Here are my thoughts on the Palisades fires.

- I live in SoCal
- Have many friends/family who have been severely impacted by these fires
- I have observed them first hand

Bear in mind - I am, in no way, an expert on these sorts of disasters, and many of my thoughts are estimations.

Overview

The fire started on late Tuesday morning, but most LA locals were unaware of the fire until late afternoon / early evening. 

At the onset, most locals thought the fires would be contained. In no one's wildest dreams could they imagine the evacuation territories extending to the I-405 Freeway (Mountaingate / Bel Air), and even extending into Beverly Hills / Hollywood / Studio City. 

I guess no one truly understood how bad the situation really was.

- Unkept wildlife areas (dead trees, branches, leaves, etc. littering the floors)
- Everything is dried 
- Palisades reservoir was closed for maintenance (Santa Ynez), which could have stored 117,000,000 gallons of water

Many people who owned homes/buildings in the Palisades did all they could - removed whatever belongings they could and, if possible, sprayed water on their properties - hoping for the best.

By Tuesday evening, reports came out of fire hydrants having no water 🙃

Can't be possible, right?
No water in the hydrants?
No fucking way that's possible.

Apparently, it was 🤡

Tuesday night was rough. 
Everyone was awake until 2am / 3am / 4am - just trying to get more information on what was going on.

By Thursday, the fires had obliterated so much so fast. 

My friend's building (50% of his net worth) was burned to the ground.
Gelson's - gone
Ralphs - gone
Sunset Blvd was a shit show

Sunset. Fucking. Boulevard. 

So many businesses that have been in the Palisades for decades were burned down. This is especially tough, given how tightknit the Palisades community really is.

On Thursday afternoon I had a meeting with one of my new tenants (he lives in the Palisades) - we had a pre-development meeting setup with a City, and he did not want to reschedule. 

Tough guy - I gained respect for him for coming. The bags were carved under his eyes.

He said over 10 people he knew lost their homes.
Makes sense.
Palisades is a tightknit place - everyone knows each other. 

Today

Most people in West LA are absolutely exhausted. 

Everyone has received either Level 2 or Level 3 evacuation notices several times by now. 

Generally, however, it appears many are optimistic, despite the grimness of the circumstance. 

'We'll come out ahead'
'We'll figure this out'
Etc.

Good, but I anticipate the optimism will quickly erode. 

Consequences

I believe there will be political and economic consequences associated with this.

Political

LAFD's Chief was fired after she placed blame on the City for mismanagement and cutting the Fire Department's budget.

I believe the blame cannot be placed on one person. It applies to many layers of governance.

- Board of Supervisors
- Council
- Mayor
- Governor
- Agencies (LADWP / LAFD)
- Etc.

For decades, CA has elected people based on a beauty contest, and not based on competence. 

The sheer magnitude of these fires is a symptom of this incompetence. The fires should never have become as destructive as they have.

- What happened to the ~$7.5B bond Californians approved ~10 years ago to build new reservoirs? 

- Why was the Santa Ynez reservoir not filled with water when warnings of the Santa Ana winds were known in advance? 
     - The Santa Ynez reservoir could store 117 million gallons of water, while the backup reservoirs that were actually used stored 1 million gallons.
     - Beverly Hills filled their reservoirs in advance of the fires due to the risks associated with these winds. Competent city.

- Why are there reports that Fire Equipment coming from out of state (e.g. Las Vegas) need to first go to Sacramento to be inspected by CalFire for compliance with CA rules/regulations, before they are dispatched to the fires? We're in a state of emergency. 

- Why did it take so long for planes/helicopters to begin running their operations? Was this due to Biden's visit on Tuesday, and a No Fly Zone issue?

- The private insurers (e.g. State Farm) began dropping many insurance policies in the Palisades in 2024, and indicated the policies were being cancelled because they "present the most substantial wildfire or fire following earthquake hazards". 
     - There is no way the private insurers were the only parties privy to these risks. Why did California fail its residents by not maintaining its wildlife vegetation? 

My gut tells me Karen Bass will resign.
It's either her or Newsom, and I don't see Newsom volunteering to take the hit 🤷‍♂️

I doubt much else will happen short-term.
Lots of promises to come back stronger, but much of the incompetence will remain (for now). 

Economic

Short-Term (<1 Year)

I don't think people realize the sheer amount of loss that people are actually facing here.

Many private insurers had been pulling out of the palisades territory, and many (most) property owners are either uninsured or underinsured.

I believe the Federal and State governments are going to flood Palisades with $$$. 

Truth be told - the amount of money that will flow into the Palisades will anger many, including those in the Eaton fires, and those affected by the hurricanes last year. 

I'll share a harsh truth.

The people living in the Palisades have contributed substantially more towards taxes, and this is a rich donor demographic that is of keen political importance at the State/Federal level. They're likely going to get a ton of money back in aid. 
It is what it is 🤷‍♂️

With respect to zoning - it is my belief that Los Angeles will take this as an opportunity to rezone many of these properties to allow for higher density uses (vs single-family homes). This will anger many, and will receive harsh pushback, but I expect the County to still attempt to push through rezoning measures. 

With respect to construction - I simply do not see anyone rebuilding until, at the absolute earliest, Q3/Q4 of this year (doubtful). 
The main challenge will be with respect to permitting issues - will these old homes with grandfathered codes be allowed to rebuild what they originally had, or do they have to conform to new (more stringent) code requirements?

The Mayor is going to preach about expediting these permits. I think it will take 1-3 years before construction actually starts in any meaningful fashion.

Quite frankly - I see the following realistically occurring:
- Thousands of displaced homeowners who believe the government will help them will prepare plans and submit them for permits:
     Days will turn into weeks
     Weeks will turn into months
     Months will turn into years

No home.
City promising the world, but also no permits after many years.

I believe this experience will be a sticker shock for many, and will prompt a reevaluation of governance and its authority. 

Quite frankly, I believe Trump and Musk will take advantage of this to garner support for their DOGE program.

Medium-Term (1-5 Years)

Many are optimistic and think the Palisades will begin bouncing back within a 5-year span.

Unfortunately, I disagree.

If the Malibu fires have taught us anything, it's that only ~25% of the homes were rebuilt after 5 years.

There will be a barrage of real estate speculators that will give quick-close, cash offers. There are firsthand accounts that people are door-knocking on the homes still standing, and offering to buy their homes.

Wild.

Many homeowners will get their insurance payouts, and sell their land to a speculator - simply not worth the brain damage of rebuilding. 
I would estimate they are most likely to move into Brentwood and Santa Monica, and may extend into Manhattan Beach / Hermosa Beach / El Segundo.  
I believe some/many may decide to move out of state entirely. 

It is my expectation that most construction will begin around end of Year 2 / 3.

GC bids are going to be through the roof (too many projects for a subset of qualified GCs to handle). 

Luxury single family homes are their own beast, and most contractors are simply not qualified for them, although I expect everyone will line up to bid these projects. 

Expect to see many projects stall mid-construction (GC unknowingly lowballed their bid). 

Long-Term (10+ Years)

I believe it will take 15-20 years for the Palisades to actually bounce back to what it was like before. 

Quite frankly, the future will look substantially better than the past:

- Brand new construction across the board
- Higher density developments

The caveat, however, is the time it will take to get there. This duration of time will make these investment returns less rosy.

I am concerned, however, that the 'community' feel and charm of the Palisades will be replaced with sterilized, pretty, new-construction buildings. 

I estimate that 1 person will come out further ahead than most - Rick Caruso. 

The optics of his Palisades Village building being unfazed vs. the carnage of everything around him (protected by LAFD). He ran for Mayor against Bass, and this contrast of outcomes is impossible to ignore.

Will he run for office again?
I'm not sure.
Will he help steward the revitalization of the Palisades?
Absolutely.
Is there a possibility he will expand his real estate presence in the market?
Yes.

Real Estate Implications

Price Gouging

Social Media / News will be harping on Landlords for 'Price Gouging'.

There is a cap that prevents rental prices from increasing by more than 10% during states of emergency, and many landlords are doubling their asking rents overnight.

Quite frankly - I see this playing out in a few ways.

#1) The AG is likely going to prosecute a bunch of landlords to try and paint them as the 'bad guys' in this story
#2) I expect civil penalties (fines) to be levied, but do not expect to see jail time

It is my estimation that Landlords in the immediate markets (e.g. Brentwood/Palisades) will have an interesting counterargument against price gouging - their cost of ownership has substantially increased overnight.

As of today, it is not unreasonable to assume an impossibility of obtaining fire insurance in the short-term for houses in the Palisades/Brentwood, which means Landlords have to self-insure their buildings (and cannot spread that risk across a portfolio of 1,000+ properties). 
The true cost of self-insurance is easily 5x-10x what a private insurer would charge.
Who knows - I'm just speculating here🤷‍♂️

Residential vs. Commercial Recovery

I believe the residential market will be the first to recover. 

The Palisades is sandwiched between the most expensive residential communities in SoCal (Malibu, Brentwood, and Santa Monica). 
All these markets have new construction homes selling for $1,500/SF+

Home buyers will simply justify it in their head - the fire just happened, and it's not likely to happen again 🤷‍♂️

Will new-construction home prices in the Palisades sell for a discount going forward? 
For the first wave of projects - maybe
Afterwards - no

I believe the commercial market will be the last to truly recover in the Palisades. 
Retail businesses need a population base to service, and it will take time for the population to build itself up again.
Office will also directly follow the population base.

It will be very interesting to see how the major players in the community (Gelson's / Ralphs) will approach whether they rebuild their stores or walk away. 

Investment Plays

I anticipate a bifurcated series of outcomes playing out, which will largely be driven by who had full insurance coverage, and who did not.

Many property owners will take their insurance payouts, sell their land, and move into a new house elsewhere. It is not worth the nightmare scenario of trying to rebuild a home.

I believe these parties will be the most likely to sell (more) quickly.

Many property owners were either underinsured, or had no insurance coverage.
I anticipate a subset of this group will desperately need the money quickly, and will sell for major discounts. The fact that they tried saving money by avoiding insurance coverage may indicate their financial position was not too great to start with.

I anticipate the remaining group to hold out for whatever hope of grant money / disaster relief may come down the pipeline. This may last for a few weeks or a few months.

Realistically - I doubt anyone will actually sell today. I do, however, anticipate dealflow to start in the next 1-3 weeks with speculators attempting to purchase lots for $500k - $800k, and hoping to flip them for a big profit on a quick recovery.

Will I be taking advantage of the destruction caused by these fires?
Yes
Will I be targeting homeowners who lost everything?
No

Out of principal, I simply can't do it.
I have no issue, however, will taking advantage of a commercial property owner who needs liquidity.

Play this game however you want - just make sure you can sleep well at night.