Exclusive Q&A: Kearny Real Estate Company's Hoonie Kang Talks About The Firm's Latest Projects
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Kearny Real Estate Co partner Hoonie Kang, who has been with the company for 15 years, sees less risk-taking as the end of the cycle nears, but the firm's overall strategy to find value-add opportunities won't change. He is among the all-star panelists scheduled to speak at Bisnow's Los Angeles Capital Markets Forum starting at 7:30am March 16 at The Water Garden in Santa Monica.
Bisnow recently caught up with Hoonie (pictured with his wife, Grace, and daughter, Ellie, at her birthday party) to talk about how he first got involved in the industry, how he landed at Kearny Real Estate and some of the company's latest projects.
Bisnow: How did you get involved in commercial real estate?
Hoonie Kang: I grew up in Southern California, but ended up going to college on the East Coast (Harvard University). I graduated with a degree in economics and my first job was with a mutual fund company in Boston. I knew I wanted to move back to California. My friends in the real estate industry convinced me that the industry was a great combination of finance and working with real, tangible assets, something you could touch and feel, as opposed to just paper pushing. I started at LJ Melody & Co (now part of CBRE), a commercial mortgage brokerage company, which was great as I was introduced to various types of real estate deals and product types. After LJ Melody, I joined Kearny Real Estate Co in 2001, where I have been ever since.
Bisnow: What is your company's strategy?
Hoonie Kang: We are a local developer/investor, with a focus on office, industrial and land with offices in Los Angeles, San Diego and Santa Fe Springs. We generally focus on opportunities where we can add significant value. We look for properties with “good bones” that are in some need of repair. Because this requires a very hands-on approach, we generally do not stray outside of Southern California.
Bisnow: Do you see that strategy changing in the next year?
Hoonie Kang: Our overall strategy will remain the same. Given where we think we are in the cycle (more on that below), we’re more likely to take less risk in the near term, whether that’s structuring deals with less debt or looking at deals with less risk (rehab of existing buildings vs. ground up, or looking at properties that have cash flows vs. completely vacant).
Bisnow: What are some of Kearny Real Estate's latest projects?
Hoonie Kang: Our most recent project is The Press. Kearny closed in November 2015 on a JV with Tribune Real Estate Holdings to redevelop the former LA Times printing plant and excess land in Costa Mesa (he is pictured above with his daughter in Lake Tahoe). The 24-acre site is just north of the 405 off of Harbor Boulevard, 2.9 miles from John Wayne Airport in Orange County. The printing press building is unlike any other in Orange County—a steel frame structure with areas including 50-foot-clear high spaces, a four-foot-high loading dock adjacent to over two acres of land, both running the length of the building, which uniquely allows for incomparable outdoor amenities, and features inside and outside of the building that are a testament to the authenticity of the building. Kearny plans a major transformation of the building into an exciting and vibrant creative office campus, taking advantage of the unique gifts of the building. We own this project without any debt, which is an example of de-risking a deal at the capital structure level.
Bisnow: What are some of your company's other acquisitions?
Hoonie: Kearny purchased the Mission Center Office Park in San Diego’s Mission Valley submarket for $29.2M in October 2015. The project is a 181k SF low-rise office campus consisting of a two-story 53k SF building leased to the County of San Diego and two three-story 64k SF multi-tenant atrium-style office buildings on 6.7 acres overlooking the San Diego River. Kearny was attracted to the Mission Valley area as the immediate area around Mission Center Office Park is benefiting from more than $3B in new and planned investment that will add approximately 10,000 new residential units and 500k SF of retail amenities by 2020.
Mission Valley feels like Playa Vista 10 years ago, but benefits from even better access to mass transit. Kearny will undertake a multimillion-dollar capital improvement program to upgrade the buildings’ common areas, including the second and third floor atriums, where enhancements will provide multiple outdoor gathering options for tenants. For those tenants on the ground floor, Kearny will provide private outdoor patios. The property was 94% leased when we acquired it, which is another example of taking less risk but being able to add value through property-level enhancements.
Another recent “project” was not an acquisition but taking over the asset and property management of a $150M portfolio owned by a private investor. Kearny manages all our properties in-house, but will also perform third-party management for select clients. We feel like this can be a truly win-win scenario in some instances as the client receives best-of-class institutional level management vs. having to have their own staff, and we are able to remain active in some of the submarkets where we otherwise do not own any properties of our own.
Bisnow: Where do you think we are in the cycle?
Hoonie Kang: I know people use the analogy to baseball a lot. In that regard, I think we’re in the bottom of the seventh or top of the eighth inning. We are mindful of how long the current recovery has been ongoing and looking at ways in the manner described below to take a bit less risk than we otherwise might earlier in the cycle. That being said, we also acknowledge that because of the nature of the recovery (slow and steady), this recovery may continue into extra innings or any correction might be pretty soft, so we think we are best positioning ourselves for those scenarios as well.
Bisnow: What do you like to do in your personal life?
Hoonie Kang: My wife, Grace, and I have a 5-year-old daughter, Ellie (pictured above on vacation at the Aulani Resort on Oahu). Even with one child, it seems most of our free time revolves around her in some way. This past weekend was the first in a few months where we didn’t have anything planned on either the Saturday or Sunday, which was really nice for a change. We love to travel, with Hawaii being our favorite destination. I also love to golf although it seems to get harder and harder to find the time to be able to do it outside of work-related events.