EVOQ Sharpens Focus After Reorganization

LOS ANGELES-EVOQ Properties suffered some blows during the recession, but is emerging from the downturn with a sharper focus and renewed spirit. The successor business to full-service real estate company Meruelo Maddux Properties just celebrated two years since coming out of bankruptcy protection to take over management of the assets of MMPI and is training its efforts on creative uses in the revitalized Downtown L.A. area.

“Two years ago, the whole industry was just coming out of the bottom,” Caverly tells GlobeSt.com. “The 'bottom bottom' was in '09, but it took another two to feel like we were starting to stabilize. Fast-forward to today, and we are still not back to the go-go days. There's not a lot of job growth in the economy. Banks are lending, but still not lending to everybody, and the housing market hasn't fully recovered, although there's some sign of that.”

Caverly admits that there are accelerated pockets of growth right now in the market, particularly in the multifamily sector since people are choosing to rent rather than buy homes. “In Downtown L.A., there's a huge influx of institutional money trying to get a foothold on Downtown. There's a transition going on Downtown, and there are some interesting dynamics happening as we come out of this very long, painful recession—the worst one I've seen.”

Coming out of the recession, social media, Hollywood and the tech boom have fortified Southern California's economy, creating a healthier economic environment, Caverly says. “The 'Made in the USA' trend has benefited us, and the market feels a lot better. We have a long ways to go—it has not been a short cycle. Most recoveries don't take this long to happen—we're five years into this.”

The general thesis on EVOQ is that the firm was a victim of what had transpired during the recession Downtown, Caverly adds. “During the downturn, all the prior demand factors evaporated, and we came in at the bottom of the market when no other capital would. We're big believers in Downtown. L.A. has had its fits and starts to be a real downtown city. We saw enough residential being built and transit being added, and we wanted to make a bet on Downtown. The company was in dire need of capital, and we were fortunate enough to find it.”

In the past two years, EVOQ has successfully reorganized its diverse portfolio of assets, paid down a sizable amount of debt and is now operating as a successful real estate asset-management company with a strong board and experienced executive team. The firm has sold 19 projects and recognized $117.2 million in gross proceeds and has paid off or retired $80.5 million in debt. In addition, EVOQ currently owns 23 rental projects and 16 projects held for real estate development. Most of the projects are in or around the Downtown L.A. area, and all of them are in Southern California.

EVOQ had to make some choices in its transformation. “We had to decide what we were going to be,” says Caverly. “We've decided to focus more on the creative-office side of the business. We have either partnered with or sold off or are in the process of selling off residential land and redeploying it into our creative-office campus at Alameda Square. We're following this trend of people living Downtown—the Arts District has become the focal point of Downtown, so now we're providing companies and workers with a place to actually work.”

EVOQ sees creative office as a long-term trend, and the Arts District is set up for that type of environment vs. the traditional office tower. The firm will continue focus its efforts on this type of product in Downtown L.A. “We're just Downtown guys,” says Caverly. “We obviously keep abreast of what's happening in other markets, but we're not investors in those markets.”

The firm says it is actively pursuing its plan to be an integral part of the greater Downtown community and is committed to responsible and long-term investments that have economic, environmental and social benefits. It has reinvested millions of dollars in proceeds from the sales of properties to revitalize its Downtown properties and to attract new businesses and tenants. These companies are bringing new jobs and services to the area, and ultimately, building community and breathing new life into once-desolate areas.

To that end, EVOQ is concentrating on transforming historic Alameda Square into a world-class campus to attract a range of creative companies and has successfully recruited brands such as Splendid, Ella Moss and Groceries Apparel. Hundreds of new employees now work at Alameda Square, and new services like gourmet cafes and food trucks are a welcome addition to the campus. The company plans to continue leasing up Alameda Square and expects to announce additional tenants shortly, Caverly says.

“What we've done in Alameda is transformative to that center and to that area,” says Caverly. “We also had the vision to invest a tremendous amount of money down there and attract great tenants, not just to be known Downtown but across the country as a leading innovation campus.”

Looking ahead, EVOQ is looking to continue to maximize the value of its assets through a range of tactics, including strategic dispositions of properties, management of its portfolio of commercial properties, redevelopment of existing properties for new uses, and potential joint ventures with companies to find the best possible uses for vacant parcels.