Robert S. Anderson is a walking history book.
This story first appeared in the December 5, 2016 issue of WWD. Subscribe Today.
The Beverly Hills resident’s great-grandmother, Margaret J. Anderson, along with her son, Stanley S. Anderson, in 1912 opened the Beverly Hills Hotel, which became the anchor for the rest of the city’s development. Anderson himself serves as a commissioner on the city’s Recreation and Parks Commission and is the official historian for the Beverly Hills Hotel. His home office in Beverly Hills drips with stories from the past. Two wide-screen computer monitors sit side-by-side on his desk, where he has videos on Beverly Hills and can access the thousands of old pictures and newspaper clippings going back to the city’s beginnings.
Anderson is also a longtime property owner on what is the city’s and one of the U.S.’ toniest shopping districts, Rodeo Drive. The street, most famous for the two-and-a-half block stretch bound by Santa Monica and Wilshire Boulevard, is home to Chanel, Hermès, Dior, Ralph Lauren, Max Mara, Cartier, Salvatore Ferragamo, Gucci and many more. Space is at a premium there and properties rarely become available for sale. About half of the properties on that street are privately owned by families, but as sales slowly close, the makeup of real estate owners has inevitably changed to include corporations. And it’s the deals in more recent years that have really led to the bubbling of valuations and asking rents.
Chanel late last year paid about $150 million for the building next door to the space it paid $100 million for just two years earlier. The most recent deal set a new record for purchase prices on the famed street. A 1954 newspaper clipping from the Los Angeles Times reported the total property was valued at $250,000 — $150,000 for the building and $100,000 for the land — at the time of the report. LVMH Moët Hennessy Louis Vuitton Inc. this summer purchased the iconic yellow building occupied by Bijan, snapping it up for about $122 million. Sources have speculated the luxury house made the purchase to eventually bring its brand under the roof with plans to redevelop the property and perhaps add subterranean parking.
“When you see Louis Vuitton buy the Bijan building or Chanel, they’re giving the street a vote of confidence for the long term,” said Chuck Dembo, a partner at Dembo Realty. “It [the sales] underscores some of these companies’ long-term commitments to the street. The majority of these brands [on Rodeo] have been around for so long, they’re not going out of business.”
Dembo’s firm has been in business in Beverly Hills for 50 years, with Dembo a part of the Rodeo Drive committee for about half that time, during which he has watched and at times been a part of the street’s action as a broker.
“There was a trend when the stores were just getting bigger and bigger with the flagships and I see that tapering a bit because it hasn’t been the best year for global luxury brands,” Dembo said. “So with that in mind, the trend right now is not to go big.”
That trend may not have significant implications for long-term property values on Rodeo.
The latest sale numbers are attractive to some. Many look on with fascination at the rising prices, but maintain a firm hold on their spaces.
“Those kinds of numbers are hard to look away from,” Anderson said. “It’s just going up. Everybody thought ‘This is crazy’ — back in the Seventies, $3 million for a piece of property that’s now worth hundreds of millions of dollars.”
Yet Anderson — like many other private owners — is not looking to sell anytime soon. He would rather leave something for his son and grandchildren, he said. He’s also pragmatic, arguing that even with the swelling price tags, the tax on the sale would amount to about half the purchase price. Why bother, he rationalized, if he can continue realizing income on the rent?
Ground-floor space on the street of between 1,000 and 1,500 square feet runs about $800 per square foot per year, according to Dembo. Larger ground-floor spaces in the range of 3,500 to 5,000 square feet average $500 per square foot per year, with basement or mezzanine space going for about $120 per square foot annually. It’s still a deal relative to Manhattan’s upper Fifth Avenue, which commands rents of about $3,000 per square foot annually for the 12 months through June, according to a recent Cushman & Wakefield report. The report billed Fifth Avenue as the most expensive street in the Americas.
Anderson’s got prime space. Brooks Brothers occupies his property, with 100 feet of frontage on Rodeo Drive and 150 feet on Santa Monica Boulevard. In about a year-and-a-half, he projects he’ll have knocked down the existing structure and replaced it with a new one, when it’s likely a new tenant would occupy the space. He declined to say who he has been in talks with, citing a confidentiality agreement.
Anderson estimates the value of his property to be around $300 million today. That’s a far cry from when his grandfather purchased the site from the Rodeo Land and Water Company for $1,500 — totaling two lots — in 1925.
Although his grandfather died when Robert was four years old, he left all sorts of notes behind and Anderson recalled one in which he wrote “I lost out of buying property in Hollywood; I wasn’t going to miss out on buying in Beverly Hills.”
Rodeo Drive Committee president Mark Tronstein and his family have owned property on the street since the late Seventies. Tronstein’s father, Donald, who studied law and later started his own real estate company, purchased a gas station on Rodeo Drive and Brighton Way, which is anchored by what is Bulgari, and the portfolio has since grown to three properties, with one of those developed into what is now the Ralph Lauren and Giorgio Armani spaces.
“He had a vision the street was going to be a bigger retail and shopping destination,” Tronstein said. “Back then, there were a few prominent proprietors on the street and then in the Seventies, Eighties and Nineties, you saw the inflow of various corporations.”
Even for Tronstein, who sees the corporate buyers coming in as a good thing, the intention is to keep the properties in the family and maintain what his father started.
“My goal is not to screw it up,” he said.
Being a property owner is being a part of a street rich in retail history. Fred Hayman is largely credited with transforming the two-and-a-half-block section of the street into what it is today, with the Giorgio Beverly Hills boutique, which he opened with George Grant in 1961. The store later changed to Fred Hayman Beverly Hills when Avon Products Inc. acquired the Giorgio Beverly Hills brand and related fragrance business in the late Eighties.
It was Hayman, along with retailer Jerry Magnin, Richard Carroll, who started men’s store Carroll & Co., and Don Tronstein who organized the retailers and property owners on Rodeo Drive, with the goal of improving and marketing the street, according to Bruce Meyer.
“They did the really heavy lifting,” Meyer said. “You’re obviously getting a younger group of enthusiasts and storekeepers now, but the street has never been stronger.”
Meyer, a car collector and founding chairman of the Petersen Automotive Museum, went in with his family more than 40 years ago to buy property on the street. He declined to say where on Rodeo they own real estate, but confirmed they’re long-term holders. The family bought Gearys Beverly Hills in 1953.
The street’s history and continued evolution is what keeps many holding tight to their parcels. It’s hard to say where the street may be a decade from now. Few could have even imagined in the Fifties and Sixties what the street would be today, but the foresight of some helped push it in a certain direction.
“We had the markings of something really great,” said Meyer, “and it just developed in the right direction.”