Mugel: Big Personality Buys, Sells Real Estate on the Quiet

Orange County Business Journal, Feb 7-Feb 13, 2005 by Padilla, Mathew

THE DEALMAKER

Michael Mugel, discussing his investments, sounds like an infomercial pitchman.

You can imagine him saying: "Here's how I made millions in real estate-and you can, too."

Only mimicking Mugel may not be easy. By his own assertion and those of former coworkers, Mugel has an uncommon knack for deal making.

In five years, Mugel has turned $45 million worth of shopping centers into $550 million, he said. That's growth of 1,122% since he founded Santa Ana-based Red Mountain Retail Group Inc. in 1999.

"I have known Mike for about 10 years," said Reza Etedali, who heads retail brokerage Reza Investment Group Inc. in Irvine. "He's one of the sharpest buyers I have met."

Etedali and Mugel were retail brokers at Irvine's Sperry Van Ness before leaving to start their own companies.

"Drive around nowadays and you see Red Mountain signs on freeways in different places," Etedali said.

But just a few real estate brokers and investors know about Mugel and Red Mountain.

He's shunned media interviews and even omitted his company's name in its own advertisements, running a drawing of a red mountain and a phone number. Red Mountain doesn't have a Web site.

The company is based in a strip mall Mugel owns near the corner of Santa Ana's 17th Street and Grand Avenue. Nearby is a Popeyes Chicken & Biscuits.

"We own this property so we pay no rent," Mugel said of his headquarters. "We're not out to create a false image."

Red Mountain manages and leases shopping centers, which are owned by investment partnerships. Mugel said he typically owns 50% or more of each center. The company has 75 workers, mostly in Santa Ana.

Mugel has a stocky frame with an internal energy pushing hard. During a recent interview, he popped out of his chair several times to draw a diagram on a white board, explaining how he made money on this or that deal.

He's talking now, because his ambitions have grown. He's taking on more risk. And he wants to do more than make a quick buck off shopping centers-expanding them to draw more rent or dividing them and selling off the pieces are his usual tactics.

Mugel said in December he plumped down $58 million of his own cash to buy seven current or former Circuit City buildings from MetLife Real Estate Investments, a unit of New York-based insurer MetLife Inc.

"I'm willing to risk it all," Mugel said, referring to the MetLife deal. "I bet the ranch."

He said he's already deflated some of the risk by signing Sacramento-based supermarket chain Raley's Inc. to a former Circuit City building in Mountain View. Glen Alien, Va.-based used car seller CarMax Inc., a Circuit City Stores Inc. spinoff, leased one in Torrance.

Mugel said he wants to go high class with his properties. He plans makeovers at some centers, possibly mixing housing and shops at Circuit City sites in Dublin, Santa Rosa, Torrance and elsewhere in West Los Angeles.

Last month, Mugel hired Linda Crowley as a partner. She's set to lead development of centers including housing. Crowley also heads developer Urban Street Advisors in Newport Beach and previously owned retail brokerage Linda Crowley & Associates, which she sold to The Koll Company in 1996.

In Newport Beach, Mugel bought a parcel at Pacific Coast Highway and Dover Drive with some older shops and offices as well as a used-car lot.

He said he plans to demolish everything and put up a 56,000-square-foot center with upscale restaurants and shops. Plans call for a European design, with authentic materials, no fake facades, Mugel said.

In Mugel's shootfrom-the-hip style, he said his goal is "to make The Irvine Company look at this project and really re-evaluate their approach to architecture in Newport Coast."

Mugel, 40, is gambling on bigger projects. But he said he has racked up experience on what makes a center work by buying money losers.

Since he started with brokerage Sperry Van Ness in the late 198Os, after graduating from the University of San Diego, he has done deal after deal without a mishap, according to Mugel and people who have worked with him.

Rand Sperry, cofounder of Sperry Van Ness, said Mugel came close to failure only once. Within his first six months at the brokerage, Mugel had five centers in escrow, Sperry said. They later fell out of escrow for various reasons, he said.

"He came into my office, and said, 'I can't take it. I'm quitting,'" Sperry said of Mugel. "I gave him a pep talk."

Sperry said he lied to Mugel and told him the same thing had happened to him in the beginning.

"I knew he had what it took to be successfui," Sperry said. "He was our first retail star."

The way Sperry tells it, Mugel embraced cold calling and loved his job. Then a developer who lost money in Phoenix joined the company and talked about how the market there was destined to rebound. It was the real estate downturn of the early 1990s.

Mugel was interested, according to Sperry. Mugel made a deal with the Boyd family, housing investors and clients of his.

In 1991, Deign Boyd agreed to put up nearly $ 1.4 million in cash for a shopping center near Phoenix if Mugel would manage it. The center is called Red Mountain Plaza.