It's been two years since City Lights at Town Center opened its doors high in the hills of Aliso Viejo, Calif. And in ever-trendy, ever-changing Orange County, two years might as well be an eternity. But this luxury apartment property, which still catches the eye of discerning developers across the country, is far from yesterday's news. All for good reason: The project revolutionized the prototypical apartment property in southern Orange County.
"When City Lights was conceived, people were building primarily three-story, garden-style walk-up projects with a density of 26 dwelling units per acre," says R.C. Alley, a partner at Orange, Calif.-based Architects Orange, which designed the project.
City Lights defied that garden-variety standard, with a density of 50 units to the acre and a unique wrap product, a design that allows residents to access their units from all levels of the parking garage.
FAMILY TIES: William Gaboury may not be an official member of the Shea family, but he's worked at the company long enough to qualify for extended-family status.
But innovation represents standard practice for the project's developer, Shea Properties, a Southern California real estate firm with a small but well-funded apartment division known for its creative apartment projects and award-winning mixed-use communities.
Unreal—and unfair—as this may sound, money is not usually an object for Shea Properties, thanks to the backing from its parent company, J.F. Shea Co., one of the largest privately held companies in the country with a 125-year track record. (For more information on J.F. Shea, see "Golden Family," page 58.)
"We have had fun because of the family backing and the fact that we have never been capital-constrained anytime throughout our existence," says William Gaboury, who has served as Shea Properties' president for 21 years. In 2002, he became CEO as well.
This tremendous financial support allows Shea Properties to quickly and effectively execute large, complex projects that would otherwise be prohibitive to a company of its size. "They have the horse power to go after things that some of the smaller groups can't touch," says Aram Chahbazian, a principal at Thomas P. Cox: Architects, which designs many of Shea's high-density projects.
Extended Family
Gaboury, who has piercing blue eyes and stands more than 6 feet tall, conveys quite the commanding presence. But talk to him for a few minutes and the CEO's warm, easygoing personality quickly emerges from his tougher exterior. "I have a pretty good sense of humor, and I don't get mad often, so that works out alright for most people," Gaboury says. The strategy obviously works. Under Gaboury's leadership, Shea Properties' value has grown from about $147 million when he joined in 1984 to $1.7 billion today, with a goal of reaching $4.4 billion by 2010.
Gaboury joined the company two decades ago, just a few years after the company was formed under parent company J.F. Shea Co. Today, Shea Properties' portfolio includes 7,500 apartment units in California, plus 4.5 million square feet of commercial space in California, Colorado, and Arizona.
TRENDSETTER: The 793-unit City Lights at Town Center in Aliso Viejo, Calif., set a new standard of living in the O.C. with resort-style pools, spas, and waterscapes.
As one of the fastest growing entities in the Shea family of companies, Shea Properties serves as a long-term investment vehicle for the parent company. "Our apartments tend to be our premier choice of product within Shea Properties, and we really want to continue to grow in supply-constrained markets and [the] markets that our sister company Shea Homes is involved in," says Peter Shea Jr., who represents J.F. Shea's fourth generation of management in his newly appointed position as president and CEO.
To grow, Shea Properties relies on the market smarts of its sister division Shea Homes, which builds all of the company's for-sale housing, including condominiums. "Where developers always get in trouble is where they don't have local knowledge," says Gaboury. "That is part of the reason why we love to follow Shea Homes around. We get their benefits of their local knowledge." In the near future, Gaboury expects to trail Shea Homes into the Florida and Washington markets.
Working so closely with a powerful sister division has its advantages, but there's always the threat of sibling rivalry. Shea Properties often competes with Shea Homes for land, a desperately sought-after commodity in today's marketplace. "We compete with them [Shea Homes], and as strong as housing has been over the last few years, they have been winning [the land deals] and building the condominiums versus [us building] apartments," says Steve Gilmore, a vice president at Shea Properties.
"We have had fun because of the family backing and the fact that we have never been capital-constrained." —William Gaboury
While this constant battle for sites can be frustrating, Gaboury doesn't let his co-workers get too unnerved. "He's the one that's taught us a little about the patience of the cycle: what goes up, comes down, and what goes down, comes back up," says Don Gause, another senior vice president at Shea Properties.
And you can count on Gaboury to know when it's time to make the next move. "When he approaches any business issue, he doesn't overreact. He doesn't jump too quickly," says Geoffrey Stack, managing director of SARES?REGIS Group, an Irvine, Calif.-based developer. "He really takes the time to analyze the problem and determine the best approach to solving it."
Mix It Up
This summer, Shea will unveil its latest project: Trio, a $70 million mixed-use project in the playhouse district of Pasadena, Calif. Directly on the path of the Rose Bowl Parade, this project is certain to catch the eye of many who pass by. As the company's first entry into the L.A. market, Trio will include 304 luxury apartments, 15,000 square feet of retail, a three-story garage, and the adaptive reuse of a historic building. And the building's appearance is just as diverse, dubbed "Trio" because of its three distinctive architectural treatments—urban, contemporary, and traditional Spanish.
With so many different parts working in tandem, Trio is an extremely complex project. But Shea Properties wouldn't have it any other way. They have been building these type of mixed-use projects for more than a decade, long before it was the "in" thing to do. Often, Shea Properties will develop such a project entirely in-house, drawing upon its diverse capabilities as a commercial and residential developer. "We really do see mixed-use as a strategic advantage because we can do all those product types internally without having to go to an external source to do it," says Shea senior vice president Gause.
(For Trio, though, Shea Properties partnered with Capital and Counties USA—a wise choice, since the San Francisco-based development firm owned the land).
Mixed-use is a natural fit for the company, adds Tom Wermers, CEO of San Diego-based Wermers Multi-Family Corp., which serves as general contractor on all of Shea's apartment projects. "They know from the beginning of the project what it's going to cost and how it's going to lease, both on the commercial side and the residential side," says Wermers. "They have all the people within their organization to be able to deliver on what they promise."
Plus, the company has the financial backing of its parent company, which helps them tackle these larger, more complex types of projects. "They [J.F. Shea Co.] are extremely well-capitalized," says Stack of SARES?REGIS Group. "They have tremendous sources of debt and bank lines."
One such complex project: Waterford Place, perhaps Shea Properties' most well-known mixed-use project, which opened in Dublin, Calif., in 2003. This colorful, highly successful project encouraged developers across the Golden State to tackle the vertical mixed-use structure—housing stacked on top of retail shops. "Waterford was very cutting-edge when we built it," says Alley of Architects Orange. "And I still get calls from people who just walked the project and think it's great and want to do something similar."
HANDS-OFF: Gaboury believes in giving his upper-level management freedom. "I am not a micromanager," he says. "I let my people do their thing, and I see the big picture pretty well."
Shea's next mixed-use project (its first transit-oriented site) promises to be even more challenging than Trio. Cedros Crossing in Solana Beach, Calif., will include 33,000 square feet of commercial space, a 500-space parking garage for transit and bicycle users, and Lofts at Cedros, which will be a 141-unit rental component.
At the top of the project's long list of complexities: Working with the public transportation entity, North County Transit District. "We are having to adjust to the pace of the public entity," says Gause. "We are geared towards working at a much quicker pace with much quicker decision making than the structure of the deal will allow." The project is expected to stabilize in 2009.
The Shea Way
Shea Properties doesn't build a lot—it only has about 7,500 units in its portfolio. But when the company decides to tackle a site, you can bet the project will stand miles apart from its competitors.
That's because Shea isn't afraid to be different, says Victoria Currens, a principal at Style Interior Design, an Irvine, Calif.-based interior design firm. She points to Trio, where Shea opted to design its leasing center and clubhouse in a soft Deco style reminiscent of the adjacent historical theater district, while many of the surrounding apartment complexes feature a trendy loft-style design. "Everybody in the area was doing this techy loft thing, and we went a whole different direction," says Currens, who designed Trio's common spaces. "They [Shea] want their project to stand out from everybody else's."
The developer's creative approach extends to its on-site customer service practices. Each morning, all on-site employees gather for a five-minute briefing on move-ins, move-outs and other property-specific issues—an idea borrowed from the customer-centric Ritz Carlton hotel chain.
Shea also pays close attention to the smallest of details, like only using flat screen computers in leasing offices so monitors minimally affect the leasing agent's contact with the prospect. And to give due credit to its janitorial staff, the company smartly refers to custodians as resident services technicians. "They are the ones that make the huge difference," says Shea's Gilmore. "They have the most interaction with the customer."
These inventive strategies are paying off. Based on its resident satisfaction surveys, Shea won CEL & Associates' national multifamily customer service award for excellence for the third year in a row. "They [Shea Properties] have a commitment to quality and service," says Chris Lee, president and CEO of Los Angeles-based CEL & Associates, a national consulting company. "They take residents' opinions and these performance metrics very seriously and respond to them." Plus, each property develops an action plan to address any shortcomings noted in the resident surveys, Lee adds.
With Shea's constant push for perfection, it's no wonder that projects like City Lights are attracting the spotlight in the O.C.
Shea Properties at a Glance
- Founded: 1971
- Headquarters: Aliso Viejo, Calif.
- Employees: 250
- 2004 Revenue: $160 million (Operating revenue from stabilized properties only)
- Units owned/managed in 2004: 7,200
- Units projected for 2005: 304
- Geographic coverage: Western U.S.
- Goal for 2005: To better integrate the different divisions of the company and share employee talent across the apartment and commercial sectors
Leadership Lessons
- Age: 60
- First Job: Naval flight officer in the U.S. Navy
- Best advice someone gave you: Do not be afraid to try something new.
- Favorite Quote: "If past history was all there was to the game, the richest people would be librarians." —Warren Buffett
- Greatest challenge: Managing people. "I was a developer my whole life. Then I turned around and said, Whoa, I am not a developer anymore—I am a people manager.'"
Golden Family
How's this for a long family lineage: J.F. Shea Co., the parent company of Shea Properties, has been around for 125 years. In the housing industry, the company is best known for its Shea Homes division, which is the largest private homebuilder in the country. But J.F. Shea didn't enter homebuilding until the 1960s. The company actually got its start in 1880, in plumbing installation for large buildings and sewer construction. The company expanded its operations throughout the years, tackling such monumental projects as the Golden Gate Bridge and Hoover Dam.
Not surprisingly, to be preceded by such a corporate reputation gives Shea Properties an undeniable edge in the marketplace, providing tremendous access to capital, market knowledge, and name recognition. "Drop the name, and 99 out of 100 times people smile and really greet you infectiously just because they are so happy to be dealing with the Sheas," says Don Gause, a senior vice president at Shea Properties.
Today, the company's diversified operations include heavy construction with a focus on tunnel construction for major metropolitan subway systems, material production, venture capital, and of course, commercial and residential development.