International Bazaar Problems Leave Entrepreneurs in Financial Straits

The San Diego International Bazaar was to have been another milestone in the renovation of the historic Gaslamp Quarter downtown.

The idea was to take an old, cavernous three-story building originally constructed in 1889 and divide it into three levels of small shops and restaurants by leasing individual, tiny stalls.

The concept looked good last spring in newspaper advertisements soliciting merchants, and it sounded even better from the promises made by leasing agents--enticing blueprints in hand--working from a trailer outside the building, while the din of saws and hammers reverberated encouragingly from the inside.

So people signed up--most of them first-time business owners chasing their dreams--and paid thousands of dollars in deposits.

Now, five months after the bazaar opened at the corner of 4th Avenue and Market Street, almost all the stores and restaurants gone, though the building--dim and silent--remains open, with nary a customer in sight.

Many of the merchants suffered financial losses, have had life savings seriously jeopardized and, in some cases, have had their credit ruined. Not surprisingly, they are angry, bitter and disillusioned.

They have lost their security deposits, the one item they thought was safe. The former operator of the building, Glenn Wilson, said he used the merchant’s money--rents and deposits--in a failing effort to operate the bazaar. The responsibility for paying back the deposits, he said, now rests with the owners.

But the owners--who have taken over management of the bazaar--claimed the obligation is not theirs but Wilson’s.

Deep Financial Trouble

The owners of the building--including well-known San Diegans such as car dealer Tom Devany and San Diego Convention Center Corp. President James Granby--find their property in deep financial trouble and leave little hope that any of the merchants will ever get their money back.

“I feel bitter. I’m numb. I used to get up at 7:30, now I don’t know what to do. Where can I get a job at age 50? I have a very, very ugly feeling,” said Shyam Wadhwani, the owner of Adam’s Broasted & BBQ, a restaurant in the bazaar’s food court. Of all the losers, he may be the biggest. Wadhwani lost $45,000, some of which he borrowed and some of which he took from his life savings.

“I’m broke . . . I don’t have money to move. We’re barely making it (at home). We’re living on credit cards and buying groceries on credit card. Now my credit is screwed up,” Wadhwani said, noting that his wife’s job has kept his family afloat.

His lament rings with a familiar echo through the ranks of his fellow merchants, who at one time numbered about 50. Their combined losses are at least $100,000, perhaps much more.

“A lot of little people got hurt; that’s what bothers me,” said Marilyn Haack, owner of Country Reflections, a store that sold crafts, stuffed animals and wood cutouts. Haack was a San Diego housewife who sold her merchandise at arts and crafts shows and jumped at the chance to open a store in the bazaar by putting down $900. Her stall was in the basement, and if customers were few and far between on the main floor and mezzanine, they were a downright endangered species in the basement.

“Ninety-nine percent of the time there were no customers. I could go two weeks without seeing a customer, it got that bad,” she said.

When a group of investors called Historic Brokers’ Building Ltd. and Historic Brokers’ Building Inc. bought the vacant historic structure for about $2.1 million in 1985, the vision was one of opportunity; of a good investment; of obtaining a foothold in the suddenly resurgent downtown; of being ready for the opening of the convention center, which was then on schedule, according to interviews with several of the partners. It didn’t hurt that the new Horton Plaza shopping center was only a block away.

Generous Tax Credits

While the investors waited for the building to turn a profit, they counted on generous tax credits because of their plans to rehabilitate the historic structure, which was rebuilt in 1909 after a fire.

The buyers consisted of Granby, Devany, Peter Fraser, Ralph O’Campo, Rudolph Martinez and brothers Salvador Contreras and Gilbert Contreras, a former member of the state Coastal Commission.

The partnership debated whether to turn the vacant building into offices or some other use, according to interviews. About a year and a half ago Fraser--who is a lawyer, Gaslamp Quarter investor and at that time the partner responsible for the day-to-day management of the building--introduced the partnership to Wilson, 62.

“I was put in contact with him through a broker,” said Fraser. “The broker said, ‘I’ve got a tenant for the building.’ That sounded good to us.”

Wilson, a developer and owner of a construction company, U.S. Land Development and Construction Corp., was a Palm Springs resident and a stranger to the owners. But he had an intriguing idea: turn the spacious building into a bazaar.

The owners claim Wilson led them to believe he was experienced in constructing and operating similar businesses, but the owners never checked that assertion, relying instead on a routine credit report, according to Devany.

Wilson today downplays his previous experience. He said that while he helped build similar complexes, his only experience in operating a bazaar was in San Bernardino, where he ran a business called Piccadilly for about two months. The San Diego International Bazaar, he said, was his first try at building and operating a bazaar from start to finish.

Renovation Job

As part of the deal, Wilson’s construction company would be given the $600,000 renovation job and he would sign a five-year master lease on the building.

Some members of the partnership disagreed with the bazaar proposal and with the cost and type of rehabilitation work, according to interviews.

According to county records, Martinez, O’Campo and the Contrerases sold their interest in the property early this year. Contacted about the sale, Gilbert Contreras declined to specify the price they were paid or discuss any other aspect of the transaction.

The new owners were now Granby and Devany, who together held majority interest, Fraser and the newcomer Wilson.

A $600,000 construction loan was obtained for Wilson’s renovations, which began early this year.

Wilson didn’t have to pay the $25,000 per month rent from January to July, while the building was being made over. Both he and Granby acknowledge that Wilson never made a single rent payment even after July.

While work on the building was under way, Wilson began advertising for merchants. Wilson employed a group of leasing agents, who established an office in a trailer outside the San Diego International Bazaar.

The agents, according to several merchants, were bountiful in their promises, among them that an outdoor cafe would be built; that free and valet parking would be provided; that tour buses would make regular stops, and that $20,000 would be spent on promoting the grand opening on June 5 and another $10,000 would be spent each month on advertising.

In return, the tenants were required to pay first and last months’ rent and a deposit equal to a month’s rent. In all, there was room for about 160 shops. Among those becoming tenants were several restaurants and stores selling a variety of merchandise ranging from jewelry and tools to childrens’ clothes and sunglasses.

One of those merchants was Mary Jane Moore, who signed a five-year lease in April for D.D.’s Delight, a restaurant specializing in yogurt, milk shakes, soft ice cream and hot dogs. It was her first attempt at operating a business. She and her daughter, who dropped out, invested thousands of dollars, including signing a $24,000 lease-to-buy agreement for two top-of-the-line yogurt machines.

July 4th Opening Date

“I really wanted it to work . . . it looked like a nice concept,” said Moore.

The initial June opening date was pushed back to July 4. As it turned out, July 4 was the biggest single day of business at the bazaar. But the look of unfinished stalls, vacant restaurants and general confusion was everywhere. “People were turned off . . . few of them ever came back,” said Moore. By the end of August, D.D.’s Delight was making $3 a day.

While many of the retail stores were ready for the opening, the restaurants were not.

Moore spent $750 for 14 cases of yogurt and other products. July 4 came and it went, and D.D.’s Delight and the other eight restaurants stayed closed. Food ordered for the opening spoiled.

Natural gas lines weren’t hooked up. The county Department of Health Services had yet to give final approval. Grease traps and ventilation ducts were not ready. Electrical wiring was incomplete. Hand-washing sinks were not provided. Wilson claims much of the work was the responsibility of the tenants. Some of the merchants say Wilson and the leasing agents promised to have the work done, and when it wasn’t, they say he attempted to bill them for the completed work.

On July 18, Moore’s restaurant finally opened. Others still could not. “They kept making promises and promises,” Moore said of Wilson and his leasing agents. Moore said she eventually lost $20,000.

Merchants complained the bazaar was dimly lit and that the construction was shoddy. Maria Olson, owner of Iberian Import-Export, said the upstairs women’s bathroom not only leaked but there was no partition separating the two toilets.

A committee of merchants was formed and complained directly to Wilson; others did the same thing individually. They were promised changes and told more tenants were needed to make the bazaar a success.

One leasing agent hired by Wilson had become frustrated with the situation.

“We did quite a bit leasing but not by any procedure I was familiar with,” said Darlene Marshall, a veteran leasing agent. “If they (had) the money, we signed them up. There was no background check . . . and if the tenants were unhappy, they could just leave.”

“I’ve been in leasing a long time . . . and if there’s one thing you want to do is be careful because you want them (tenants) to be successful,” she said. “You don’t want someone to come in and stick their life savings (into a business). It’s bad for both parties.”

Marshall and another agent went directly to Granby and Devany in August and laid out the situation. “They were absolutely shocked,” she said. “It was like I hit them with a fence post.”

For their efforts, Marshall and the other agent were fired by Wilson. “I felt her loyalty had been impaired,” said Wilson. “I felt it was my business . . . I expected loyalty.” He also said he fired Marshall and the other agent because they hadn’t signed enough new leases.

By the end of August--less than two months after the bazaar opened--Wilson informed the owners he was dropping the project and walked away from the San Diego International Bazaar. Among other things, the owners said Wilson told them he had a heart problem.

“He said he couldn’t continue. He announced at a meeting, ‘I can’t continue . . . I’m getting out,’ ” said Granby. “It was a shock, to put it mildly.”

Wilson said he had no choice but to leave. He claims he wasn’t making any money on the bazaar, that the tenants weren’t paying rent and that others were “skipping out” of their leases by folding their businesses.

“I couldn’t handle the rental situation . . . paying for the administration, the sales people, the building manager . . . all the payroll, the utilities,” Wilson said. As for the deposits he received from the merchants, Wilson said all the money was spent on the bazaar’s operation. Wilson, who sold his one-sixth ownership interest back to the partnership--a paper transaction in which money was never exchanged--said it’s now Granby’s responsibility and those of the other owners to pay back the tenants.

“They took over the obligation of the leases,” said Wilson.

That assertion, though, is hotly disputed by Granby and Fraser, who say Wilson, as the master lease holder of the building, is responsible.

Called It Quits

When the tenants were told of Wilson’s departure and that Granby and Fraser were to take over day-to-day operations, many called it quits and left. Granby, who for the next few weeks visited the bazaar almost daily, promised changes. He asked the remaining merchants to sign new leases which included reduced rents and the promise he would return their deposits if they stayed a year. He promised to make physical changes to the building. In an effort to bury the past, the bazaar was renamed Gaslamp Village.

Granby said he spent $100,000 on more renovations and a new operation. But the tenants, who numbered about 15 to 20, were alone. Few customers came in. No major advertising was done. No new tenants leased space. Despite the new name, the large sign outside still said San Diego International Bazaar. By the end of September, those merchants who remained saw history repeating itself.

The merchants were told the owners were having financial troubles and couldn’t spend any more money on the building.

“Obviously, there was a limit to it,” Granby said.

The bazaar wasn’t the only financial problem facing the owners. Last year, Granby and Devany took over ownership of Pacific Beach Toyota by buying out four other partners--O’Campo, Martinez and the Contrerases, the group that originally invested in the bazaar. Granby and Devany have defaulted on their $2 million note and the former partners have initiated foreclosure.

Today, only four businesses remain at the bazaar. The property is saddled with two mechanics’ liens. It is in default for $14,242 in county property taxes. Two weeks ago, the remaining tenants were told the owners could no longer afford to pay the utility bill and the $2,386 due was now their responsibility.

Granby said he is looking for a way out. The building is for sale, though he’d like to keep it if a new operator with money to spend could be found. Granby said he is negotiating with the building’s lenders. Granby, on the advice of his attorney, declined to talk in depth about Wilson. “The only thing I know is that those (merchants’) deposits were paid to the original tenant and we don’t have them,” Granby said.

“We’re a victim here . . . Jim and I. We’re victim as much as the tenants, even if they don’t understand what happened,” said Devany, adding that the sour deal at the bazaar has the potential to send him into bankruptcy.

Wilson said he lost $150,000. “I took a bath,” he said. He said because he is on the note for the $600,000 renovation loan, he was forced to make a $5,700 interest payment on the loan last month after Granby and the other owners failed to do so. Despite what the merchants contend, he claims he lived up to all of his promises.

“I don’t think there was any one thing that made it fail . . . we thought it was conducive to making money. I thought I did a good job putting it together,” said Wilson, who said he is now involved in the construction of a store called Home Furniture in Mira Mesa.

“I know the tenants lost money . . . but business is a risky proposition. Unfortunately, the business didn’t achieve the success” expected.

“You can’t point the finger at me . . . I know the blame has to fall somewhere for success or failure,” Wilson said. “I did nothing to hurt those people individually or collectively because it wasn’t in my best interest . . . What can I say, it was a bad investment for me as much as for them, if not more.”

As for the tenants, some have hired attorneys, others say they’ve already lost so much they can’t afford to hire a lawyer.

If there is an epitaph to what’s occurred at the San Diego International Bazaar, it may be that despite the gains made downtown and in the Gaslamp Quarter, the business climate--for investors as well as small entrepreneur--remains fragile.

The promise of downtown has gone sour for many, from art gallery owners to restaurateurs, whose empty storefronts have littered the downtown landscape. Another business similar to the bazaar, called Kobey’s Downtown, announced it intends to close after being open less than a year.

But dreams die hard. “I’d like to go back,” said Marshall, the leasing agent who was fired. “I think it has a lot of potential if it’s done right.”