Jim Starbird remembers telling Rick Caruso more than once that it would be OK to call it quits.
Starbird, then the city manager of Glendale, California, knew the Los Angeles developer faced enormous challenges building the mixed-use, more than 1 million-square-foot Americana at Brand retail lifestyle center in Glendale in the mid-2000s. The project was mired in a lawsuit with a competing mall next door and encountered stiff resistance from the community. The stakes were high for a development the city hoped would be a catalyst for economic activity.
Instead of quitting, Caruso listened to the concerns about the project and attempted to rework the development so it would better fit the community’s needs, Starbird said. That process, he said, is ideal for someone seeking to become a successful politician.
"On more than one occasion, I heard him say, 'The relationships are more important than the economics,’" said Starbird, now retired. "You didn't often hear developers talk like that."
Caruso now faces a different political challenge. The 63-year-old billionaire enters the final weeks of his campaign to become mayor of Los Angeles, the second-largest U.S. city, having narrowed a gap in recent polling but still trailing Rep. Karen Bass, a Democrat. He's a longtime registered Republican and later registered independent who is running as a Democrat in the race. Because no candidate in the June 7 primary received more than 50 percent of the vote, the top two finishers face off in the Nov. 8 election. While a Caruso victory is far from certain, his candidacy has caught the attention of a large swath of the region's commercial real estate industry.
A prominent citizen, he has served on commissions overseeing the nation's largest municipal-owned utility — the Los Angeles Department of Water and Power, and the Los Angeles Police Department as well as the board of trustees for the University of Southern California. Even so, he's still a political outsider who’s never held elected office, so his experience developing projects and winning approvals from cities and their commissions may offer insights on how Caruso may serve as mayor.
Caruso's eponymous development company has more than 2.5 million square feet of properties in Southern California, concentrated in Los Angeles, Thousand Oaks, Glendale, Marina del Rey and Montecito, in Santa Barbara County, which means he has spent countless hours interacting with politicians and citizens in and out of public meetings. The developer stepped down as CEO of his development company in August to focus on his mayoral run, and he has said the company wouldn't pursue any projects in Los Angeles if he's elected.
His successful development career has so far funded his campaign, financing the bulk of the more than $62.5 million it has raised thus far, according to the Los Angeles City Ethics Commission. Bass has raised roughly $7.5 million.
Caruso also has received support from executives at some of L.A.'s biggest real estate companies. Those donors include John Kilroy Jr., the CEO of REIT Kilroy Realty; Victor Coleman, CEO of Los Angeles-based REIT Hudson Pacific Properties; Dan Emmett, chairman of Santa Monica-based REIT Douglas Emmett; and Howard Schwimmer, co-CEO of Los Angeles-based REIT Rexford Industrial Realty.
A high-profile donor is Jason Oppenheim, who runs West Hollywood-based luxury residential brokerage firm Oppenheim Group, the subject of the hit Netflix TV series "Selling Sunset." None have donated to Bass, according to city records.
Caruso and Bass did not respond to multiple requests to comment from CoStar News for this story. But Caruso hasn’t shied away from his past business successes, boasting on his campaign website that he has been an “opportunity creator” and “community builder” after starting Caruso in 1987.
Challenges Ahead
Not everyone in L.A.’s real estate orbit is fond of Caruso or thinks highly of his development career.
The developer is embroiled in a spat over his decision to oppose a $1 billion redevelopment of the iconic 25-acre CBS Television City property at 7716-7860 W. Beverly Blvd. in L.A.’s Fairfax District. Caruso’s crown development jewel, the Grove shopping center, sits next door to proposed redevelopment and he has said he opposes the potential traffic complications from the project. The project, which would add offices and soundstages, is expected to create thousands of entertainment jobs and generate $2.4 billion in annual economic output, according to letters supporting the project submitted to the website for the city of Los Angeles.
While the proposed project would not directly compete with the Grove, a Caruso executive told the Los Angeles Times the company was concerned about the effects of traffic, parking and construction.
Caruso is helping to support an opposition campaign to the project, the Times first reported in August, an initiative that has sent fliers to neighbors and created a website opposing the project. Zach Sokoloff, senior vice president of Hackman Capital Partners, the project’s developer, lambasted Caruso’s attempt to block the development.
"Rick Caruso the public candidate laments red-tape that obstructs development," Sokoloff told CoStar News in an email. "Rick Caruso the private businessperson is weaponizing [the California Environmental Quality Act] to obstruct development. Rick Caruso the public candidate trumpets his commitment to cleaning up L.A. Rick Caruso the private businessperson would rather retain the status quo and thwart a project that will beautify deteriorating streets and improve public safety. And Rick Caruso the public candidate touts his deal-making skills, while Rick Caruso the private businessperson abandons the negotiating table and refuses to solve problems in good faith.”
Neither Caruso nor the campaign responded to requests to comment on Sokoloff's comments.
Caruso’s negotiation skills undoubtedly will face a different sort of test if elected mayor. As a developer, whatever Caruso said was what happened because he was the boss, but it doesn’t work like that in government, said Joel Fox, a political analyst and adjunct professor at the Pepperdine University School of Public Policy.
Businesspeople often jump into politics because they’re frustrated with challenges facing the city and consider themselves problem solvers adept at tackling complex issues, Fox said. But he adds that being mayor does not empower someone to simply make decisions for the city. L.A.’s mayor holds a relatively weak legislative role, and while the officeholder can set a policy agenda, the power over budgeting and other decisions largely rests with its veto power over certain city council actions. Building coalitions to marshal votes among the city’s 15 councilmembers to pass laws is an important skill for a mayor.
Despite municipal officials saying he has a track record of engaging with community groups, that may prove a challenge for Caruso, Fox said.
"Caruso is going to have to be a leader who can deal with that kind of move or he has to make the decision that he'll be the backstop to legislation he feels is detrimental to the city," Fox said, adding that it can be tricky as the city moves more to the left politically.
Bass also will face the same issue if elected, Fox said, because she’s seen as a moderate Democrat.
Promises Kept
Caruso started his real estate career in Thousand Oaks, in L.A.’s San Fernando Valley, in the late 1990s and early 2000s.
Former Thousand Oaks City Manager Scott Mitnick said he remembered when Caruso was attempting to secure approvals for what became the roughly 48,000-square-foot Lakes at Thousand Oaks. Caruso would come to meetings with a chair and a couple bottles of water and field questions and concerns from the community for hours.
Often, residents would scream at him, but Mitnick said he never saw the developer lose his temper. Caruso then would come back with tweaks to his projects to appease resident demands.
"He was very calm and willing to listen," said Mitnick, who is now senior vice president of El Segundo-based land-use consultancy Kosmont Cos.
Caruso also met individually with council members to build relationships and get projects approved. The developer was "unusually responsive" and would reply to emails within minutes, even after working hours, Mitnick said.
Caruso stayed in touch with Mitnick and others who he worked with even when projects were completed. Mitnick remembered visiting Caruso's office once and seeing the words "relentless follow up" posted on a wall.
"He set the tone and raised the bar for land use," Mitnick said.
Starbird, who has no disclosed business connections to Caruso and hasn't campaigned for him or donated to either candidate, said an important contributor to Caruso’s business success was remaining involved with projects even after winning approvals. During the building of Americana at Brand, Starbird said, the developer arrived on the construction site each Thursday and would cater lunch for the hundreds of workers, setting up the tables before the weekly meals. Caruso knew that keeping his workers happy would ensure a smooth construction process, Starbird said.
Americana at Brand ended up looking better than the renderings when it was finished in 2008 and has maintained its luster ever since, said Starbird, who still visits the shopping mall.
"It's everything he promised," Starbird said.