CIM lands in pension-fund spotlight
The real estate developer paid middleman Villalobos nearly $16 million for securing investments from CalPERS and the California State Teachers' Retirement System. CIM is not accused of wrongdoing.
CIM has secured a $30-million federal loan to help it attract Cirque du Soleil to the Kodak Theatre at its Hollywood & Highland mall, above. In L.A., officials have offered CIM at least $58 million in loans and grants. (Christine Cotter / Los Angeles Times / November 23, 2009)
Founded in 1994 by two Israeli immigrants and an investment banker who once worked with junk-bond king Michael Milken, CIM has made its mark on some of the more recognizable developments in Southern California, including Santa Monica's Third Street Promenade.
Along the way, Hollywood-based CIM has secured billions of dollars in pension fund investments and tens of millions of dollars in public subsidies -- chiefly by locating many of its projects in struggling neighborhoods where grants, loans and other forms of taxpayer help were readily available.
In recent weeks, its voracious appetite for public investment landed CIM in the public spotlight.
Recently released documents show that CIM paid former Los Angeles Deputy Mayor Alfred J.R. Villalobos nearly $16 million in fees for securing investments from the California Public Employees' Retirement System and the California State Teachers' Retirement System.
CIM has not been accused of any wrongdoing, but CalPERS officials said they were unaware of the amounts CIM and others had paid to Villalobos and other so-called placement agents, who lobby pension funds on behalf of big money managers. CalPERS officials have also hired an outside law firm to determine whether the fees and investments were proper.
CalPERS has a $466-million balance in a CIM fund initially pitched by Villalobos, and over the last decade has agreed to invest nearly $1.9 billion with the company.
In Los Angeles, meanwhile, the Securities and Exchange Commission has asked former Fire and Police Pensions board member Elliott Broidy to disclose his communications with CIM and other firms, according to court documents.
Broidy pleaded guilty Dec. 3 to a felony corruption charge in New York, admitting that he paid $1 million in gifts to public pension officials there to win $250 million in investment capital for his private equity fund.
While on the Los Angeles board, Broidy voted in 2007 to invest $30 million in CIM. At that time, CIM had $500,000 invested in Markstone Capital Partners, a fund that Broidy managed. CIM said the investment was personally staked by the company's principals, not pension money.
Fire and Police Pensions board President George Aliano said he was not aware of the relationship between Broidy and CIM until recently, and criticized CIM for not disclosing it. "For me, it will be difficult to invest in them" in the future, Aliano said.
Executives at the company, which employs 200 workers, declined to be interviewed for this article but answered some questions in writing.
In a statement, CIM said it had provided state pension officials "ample disclosures concerning its use of placement agents" such as Villalobos and did not want to distract from the ongoing investigations.
The company did not address Aliano's complaints, but said it had been "a pioneer in the adaptive reuse of California downtown real estate to meet the demands of a nationwide trend toward urban living."
CIM's growing list of projects and properties includes the Ralphs supermarket in downtown Los Angeles, the Lady Luck Hotel & Casino in Las Vegas and downtown renewal projects from Anaheim to San Jose.
"They were in the Hollywood market before most of the players went there. They were in Santa Monica before the Third Street Promenade took off. They have been ahead of the curve," said Bob Safai, a commercial real estate broker with Madison Partners.
CIM's founders first met by chance in 1987 when two friends from Israel -- Shaul Kuba and Avi Shemesh -- showed up at the home of Richard Ressler to talk about landscaping his property.
Shemesh and Kuba both grew up in Herzliya, a city outside Tel Aviv. They served in the same brigade of the Israeli army and arrived in the United States at the same time. By the 1980s, Shemesh had a landscaping and contracting company and Kuba had an electrical business.
Ressler, who holds a law degree and MBA from Columbia University, had spent part of that decade handling mergers and acquisitions for Drexel Burnham Lambert, the firm made famous by Milken.