Rick Caruso on LA real estate, feng shui, leaving LA City for Nashville and Florida, and why he won't raise outside capital

Rick Caruso on LA, outside capital, and expanding Caruso's footprint

Rick Caruso built one of LA's most recognizable real estate portfolios — The Grove, the Americana, the Rosewood Miramar Beach — without ever taking outside capital. Nearly 40 years in, that model is still intact, and Caruso says the 18% CAGR the business has compounded justifies the discipline.

The self-funding posture wasn't ideological at the start. When Caruso bought the Miramar — a derelict beachfront property in Montecito with a commuter train running through it, which two prior owners including Ty Warner had tried and failed to develop — no outside investor would have backed it. The same logic applied to The Grove: a trolley that goes nowhere, streets turned inward away from traffic. Caruso argues those features would have been killed by any committee process. He's now open to joint ventures, but selectively, and because the track record exists to raise capital on his terms rather than a partner's.

“California and Los Angeles are very difficult to invest in anymore, especially LA City. We have not built anything new in LA City since the Palisades very intentionally because it's too over regulated, too expensive, too unpredictable... Our CAGR is 18%.”

The LA exit thesis — and its limits

Caruso is expanding into Nashville, Austin, and Florida, with a recent visit covering Palm Beach to Coconut Grove. The driver is LA City specifically, not California broadly. He hasn't broken ground on anything new in LA City since the Palisades project and says over-regulation, cost unpredictability, and security spending to compensate for inadequate policing have made the city uninvestable for him. The Palisades property itself was destroyed in the fires.

That said, Caruso draws a sharp line between LA City and the surrounding region. He's putting $130 million into an expansion at the Calabasas Commons — a property he first built 30 years ago — and is actively looking at Glendale. Montecito is getting a retail expansion and workforce housing built on the hotel property for employees. Century City, he notes, commands some of the highest office rents in the US outside New York, while downtown LA sits at 40% vacancy — same product, different result driven entirely by safety and management.

His read on why LA has deteriorated is blunt: the city's leaders aren't qualified, not malicious. He spent 17 years as a commissioner under three mayors — Tom Bradley, Dick Riordan, and Jim Hahn — and believes the city can recover with competent leadership, though he's not signaling another mayoral run.

The experience product

Caruso's design philosophy runs deeper than aesthetics. Feng shui is applied to every property by a dedicated advisor, Catherine, who reviews plans before construction and blesses properties before opening. The trolley number at The Grove — 1759 — maps to his birthday, January 7th, 1959, and was cleared for feng shui compliance before being used. The Grove's street pattern, curbs, gutters, tree rhythm, and building depths were modeled on Charleston's scale. A landscape architect threatened to quit over the curb-and-gutter requirement; Caruso kept them.

The underlying logic is that human beings gather instinctively — around fires, in piazzas — and no e-commerce channel competes with that. Caruso traces the conviction to childhood visits to small Italian towns where the piazza functioned as the center of daily life regardless of wealth. The Sears catalog predated the internet, he points out, and didn't kill retail either.

AI and the next generation

Caruso says AI is already changing how Caruso designs and operates properties in ways he wouldn't have predicted two years ago, and his biggest internal frustration is pushing the team to adopt more of it faster. His advice to anyone entering any industry now: the uncertainty around AI is the opportunity. Inefficiency creates the best entry points.

The business metrics back the patience. 18% CAGR sustained over decades, fully on balance sheet, with no LP constituency to manage. Caruso's view is that local knowledge — the kind you get from driving your kids to school and knowing when the 405 backs up — is what generates generational wealth in real estate, and that knowledge can't be imported into a new market. The expansion outside California is real, but it comes with a plan to hire heavily local.