Annual NAIOP USC/UCLA Real Estate Challenge takes place next month. Students are focusing on downtown Los Angeles redevelopment
Article By Julie Nakashima
Los Angeles' two crosstown university rivals are girding once again for their annual showdown.
Instead of helmets and shoulder pads, however, the battlefield accouterments are more likely to be calculators, graphs and PowerPoint presentations.
That's right. It's time for the NAIOP USC/UCLA Real Estate Challenge.
Each year, the Southern California chapter of the National Association of Industrial and Office Properties sponsors a competition between the Anderson School at the University of California, Los Angeles, and the Marshall School of Business at the University of Southern Californiacolor>.
NAIOP selects a real estate development opportunity in the greater Los Angeles area and challenges teams from USC and UCLA to present the most feasible plan. To the victor goes the prized Silver Shovel.
This year's outing, the sixth, will take place April 10 at Union Station in downtown Los Angeles. So far, the score is 3-2 in USC's favor.
Past challenges have looked at specific sites such as the Rykoff property at Seventh and Alameda streets or Boeing's Pacificenter site in Long Beach.
According to David Thurman, a co-chair of the challenge committee and immediate past president of the Southern California chapter, the challenge takes a slightly different tack this year.
"We're trying to pose a question to the students that is more strategic in nature than a higher and best use for just one site," Thurman said. "This is something that the deans of the schools were strong advocates of because it had a little more real-life application for the students and is something that was not being covered in-depth enough in their own curricula."
This year's challenge puts students in the shoes of a developer who's seeking a large investment from an institutional investment fund. The students are to select an area within downtown Los Angeles and demonstrate why this is the best location to jump-start the revitalization of downtown.
The judging format consists of a written presentation, a private, afternoon presentation before the judges that includes a question-and-answer session, and an evening presentation before the public at a dinner event at which time the winning team is announced.
Thurman said the challengers are not treated as students but as professionals. At the private judging session one year, a team found itself in the hot seat because its written report was riddled with typographic and grammatical errors.
As Thurman tells it, "Kathy Briscoe of Lowe Enterprises raised her hand and said, 'Have you guys ever heard of spell-check? If you were in front of our investment committee right now, you'd be thrown out.'"
One of the students immediately excused himself to make a phone call while the rest of his team pressed on. By the time the judges began heading for the evening event, the team had corrected all of the mistakes and presented the judges with new packages.
Thurman said Briscoe "was impressed that they recovered so well."
Still, Simon Cowell, the acerbic judge of "American Idol" fame, need not apply.
"We try not to publicly embarrass the students," said Timi A. Hallem, who is serving as a judge this year for the fifth time.
A partner in the Los Angeles office of Luce, Forward, Hamilton & Scripps LLP, Hallem's also the challenge committee co-chairwoman with Thurman.
According to Hallem, serving as a judge is such a rewarding experience that many of them ask to come back. Take the question-and-answer portion, for example.
"That interactive process is very rewarding in terms of participating in the educational part of the program from the point of view of the students," Hallem said. "You can ask more pointed questions, follow up on responses, and truly try to help the students see how their presentations could have been more informative, punchy or more persuasive."
The students learn some valuable lessons. For example, there was the time judge Kenneth Townsend of Ernst & Young started going over one team's financial pro formas.
"Five minutes into the presentation," Thurman recalled, "[Townsend] raises his hand and says, 'Hey, your numbers seem to be a little off right here.'"
Townsend proceeded to point out a $100,000 mistake in the team's assumptions. The students agreed that they were in error and continued their presentation.
Ten minutes later, Townsend raises his hand again. After running down the numbers, he informs the students that the relatively modest $100,000 disparity on the front end would have a $21 million impact on their proposal's bottom line.
"The students just froze," Thurman said.
Northern California Roots
The NAIOP Southern California challenge mirrors a program that was started eight years before by the organization's San Francisco Bay Area chapter. At the time the Southern California challenge was created, Doug Hinchliffe of Lowe Enterprises was the president of what was then the Los Angeles chapter of the NAIOP, and Thurman was on the board of directors.
According to Hinchliffe, he and other Los Angeles chapter officials had gone to a national NAIOP event in Washington, D.C., and learned about a competition between graduate students at University of California, Berkeley, and Stanford University. The students were to come up with the best commercial real estate project for a selected site, taking into account such issues as best use, design, financing and marketing.
"It occurred to us that that would be an event we could duplicate in Southern California," Hinchliffe said, "and the two schools that seemed to make the most sense were USC and UCLA."
The group started the program to give people in the real estate industry an opportunity to participate in something with redeeming value, he said, as well as interest students in the profession.
"It really gives them a chance to meet face to face with the so-called icons of the real estate industry, whether it's Rob Lowe or Dick Ziman," Hinchliffe said. "Also, it's a terrific opportunity for them to strut their stuff."
Although job offers aren't part of the program, a number of former challengers have been hired by either NAIOP member companies or judges' companies. Lowe Enterprises itself has brought aboard several challenge team members.
Despite the potential for a job offer, students, many of whom will be graduating in a few months, don't refrain from speaking their piece.
Case in point: On a previous challenge where students were charged with identifying what type of development should occur along Figueroa Street near the Staples Center, judge Steve Soboroff and one team got into a vigorous debate about why retail would or wouldn't work in that area.
Thurman recalled that the students obviously had no idea who Soboroff, a shopping center development industry leader who is president of Playa Vista, was. However, the deans of both schools, who also were present, most assuredly did.
"The students basically looked at Steve and said, 'You don't know what you're talking about.' The deans were in there cringing," Thurman said.