News and blog

Corporate landlord CIM underperforms its peers, makes headlines with controversies

The CIM Group is a private equity real estate firm based in Los Angeles, CA.

The last four CIM real estate funds have underperformed their peers, posting returns in the third and fourth (i.e. bottom) quartiles. For instance, CIM Fund VIII had a negative 1.60% annualized return (IRR), placing it in the bottom quartile. The peer benchmark IRR according to Pitchbook is 8 times more than CIM Fund VIII’s.

CIM Group Fund Performance[1]

Fund NameVintageSizeTVPIIRRBenchmarkQuartileDifference
CIM Fund IX2017$883MN/A10.00%11.82%3 (Lower-Mid)-1.82%
CIM Fund VIII2013$2.43B0.96x-1.60%11.30%4 (Bottom)-14.20%
CIM Fund VI2012$724M1.44x5.19%12.00%4 (Bottom)-6.18%
CIM Fund IV2008$1.77B1.00x5.90%7.30%3 (Lower-Mid)-1.40%

One example explaining CIM’s poor performance is its purchase of Jack London Square in Oakland, CA in 2016. CIM announced that it would build a hotel on one of the undeveloped parcels.[2]

  • At the time of the purchase in 2016, CIM said that existing entitlements allowed for a 220,000 square foot, 250 room hotel.[3]
  • In 2018, CIM had scaled its plans back to just 100,000 square feet and 155 rooms.[4]
  • By 2020, CIM had scaled its plans back even further to just 80,000 square feet[5] and 144 rooms.[6]
  • Three years later, as of January 2023, the hotel has still not been built.


Other CIM Group Controversies

In addition, just in the past year, there have been a number of controversies involving CIM that have made headlines.

  • New York Times, Sept 2021: Residents of Troubled Supertall Tower Seek $125 Million in Damages: According to a 2021 New York Times article, the condo board at a luxury tower sued the CIM Group for 1,500 “construction and design defect that have led to floods, faulty elevators, and electrical explosion.” The Times reported that on several occasions residents were trapped for hours in stalled elevator cars, and that the suit claims that even Richard Ressler, a founder of CIM and a building resident, once said the sound and vibration issues from the building sway were “intolerable.” The lawsuit is pending.[7]
  • Bloomberg, Apr 2022: An Entire Neighborhood Is Being Flipped by a Los Angeles Developer: Bloomberg reported in 2022 on the gentrification o of a Los Angeles neighborhood where CIM is developing 40 properties, some of which Bloomberg described as “hipster bait – industrial spaces reconfigured to lure affluent tech and entertainment professionals.” Bloomberg noted that the gentrification is “happening in a highly racialized context, sometimes with the backing of the city and the police” and that it is “displacing many of the Black and Latino families and entrepreneurs who gave the boulevard the distinctive character CIM is now exploiting.”
  • Business Insider, Dec 2022: A band of immigrants went to war with their $31 billion landlord: A recent Insiderarticle detailed problems at the Southern Towers apartment complex in Northern Virginia, which CIM purchased in 2020. Southern Towers is a 2,300 unit apartment complex in Alexandria, Virginia, that has been home to thousands of hardworking, blue-collar families, the majority of whom are African immigrants. Tenants hoped that CIM would bring positive changes to the complex, but “instead of improvements and upgrades, tenants received eviction notices during a nationwide ban on evictions — and mold, pest, and other maintenance issues went unresolved.” The tenants “were worried by their new landlord’s agenda. They wondered whether CIM wanted them gone, in favor of the 25,000 Amazon employees who would soon work at the company’s planned second headquarters just 5 miles away.”

 

[1] Pitchbook, accessed Jan 11, 2022. https://my.pitchbook.com/profile/13750-21F/fund/profile#fund-family
[2] https://www.businesswire.com/news/home/20160311005148/en/CIM-Group-Acquires-Jack-London-Square—-Premier-Waterfront-Retail-and-Office-Destination
[3] https://www.businesswire.com/news/home/20160311005148/en/CIM-Group-Acquires-Jack-London-Square—-Premier-Waterfront-Retail-and-Office-Destination
[4] Oakland City Planning Commission Design Review Committee staff report, p.4. http://www2.oaklandnet.com/oakca1/groups/ceda/documents/agenda/oak068735.pdf
[5] https://www.cimgroup.com/projects/jack-london-square-site-f3-hotel-25-alice-street
[6] Oakland City Planning Commission Design Review Committee staff report, p.4. https://cao-94612.s3.amazonaws.com/documents/Item-02-Staff-Report-Case-File-ER030004-PUD13170-PUDF03-R01.pdf
[7] Case number 655617/ 2021, “Board of Managers of the 432 Park Avenue Condominium v. 56th and Park Owner, LLC,” filed September 27, 2021.

 

 

Sign up to our newsletter to receive news and updates from PESP

Click here