PaliHi Grad Is COO of New Brokerage Firm

By ELIZABETH MARCELLINO Special to the Palisadian-Post Peter Hernandez’ first memories are of small-town Pacific Palisades in the 1950s. His family moved to Toyopa Drive when he was two, and he grew up playing baseball at the park for the undefeated Yankees; watching his teenage brother, Michael, and his friends ride their motorcycles up to the old Hot Dog Show on Sunset; and swimming on Coach Nelson’s team at Palisades High, when the center quad there looked like an offshoot of the Woodstock music festival. The town has changed a lot since then and Hernandez, 55, now lives in Point Dume with his wife, Kerry, and six-year-old daughter, Faith. But he would like to return to the Palisades one day. As founding partner and COO of a new real estate brokerage firm, Teles Properties, his expansion plans include a local office. Teles Properties opened in Beverly Hills on November 1 and now has 30 agents focusing on properties in Beverly Hills, Brentwood, Pacific Palisades, Santa Monica, Hollywood, Hancock Park and adjacent neighborhoods. Hernandez and CEO Lou Piatt have partnered to create what they believe is a new model for real estate brokerage. Already, two of their deals have gained notoriety: the $22-million listing for acreage adjacent to the iconic Hollywood sign and a $15-million condo sale in Century City. With more than 70 years of real estate experience between them, Piatt and Hernandez looked at other firms and saw that about 20 percent of the agents generated nearly 80 percent of the business. They found that the same was true of housing markets; productivity was concentrated in specific residential areas. The idea of starting a boutique firm with a narrower market focus was appealing to them as a way to exploit those concentrations. ‘It’s very hard to design a company that is responsive to every market in terms of its marketing needs and style–to design a company that works in Wichita and Manhattan and Palm Beach and Beverly Hills,’ Piatt said. ‘The markets we focus on are very special, high-end markets with a lot in common.’ Hernandez’ first real estate job was working for his family’s brokerage firm in Marina del Rey. He began in 1970, just a few years after the marina was completed and development began in earnest. Only 18 years old and an economics major at UCLA, Hernandez was lucky enough to catch a great call on his first weekend in the office, and he quickly sold a two-story Cape Cod on Eastwind for $47,500. Hooked on real estate from that point on, Hernandez left the family business in 1983 to build his own reputation at Jon Douglas in the Marina. He became a top- selling producer for the firm, where he and Piatt met. Over the years, they remained friends–even as Hernandez moved on to Coldwell Banker and Jon Douglas was purchased by Prudential–and talked about creating their own business. In the spring of 2007, Piatt, Hernandez and a third colleague, Steve Shull, began focusing in earnest on a business model. Drawing on their extensive network of relationships, the three partners were able to attract ‘competent agents with character,’ Hernandez said, and Teles Properties opened its first office at Wilshire and Santa Monica Boulevards with five realtors. When it comes down to defining the division of labor between them as COO and CEO, Hernandez and Piatt insist that they split whatever is on the firm’s to-do list. And ‘no job is too small’ for either of them, said Piatt. By way of illustration, Hernandez told about their first partners meeting in the small conference room. They walked in to find that a heavy rain had penetrated the roof and soaked through the acoustic ceiling tiles until they collapsed like wet cement on the conference room table. So partners or not, they became the clean-up crew. While Teles seeks only experienced agents, even seasoned performers are asked to ratchet up their level of commitment and discipline. Shull, the third partner, serves as a professional in-house coach to the Teles team. His experience as a linebacker for the Miami Dolphins and one of the team’s tri-captains in the 1982 Super Bowl serves him well as a coach. ‘Steve can get even agents in the top 10 percent to double their volume,’ Ernie Carswell, a Teles agent, said. Agents operate independently and rely on business contacts who often become personal friends. The opportunity for distractions–a long lunch, an extra stop to meet someone who may be more friend than business contact today, a break to run errands–is high. Shull challenges agents to commit to tough goals and maintain a more intense level of focus. Piatt has seen Shull push agents to ‘exert the kind of effort’ that they just can’t reach on their own and uses the analogy of a personal trainer at the gym. The Teles partners believe that they can also make a more intense commitment when managing a smaller team of agents; their own leadership, support and firm resources have greater impact. A maximum of 50 agents per office is the company’s goal, and the principals do not actively sell in competition with their agents, which differentiates them from other boutique firms. Even if the Teles model is unique enough to capture attention in a market seemingly saturated with brokerage firms, isn’t it hubris or foolishness to open a new company in the midst of a market downturn? Piatt, who has worked through tough real estate cycles beginning with the 1974 market correction, said that, on the contrary, ‘the timing couldn’t be more perfect. In transition markets, it’s really clear to clients that they need competent service. We have a chance to differentiate ourselves at a time when service makes a difference.’ If the 80-20 rule holds in a good market, ‘in a tough market it goes 90-10,’ with fewer and fewer agents operating at a highly successful level, Hernandez explained. Piatt, Hernandez and Carswell all stress the importance of looking closely at specific submarkets in order to make judgments about trends in valuation or inventory. ‘The macro numbers are troubling,’ Piatt said, ‘and larger markets are in transition. But individually, well-priced properties that are strategically marketed will find a buyer. When you start comparing the macro numbers that you see in the newspaper, you are comparing markets from South Central Los Angeles to Beverly Hills’ and you can’t draw useful conclusions about a specific smaller market. Piatt and Hernandez focus on what they call ‘micro-markets,’ which they define as either submarkets like Pacific Palisades or Brentwood or even smaller areas, such as the Highlands or the Riviera within Pacific Palisades. ‘You need to drill down into the specifics of the immediate area,’ said Hernandez, in order to make useful judgments on behalf of clients. A recent $15-million condominium transaction illustrates Hernandez’ point. Teles agents David Mossler and John Iglar represented the buyer of the 38th floor unit at The Century, a luxury development under construction in Century City and slated for completion in 2009. The sales price of $2,700 per square foot sets a new Los Angeles area record, according to the Los Angeles Times, despite broader market trends. But the company’s highest profile listing to date is Cahuenga Peak. The marketing of this $22-million property, adjacent to the historical Hollywood sign, was announced February 13 and drew press coverage across the U.S. and as far away as Russia. It also drew controversy, as Los Angeles Councilman Tom LaBonge denounced the potential development of the site, saying ‘It should be pristine and left open and not developed.’ LaBonge insisted in a recent interview with National Public Radio that the city must buy the site to protect it; but pricing is a problem. The city has appraised the site at $6 million and is said by the Los Angeles Times to have accumulated $5 million to buy it, a far cry from the current asking price, which Teles agents say has drawn plenty of interest from serious buyers. Agents Sarah Blanchard and Carswell seem unfazed by the debate. They note that most interested parties are considering a single structure on the 138-acre site and are sensitive to the entitlements and environmental issues unique to this location. Perhaps most importantly, they explain that the primary development area does not block the sightline to the much-photographed landmark, but falls behind and to its left. One of the attractions of joining Teles for Blanchard and Carswell is the camaraderie among the agents and management. In an unusual office adventure, the Teles team took a hike up to Cahuenga Peak the Saturday after the Wednesday press announcement. The hike to reach the 1,820-foot elevation was steep enough to make it a challenging ascent. But with a little sweat, everyone made it to the top and celebrated with champagne and mimosas. Great staging for a hike and pure economics aside, the profile of the Cahuenga property must appeal to Hernandez, who peppered his discussion of the market and the firm with reference to high-end brands like Apple, Nike, Goldman Sachs, Tiffany and Harvard Business School. He said he thinks the Teles model draws more on businesses outside real estate than existing brokerage models and he aspires to build a brand as strong as those he admires. But the model itself may limit the scale of management’s aspirations, since it relies on smaller teams and the delivery of an intense level of service. Hernandez and Piatt say their goals are being realized faster than expected and point to the 30 agents already in house as evidence, including Melissa Alt, who focuses on the Palisades. They’ve nearly filled the new office they lease, but before finding new space in Beverly Hills, they plan to replicate their model in Brentwood. The exact timing relies on getting all elements of the model ‘firmly under foot,’ said Piatt, but they expect that this will occur within the next two quarters. Then what? Pacific Palisades follows Brentwood on their list of satellite offices to open in markets where they believe clients value the high level of service Teles can offer, Hernandez said. So will he make a move back to his old stomping grounds? Even without the Hot Dog Show? ‘I would love to work out of Pacific Palisades,’ he said, ‘or Malibu,’ because he likes to surf in the morning before heading into work. So Palisadians may see Hernandez in a local office soon, but he probably won’t be moving back into town. The surf is just too good at Point Dume, even for a kid who learned to catch a wave at State Beach.