not interact with the media,” said John Cushman III of Cushman & Wakefield, who said the brokerage’s leasing and capital markets teams have worked frequently with Jamison. He added that Lee “is a savvy businessman, who has acquired a very significant real estate portfolio of properties he bought at the right time in the right markets.”
Lee’s interactions with the media across his 22-year career as a landlord can be counted on one hand, and sources say he’s never been pleased with the outcome. Nevertheless, with a roughly 17 million-square-foot office portfolio in L.A. County, according to CoStar, he is ubiquitous. Several of the real estate professionals who’ve interacted with him over the years did not immediately recognize the company name Jamison Services, but they certainly knew him, asking, “Oh, you mean Dr. Lee?”
What the name Dr. Lee conjures depends on the audience. He is a man who has more than one reputation.
On the one hand, he is known for being a neglectful office landlord who bought his properties on the cheap and then let them fall into disrepair. Stained carpets, minimal amenities and a lack of decorum and landscaping — paired with cheap rent — are the hallmarks of a Jamison-owned building, several sources said.
“I try to steer tenants away from his office buildings because he doesn’t put any money into them,” said a commercial tenant broker who wished to remain anonymous because he said “everyone” works with Jamison at some point. “Dr. Lee just holds them until the time is right to sell.”
For example, the broker cited the former Macy’s Plaza retail-and-office complex that Jamison acquired for $160 million in 2005. Under Jamison’s ownership, it declined to such a state that the Los Angeles Times called it a “dated, downscale relic.” In 2013, Jamison sold the multi-use complex for $241 million to Ratkovich, which is in the final stages of giving the site — now dubbed the Bloc — a $180 million makeover.
But Lee also has a reputation as a smart investor who sticks to his word.
Kevin Shannon, president of the West Coast Capital Markets team at Newmark Grubb Knight Frank, has worked with Jamison on 20 deals. “He knows every building. He’s sarcastic. He’s also charming…Dr. Lee always does what he says,” Shannon said. “He takes risks and he is known in the investment marketplace as a closer. He has a strong reputation.”
Someone on the finance side of Dr. Lee’s deals called him “honest, reasonable and accessible at all times of the day,” but did not want his name in print, aware that Lee dislikes appearing in the press.
Multifamily moves
Regardless of the somewhat contrasting views of Lee, market experts agree that he and his family-run firm are entering a new era.
Either by luck or by design — it depends on whom you ask — Jamison owns more parcels than any other real estate investor in now gentrifying Koreatown. Apartment rents in the neighborhood climbed by almost 5 percent in the 12 months ending on June 30, while vacancy rates fell to just over 3 percent during the same period, according to CoStar data.
Jamison has quickly shifted its focus to multifamily development, converting several of the office holdings in its portfolio in the increasingly hip area to rentals, as well as embarking on ground-up developments in the neighborhood and in Downtown Los Angeles.
“His strategy of expanding his business from office to residential is a very natural evolution, given that the multifamily market has been red hot across the country,” said Cushman.
Since 2014, Lee has placed more than 15 multifamily developments totaling roughly 3 million square feet in the pipeline, including projects with as many as 648 units, according to data from CoStar. Some reports pinned the number of planned multifamily projects as high as 27.
“People are working against the clock right now,” Jaime Lee told the Wall Street Journal in a rare press interview in early 2016, explaining that Jamison wants to get its residential projects online before the cycle ends. “We’re coming to market as quickly as we can.”
The largest projects are Circa — a $500 million development with 648 units across two towers in DTLA — and a proposed 644-unit high-rise at 2908 Wilshire Boulevard, on the border of the Koreatown and Westlake neighborhoods. Both are being done in partnership with Mid-Wilshire investment firm Hankey Investment Company. Circa is slated for completion in 2017.
Jamison recently proposed a residential project at 3980 Wilshire Boulevard designed by KTGY, an architectural firm based in Irvine, California. The 205,000-square-foot, mixed-use development would include 228 residential units and 17,000 square feet of retail.
Office rents in Koreatown average $2.15 a square foot, according to JLL research. Rent at Jamison’s buildings can be even lower, according to CoStar data, which logged them in the $1.50-per-square-foot range, with an average office vacancy rate of 22 percent at Jamison-owned buildings. Meanwhile, apartments in the area rent for $3 a square foot with a 3.3 percent vacancy rate, according to CoStar.
By building new product, Jamison also has a particular advantage. New construction commands a dramatic 45 percent rent premium on average over the older product, according to a report by CoStar. The rent at 4- and 5-star properties averaged $2,300 a month in the second quarter.
Because Lee is building on land he already owns, development costs are much lower than for investors who must purchase land, said Brent Sprenkle, a broker with Berkadia, who has sold two multifamily properties with adjoining developable lots to Jamison. “To get the land from scratch would be about $250 a square foot, and now it’s $100 a square foot because they already own land,” he said.
Some offices, if gutted, would look “like bowling alleys,” Sprenkle said. Jamison was able to look through its portfolio for office buildings with short-term leases that also had attractive layouts.
Adding residential to the portfolio also diversifies the Jamison holdings, Sprenkle said. “It’s a smart move. Dr. Lee is a busy guy and he doesn’t have time to play games.”
Face forward
Meanwhile, Jaime Lee, a recently married USC Gould School of Law graduate, has stepped forward as the face of the company on the office front as the family attempts to change its reputation as a landlord.
“Jaime is coming into leadership, and has a creative eye, and wants to invest capital and go fishing for a different kind of tenant,” said Mark Fluent at Deutsche Bank, who has worked on financing deals with Jamison. “Before, they had institutional or government tenants. Now they are courting tech and media tenants. They are well- positioned to take advantage of the changes in Koreatown and Downtown Los Angeles.”
Jamison has begun creative office conversions on three of its properties, sources estimated, including the California Market Center in DTLA, where it has leased to e-commerce fashion companies. Three office properties have been refinanced in the last year, according to Real Capital Analytics.
“We’re a long-term holder and this new shift is focused on capital improvements because it’s that time to put money back into the buildings,” Jaime Lee told the Los Angeles Business Journal last year.
Sources said the investment into its office holdings was limited in scope, and that Jamison planned to renovate only the buildings with creative office potential in prime locations, or those with architectural significance. But any change is change. Some market pros characterized Jaime Lee’s stepping into the forefront as a positive for the company.
“I think she learned a lot from her father, and is taking what she has learned from him and what she thinks should be done and elevating Jamison to a very high level,” said Jonathan Larsen of Avison Young.
A contractor who has worked with Jamison had blunter words. “Dr. Lee is difficult to work with,” the contractor said. “But he is turning more responsibility over to his son Garrett and his daughter, Jaime, both of whom are delightful to work with.”