Cities Report Growth --and Some Losses-- From Asian Business

When Henry Hwang, a Chinese immigrant, tried to buy a house in Monterey Park in 1960, he was turned away by a real estate agent, who told him: “We don’t sell to Chinese.”

More than 20 years later Hwang, by then president of Far East National Bank in Los Angeles, took another look at Monterey Park, seeking a location this time for a bank branch. But now it was Hwang who rejected Monterey Park, for an ironic reason.

“We felt Monterey Park was being overcrowded by Chinese,” Hwang said. “Too many Chinese . . . too many Chinese banks.”

Regulatory restrictions and internal problems had prevented Far East from opening a branch in Monterey Park when the heavy Asian influx into the San Gabriel Valley began in the late 1970s, Hwang said, and by the time the bank was ready to move in 1982, Monterey Park was saturated with Asian banks and so crowded with immigrants that it was apparent that the population explosion would push into nearby cities. So Far East opened its branch in neighboring Alhambra, becoming the only bank in that city to cater to Chinese, an edge it held only briefly. Eight of the 18 banks in Alhambra today are Asian.

Rapidly Expanding Market

Hwang, who founded Far East National Bank in Los Angeles in 1974 as the first federally chartered bank owned by Chinese-Americans, said he wishes his bank had the capital to open more branches in the area because he sees a rapidly expanding market. “The whole San Gabriel Valley will be a big Chinese community,” he predicted. “We see this as a trend that is going to grow and grow.”

The impact of immigrants from China, Taiwan, Hong Kong and Southeast Asia is apparent in business districts throughout Monterey Park, much of Alhambra and eastward through San Gabriel and Rosemead to West Covina and Rowland Heights. It can be seen not only in banks with Asian names, but in herb stores, fast-food stands selling noodles and rice, an amazing variety of Oriental restaurants, racks of Chinese newspapers and store signs that give equal space to English words and Chinese characters.

The Asian influx has filled vacant stores with new businesses and driven real estate prices upward. It has pumped millions of dollars from the Far East into the local economy.

But some economic gains have been offset by losses. In Monterey Park, supermarkets and other large businesses, unable to afford higher rents, have moved away and some have been replaced by small shops that provide immigrants with the jobs they need to stay in this country, but generate relatively low sales. The result has been increased demand for city services without offsetting gains in tax revenue.

Dormant Districts Revived

Nevertheless, the arrival of new entrepreneurs and new money has revived dormant business districts, brought new construction and given such cities as Alhambra and Monterey Park a chance to remake themselves.

David Carmany, assistant city manager in Alhambra until his recent appointment as city manager in Agoura Hills, said the Asian influx revitalized Alhambra.

Carmany said the business climate was so bad in Alhambra a few years ago that the major topic of conversation was which store would move out next. “There were a lot of vacancies,” he said. “Now, all of a sudden, people are investing in the community.

“It’s a real opportunity for an older city to capture new investment.”

Some Made Fortunes

The economic changes have benefited some individuals more than others, of course, and made fortunes for men like real estate investor Fred Hsieh, who is credited with sparking interest in Monterey Park by promoting it in Hong Kong as the “Chinese Beverly Hills.”

Hsieh, who spent his youth in Shanghai and moved with his family to Hong Kong in 1956, came to the United States in 1963 and earned an engineering degree from Oregon State University. He went to work as a civil engineer with the city of Los Angeles in 1970 and with the help of his credit union scraped together a down payment on his first piece of property, in Echo Park.

He opened a real estate office in Monterey Park in 1975, snapped up commercial land at $5 a square foot that is now worth 10 times that much, and built an empire that includes a music store, a movie theater, a restaurant, a Chinese-language weekly publication called Buy and Sell Classified, and several hundred apartment units. His Mandarin Realty Co. employs 60 agents and has annual sales of $60 million.

Hsieh, 41, now divides his time between offices in Monterey Park and Hong Kong, and is building a $25-million, 400-room resort hotel in his native town of Guilin in China.

First Chinese Supermarket

Another immigrant who saw opportunity early was Jen Shen Wu, 49, who was a stockbroker in Taiwan before he came to the United States 11 years ago. He opened the first Chinese supermarket in Monterey Park in 1978. By offering Asian foods in a market staffed by employees fluent in Cantonese and Mandarin, Wu not only made money, but helped create an environment that made Monterey Park hospitable to immigrants.

In an interview in which his remarks in Mandarin were interpreted into English, Wu said, “When I started here 10 years ago, people said, ‘You have bought too big a piece of land and put up too big a store,’ but pretty soon I found it wasn’t big enough.”

Wu built the Diho Market into a chain of stores with 400 employees and $30 million in annual sales. Although he recently sold the Diho Market in Monterey Park, Wu has retained an interest in other stores in the chain.

Gregory Tse, owner of Wing On Realty, is another immigrant who has helped remake Monterey Park. Tse moved here from Hong Kong in 1968 at the age of 30 after a $1,500 feasibility study commissioned by his father showed that the family’s best economic opportunities would be in the Los Angeles area.

Invested in Real Estate

Tse, who had studied law in Hong Kong, took a job with the Los Angeles Unified School District teaching English to other immigrants. Meanwhile, he began investing in real estate and became a real estate salesman before opening his own office.

Tse said he was attracted to real estate because property here seemed cheap compared to the crowded island of Hong Kong where one had to pay thousands of dollars a square foot.

But recently, Tse said, as prices of commercial land along Garvey Avenue and Valley Boulevard have pushed upward, he and other investors have begun looking elsewhere. For example, he said, in Victorville in San Bernardino County, commercial land is available for $5 or $6 a square foot and stores can be rented at a monthly rate of $1.25 a square foot. Although Monterey Park landlords can command monthly rental rates of $1.50 to $1.75 a square foot, they must pay $50 a square foot for the property, he said.

Prices ‘Will Never Go Down’

Nevertheless, Tse said he does not expect prices to tumble in Monterey Park. “They will never go down because the influx of Asians is such that money is always here,” he said.

“People are buying because this is like a second Chinatown. They are buying for pride of ownership or because (the property) is easy to manage, but as far as return (on investment) is concerned, it’s zilch.”

Leslie Anderson Little, economic development officer in Monterey Park, said she has often seen developers buy commercial property in the city at high prices and make expensive improvements, incurring costs far beyond the revenue potential. “I’ve stopped trying to figure out why people are doing projects,” she said.

Shant Agajanian, an economic consultant who has studied the Monterey Park economy for the city, said many commercial projects are funded by foreign investors whose outlook is influenced by investment rates in Asia.

Local investors will shun projects that promise an 8% return, he said, but that rate looks “stupendous” to someone who can get only 4% in his own country.

Asians Invest in Long Term

“Imported Asian capital is much more patient,” he said. “You hear the term ‘patient money’ a lot. But it’s not just patience; it has to do with accepting a lower rate of return in order to get more secure, stable, long-term development.”

Political uncertainties in Hong Kong, Taiwan and elsewhere in Asia encourage the wealthy to invest in Canada and the United States. Big foreign financial institutions and other investors, with hundreds of millions of dollars to spend, look for opportunity everywhere, Agajanian said, and have no reason to focus on Monterey Park. But smaller investors from Hong Kong and Taiwan have heard of the Chinese influx to Monterey Park and feel safer putting their money there than in, say, Santa Monica or Costa Mesa.

Typically, he said, local real estate agents will put together projects in the $500,000- to $2-million range and secure foreign money, often with the help of investment houses in Hong Kong and Taiwan.

Land Prices Equal Pasadena’s

This foreign appetite for Monterey Park real estate has driven prices for commercial land on major streets to $50 to $60 a square foot. Agajanian said property on Garvey Avenue in Monterey Park now costs as much as property in downtown Pasadena.

The inflated property values have led to higher rents for tenants. One result has been that businesses that need large amounts of space--car dealerships and supermarkets, for example--find it economically difficult to operate in Monterey Park. One car dealership is moving, and several supermarkets have pulled out, leaving just two, Hughes and Albertson’s, that do not concentrate on ethnic foods. Monterey Park officials said every supermarket chain they have talked to is interested in coming to Monterey Park, but cannot find suitable space at an acceptable price.

Frank Bellavia, 45, owner of Monterey Park Stationers on Garvey Avenue, said he put his business up for sale after the building it occupies was sold and the new landlord announced a rent increase of nearly 80%, effective this July.

Bellavia, who has owned the store for a dozen of the 30 years it has been open, said he immediately began looking for another location, but could not find a suitable one in Monterey Park at any cheaper rental rate than he was being offered. Facing a $15,000-a-year rent increase, Bellavia thought for a while that he might have to close the business.

But recently the outlook has brightened. Bellavia said his landlord has scaled back the new rent from $1.45 a square foot to $1, or just 15 cents more than he has been paying. Bellavia said that he has decided to continue looking for a buyer for his store because he wants to leave the Los Angeles area, but that at least the rent increase will not force him out of business.

Sees Rental Market Softening

Bellavia said his landlord’s willingness to offer a better rental rate may indicate that the rental market is softening in Monterey Park. For the first time in a long while, he noted, the city has some empty store buildings.

Bellavia said he has never understood how some businesses that pay high rents can survive economically.

Agajanian said many stores remain in business because they serve needs beyond making a profit. He said stores are being opened by immigrants who have few employment opportunities and need to establish businesses to provide income for themselves and to offer jobs to relatives who are immigrants.

What does it take to start? “It takes $300 a month rent, some knickknacks to sell and you’ve got yourself a storefront . . . that you can sell things out of,” he said. “Once you have that, you’re a proprietor and you can offer your brother-in-law a job.” The owner and his family work in the store, so they have no labor costs and their main expenses are rent and inventory. Agajanian said that if the owner “can make $6,000 the first year, he’s happy as hell. He’s alive.”

Wealthy Moving In Too

Of course, not all the new stores are being opened by poor immigrants. Families and companies with substantial wealth are moving in, too.

James K. Liu, president of Trans National Bank, the first Chinese-owned independent bank in Monterey Park, said his bank has customers who deposit as much as $5 million at a time.

One common way for wealthier Asians to establish themselves here, he said, is for the family to send children over as students and set them up with a house and a car. The children, once established as permanent residents, help their parents immigrate. Another common pathway, he said, is for the family to buy real estate and then open a business, sending family members over to run it. With business interests and family members on both sides of the Pacific, Liu said, travel across the ocean for some families is as commonplace as a plane trip from Los Angeles to San Francisco.

For those who establish businesses primarily for immigration reasons, profits may be secondary, Liu said, but no one wants to lose money forever.

David Ma, whose company helps immigrants establish themselves here, estimated that 30% to 40% of the businesses established by immigrants are successful, 20% hang on with difficulty and 40% to 50% fail.

Ma’s estimates indicate that immigrant businessmen are doing better than average. While no official statistics are available, a spokesman for the federal Small Business Administration said it is generally accepted that nationwide, half of all new businesses fail in the first year and 90% by the fifth year.

Total Sales Remain Flat

Although the number of businesses in Monterey Park has increased sharply with the Asian influx, total sales have remained flat when adjusted for inflation.

David Bentz, city finance officer, said there were 2,700 licensed businesses in 1978-79 and 4,300 in 1985-86, while the population grew from 53,700 to 60,200.

Meanwhile, Bentz said, taxable sales rose less than 2% from 1977 to 1985 in Monterey Park, after adjusting for inflation. In the same period, taxable sales in the West San Gabriel Valley as a whole rose more than 10%, and the statewide increase was 23%.

Monterey Park’s anticipated sales tax income per resident this year amounts to $52, compared to $81 for Alhambra, $83 for San Gabriel, $108 for Pasadena and $110 for Arcadia.

Although Monterey Park has 90 restaurants, most of them Asian, it trails other San Gabriel Valley cities in even that sales tax category and ranks below the state average.

Started with Little Investment

Agajanian said that one reason many Monterey Park businesses are generating low sales is that they started with little investment. He said high rents have forced retailers to occupy small spaces, stacking inventories to the ceiling. In some cases, large buildings have been divided into cubicles for merchants to peddle their wares.

The business and population growth has put a strain on city services without providing increased revenue to pay for the added costs, Agajanian said. As a result, older residents, including established Asians, are increasingly concerned about the impact of immigrant entrepreneurs. It is not a racial or ethnic issue, he said, but “Monterey Park is a solid middle-class community and they see themselves beginning to slide.”

The Monterey Park City Council last year hired three consulting firms to “redesign” the city by recommending steps to improve traffic flow, attract stronger commercial enterprises and upgrade standards for residential development. Agajanian, who is in charge of the Southern California office of one of the consulting firms, Williams, Keubelbeck & Associates, said the proposed strategy would use the city Redevelopment Agency to combine small lots and bring in developers to attract a department store, a large drugstore and other needed businesses. The larger enterprises would move the city “away from the 12-seat restaurants and the 500-square-foot boutiques that sell $3.95 blouses and $4.95 dresses,” he said.

Well-Known Overseas

The proposed redevelopment effort would capitalize on the fact that Monterey Park is well-known among Asians overseas by seeking financing from them, tapping into that so-called “patient money.”

Agajanian noted that Monterey Park is the first San Gabriel Valley city to be heavily affected by Asian immigration.

“I suspect that the kind of issues you are seeing in Monterey Park now will be coming down the road in San Gabriel and Alhambra in five to 10 years,” he said.

Dick Nichols, manager of the Alhambra Chamber of Commerce, said 700 to 800 of the 2,000 retail businesses in Alhambra are already Asian-owned. Even those businesses that are not Asian-owned are adjusting, he said, in ways ranging from hiring clerks who speak Asian languages to stocking smaller sizes in shoes and apparel.

Alhambra has profited from the Monterey Park City Council’s decision last April to impose a moratorium on construction of multifamily housing and on construction in most commercial areas. The moratorium forced developers to look elsewhere, and many turned to Alhambra. Building permit valuations rose in Alhambra from $27.5 million in 1985 to $45 million in 1986 and declined in Monterey Park in the same period from $69 million to $39.7 million.

Real estate experts say that land that was selling on Valley Boulevard in Alhambra for $20 a square foot five years ago has doubled or tripled in value. One local banker said a customer paid $8 million for property on Valley Boulevard in 1985 and sold it a year later for $12 million.

Seldom Seek Quick Profit

But Gregory Tse, who has branched out from his realty company to also become vice chairman of a savings and loan association, said that Asians seldom look for a quick profit in real estate.

“Asians are looking for long-term investment rather than short-term return,” he said. Once they have bought land here, most would rather give it to their children than sell it.

Asian investors prefer to pay cash for property rather than borrow, he said. “I consider myself pretty risky,” Tse said. “I borrow about 50%.”

City officials in Monterey Park have often complained that too many of the new businesses are alike. One mini-mall, for example, has seven dress shops, and officials have discussed regulations that would encourage landlords to get a better tenant mix.

But when asked to identify the best business opportunities now, Tse named restaurants, Chinese markets and Asian banks, even though those enterprises already exist in abundance.

“Any good restaurant here will make it,” Tse said. “If they have good management and reasonable prices and good food, they all make it.”

Tang Kim Chuy, a refugee from Cambodia, has opened several restaurants in Chinatown and the San Gabriel Valley. All have been successful, he said.

Arrived Penniless

Speaking through an interpreter, Tang, 64, said he came to the United States penniless in 1978 and spent four months on welfare. With the help of friends and relatives, he and a partner opened a tiny restaurant in Chinatown that offered a style of food from the Chaur Jou area of Canton. That success led to other restaurants now run by other refugees who learned the business from him.

Two other refugees who have achieved business success are Allen Co and his wife, Lina, who came to the United States from Vietnam in 1975 and now own two video stores and a real estate company.

When they arrived in this country, a social worker advised them to apply for welfare, but they got jobs instead. Lina Co went to work as a bank teller. Allen Co acquired three jobs, as an inventory clerk, property manager and janitor, and enrolled at East Los Angeles College.

Allen Co, 34, said he also tried selling life insurance, but his only customers were friends who bought the policies as a favor.

Then, he said, he went into real estate at an opportune time, in the late 1970s. Co said he made “big bucks” not only from sales commissions but by putting deals together in which his commission was a share of the property. Co said his ability to speak six languages, including English, enabled him to work with all sorts of investors and property owners.

‘I Think It Was Luck’

“Of course, people say I work hard, but I think it was luck because anybody during that period, 1976-78, could buy anything--you could buy garbage--and make money,” Co said.

When the real estate boom passed, Co decided to put some money into a business. He said he wanted a business that did not take much capital, would be easy to run and did not require technical knowledge. He said he was torn between a one-hour photo developing business and videotape rentals. He settled on the latter because he feared the photo developing machine might break, and “I am not a handyman.”

Co said the video business was excellent the year he started, in 1982, but is now highly competitive. He stocks videos in both Cantonese and Mandarin, as well as English, in his two stores, in Chinatown and Monterey Park.

Co said many successful immigrants came into this country with little money. He said wealthier immigrants are afraid to take risks and sometimes, when they do, they make bad decisions.

He said a relative came here with $400,000, invested in a motel in Arizona that was poorly managed and lost everything, including his house, through foreclosure.

Dreams Being Fulfilled

Many new arrivals, he said, are “natural-born entrepreneurs” whose dreams of owning their own businesses are being fulfilled. He said many small businesses are so successful that other immigrants, who opted to get an education and obtain a corporate job, are jealous of those who went into business.

But, Co said, there are also businesses in which families work long hours and earn little.

“This is a transition period,” Co said. The children of these entrepreneurs are not going to be willing to work for nothing, he said. The businesses will grow and become more sophisticated or family members will find other jobs.

Liu, the president of Trans National Bank, said most businesses established by immigrants are serving only their own ethnic neighborhoods. The next step, he said, is to reach beyond that market.

‘A Lot of Players in the Game’

Even his own bank, Liu said, cannot continue to target only Asian customers because there are so many other Asian banks, and even the non-Asian banks are seeking those deposits, too. The Asian market “is a huge market, but there’s a lot of players in the game,” he said.

There is no question that Monterey Park and the San Gabriel Valley are benefiting economically from the Asian influx, Liu said. Property owners have profited from increased values, and the newcomers are making their own way by establishing their own businesses. The state estimated the unemployment rate in Monterey Park at the end of 1986 at 4.6%, compared with 6% for the entire Los Angeles region.

The people who are coming here are not interested in going on welfare, Liu said, but are working hard. They know, he said, that wherever you are, “the way you make money is by the sweat of your brow.”

Former Times staff writer Alan Maltun contributed to this story.