The Closing: Michael Hackman

Michael Hackman is the CEO and founder of Hackman Capital Partners, a commercial development firm. After growing up in Columbus, Ohio, Hackman moved to Los Angeles right out of Ohio State University to work at Majestic Realty. He later went to CBRE as a commercial broker before forming Hackman Capital in 1986. Since then, he has executed more than $4 billion in real estate investments across 41 states, including about $1.5 billion in acquisitions through affiliated entities in the past five years, according to the firm. The company currently has about 60 employees and a little over $2 billion in assets, and it controls 10 million square feet of industrial and commercial space. Hackman Capital has been especially active in Culver City, where it has worked with Apple and Amazon Studios. After acquiring historic Culver Studios, which Amazon fully leased in 2017, Hackman struck the largest dollar-value deal of his career in December with the purchase of the 25-acre CBS Television City campus for $750 million. In this interview, which has been edited and condensed for clarity, Hackman chats about the CBS deal, why he missed the Downtown development wave and his reputation as a doomsdayer.

Age: 62
Hometown: Columbus, Ohio
Lives in: Brentwood
Family: Married with one daughter and one son

How did you start in real estate? I majored in real estate finance. Every summer I worked in an area of real estate. I knew I wanted to do that as a career. My role models were my father, who was director of real estate for a big corporation, and my grandfather, who was a real estate lawyer. When I was about to graduate, I really wanted to get away from Columbus, Ohio. I got a job offer from Ed Roski at Majestic Realty to work from the bottom up. All that I have accomplished is due to him giving me a shot here in California. I basically learned the industrial real estate business from the ground up, starting at Majestic.

What do you remember about your first deal? It was around 1985. We bought a small industrial complex. We had to raise $250,000 for the investment. I remember waking up at 2 a.m. and throwing up because I was worried whether I would be able to get it done. I laugh about it today, considering the size of the transactions that we have.

What was your first office like? When I left CBRE in March of 1986 and we formed Hackman Capital Partners, my first office was literally a closet in an office building. No windows, four walls. I had a partner at the time, and we worked out of that office space together. It was pretty ridiculous.

Was there one project that really launched you? When I left to go on my own, my father called everyone he knew to try to throw me business. I was very upset at the time, because I wanted to do this on my own. I got a call from a gentleman in the industrial equipment auction business, Irving Rabin [founder of Rabin Worldwide]. It was a bankruptcy, a property in the South Bay. I had no idea what I was doing at the time. But I went and put the deal together, and we sold it nine months later for a $2.3 million profit. That grew into me becoming a partner in Rabin. Since then I have probably done 300 or more plant liquidations on three different continents. That taught me speed, it taught me how to buy out of bankruptcy. And it also taught me why companies and people go into bankruptcy, the mistakes they make. It also gave me a doomsdayer mentality, sometimes.

So how did you develop this reputation as a “doomsdayer”? As they like to say here around the office, I have been accused of predicting 15 of the last 3 recessions. I am always worried that tomorrow everything is going to fall apart. We have traditionally bought properties that were in trouble. We have preyed on down markets, taking advantage of mispriced risk or financial situations where people weren’t properly capitalized.

What was the strategy that you eventually settled on? We have focused a lot on urban infill. The thesis we had starting in Culver City 12 or 13 years ago was that the population continues to grow, and demand for amenities continues to grow, but that in these urban environments there isn’t any vacant land to build on. To meet that demand, you have to take older industrial or vintage commercial buildings and convert them to higher and better uses. So we started buying up in Culver City. We had built up a portfolio of about 25 million square feet of industrial buildings representing over 300 properties. About three years ago we started selling those buildings off. Today we have a lot less properties in numbers, but our values are actually greater than what we had before.

Why didn’t Hackman get more into the Downtown development game? We definitely missed the market, but it was purposeful. A lot of the real estate people in Los Angeles that have been here for a while have seen the boom-bust of Downtown Los Angeles, where when things softened up, they really took a hard fall. The reason we missed it was probably that prejudice. We like areas that are fairly restrictive, as that creates high barriers to entry. It makes projects that exist there very valuable.

What are your plans for CBS Television City? We intend to operate the studio long-term. We are not interested in tearing it down. We are retaining all the employees there. We bought it because we like the studio business.

Is Hackman a family affair? My son and daughter have started to work here. They are at the bottom, having to work their way up. We run a meritocracy. It is an unbelievable pleasure to be able to see your children every day. It’s funny because my son, who is 28, will say hello in the morning and we’ll talk about deal flow. My daughter will do the same thing, but she will always come in and say, “Did you have breakfast today? What are you doing for lunch?” She has a motherly instinct. It is kind of cute.