Real Estate & Retail and Sports Business

BEHIND THE NEWS: California investor arrives with a splash-and a past

May 8, 2006

Remember the name Judah Hertz. The Californiabased real estate investor last month became a sizable player in the downtown Indianapolis office market, buying the Gold Building and 251 East Ohio for more than $40 million. But he has bigger aspirations here-and the cash to carry them out.

"We like Indianapolis a lot," Hertz said. "We're definitely interested in purchasing more buildings in Indianapolis."

Plain-vanilla pension funds buy and sell buildings here all the time. By contrast, the 56-year-old Hertz is one fascinating guy-a self-made man who made a bundle in the Los Angeles office market but then dropped $200 million on New Orleans real estate before Hurricane Katrina hit.

That made him the largest owner of Class A office space in that now-devastated city. But that's not all that dogs Hertz these days. He continues to field questions over Nevada gambling regulators' rejection in 2000 of his application to buy three Reno casinos, citing his "reputed mob ties."

"Suffice it to say, this is an individual that ... has no business here," the chairman of the Nevada Gaming Commission testified at the time.

So does Hertz have ties to organized crime? "Definitely not," he said during a phone interview.

Yet the regulators' rebuke hangs over him. In 2003, he took the extreme step of hiring a prominent law firm, and two private investigation firms, to conduct an independent inquiry. After six months of digging, they said in a report that Hertz appears to be a "legitimate businessman who does not consort in illegal business practices with organized crime."

Hertz's trouble with gambling regulators appears to stem largely from his tie to Israeli immigrant Jacob Orgad, who became Hertz's driver in 1990, when Hertz was suffering from serious health problems and wasn't allowed to drive himself. The men subsequently had business dealings but severed ties after a falling out in 1997.

Three years later, Orgad was arrested for drug trafficking, and he's now serving a 20-year prison sentence. Investigators say he distributed cocaine for the Escobar and Gambino crime families. He also is reputed to have supplied cocaine and recruited women for Hollywood madam Heidi Fleiss. Eve Francour, a former office receptionist for Hertz's company, also allegedly worked as a prostitute for Fleiss, according to the report Hertz commissioned.

The report said gambling regulators cited other personal and business associations, as well, in what appeared to be a "calculated [attempt] to create the impression Mr. Hertz moved in extraordinarily unsavory circles."

In fact, the report said, the gambling commission's denial was rife with innuendo, and Hertz had little connection to many of the people named. It also said Orgad did not appear to launch his criminal career until parting ways with Hertz.

Big-time buyer

Hertz admits frustration over continuing questions about the 6-year-old gambling decision. But he's not sitting around feeling sorry for himself. He and his Santa Monica, Calif.-based company, Hertz Investment Group, are too busy buying real estate in second-tier cities like Indianapolis, Cincinnati, Kansas City, Pittsburgh and St. Louis.

He headed east because prices for office buildings in his home base of Los Angeles have hit the stratosphere and now "are so much higher than the cash flows would justify." Hertz is the latest in a stampede of investors to head to such cities, drawn by the potential for higher returns.

He's primarily a downtown guy. He said central business districts across the nation are enjoying resurgence. As the population ages and gas prices rise, more people are choosing to live downtown instead of outlying areas.

Indianapolis in particular has a "very vibrant downtown," Hertz said, with sports venues and other attractions, as well as the stability that goes along with being home to the state capitol.

He found his way here in part because he's seen firsthand the downside of concentrating holdings in a single market. He said New Orleans remains "a great city and a wonderful place to live," though he could do without the natural disaster.

Hertz last month purchased the 396,300-square-foot Gold Building-otherwise known as Market Square Center-from a pension fund affiliated with New York-based Morgan Stanley. He bought the adjacent, 214,000-square-foot 251 East Ohio from a fund affiliated with Iowa-based Principal Financial.

The Gold Building is 68-percent leased, and 251 East Ohio is 80-percent leased. The Gold Buildings's 525-space parking garage, which sits between the two properties, now will serve both buildings. The 251 building had lacked its own parking.

"That was a real carrot to the buyer," said Andy Banister, first vice president of CB Richard Ellis, which represented the sellers.

The sales are done, but Banister, part of CB Richard Ellis' Investment Properties team, doesn't expect to lose touch with Hertz.

"He absolutely would" like to be a bigger player here, Banister said. "He calls us two to three times a week to see if there is something new to look at."


Hertz
Source: XMLAr00400.xml
ADVERTISEMENT

Recent Articles by Greg Andrews

Comments powered by Disqus