Starting From Scratch : Small business: Two months after the riots, the reality of the rebuilding challenge is demonstrated on the corner of Pico and La Brea.
It has been 60 days since the strip mall burned down, and Fatburger still stinks of singed hamburgers and charred bottles of ketchup. Flies buzz around the blackened mess of collapsed metal and wood. Thieves have been in to slice up the bones of the building and cart off steel and copper to junkyards.
A foot-wide beam that used to hold up the roof of the neighboring check-cashing store lies neatly perforated by a blowtorch like a cut-up candy bar, ready to be taken away by a scavenger.
Here at the corner of Pico and La Brea, the realities of what it takes to “Rebuild L.A.” are clear for anyone to see. Government aid programs are not getting cash where it is needed, business owners complain. Some insurance companies seem to be dragging their feet in paying claims, merchants say. People say they are being bankrupted by red tape.
Though scorned as some of the ugliest slabs of Los Angeles’ car-culture architecture, humble mini-malls such as this one are the incubator of thousands of mom-and-pop dreams, and the generator of lifeblood income for thousands of families. It might be an exaggeration to say: As goes the mini-mall, so goes the city. But there is an important symbolism in the fate of these pockets of enterprise, the suppliers of everyday needs for thousands of people. Months after the looting and burning, many still lie in ruins, and so do lives that depend on them.
This corner is a famous one. The flames that devoured it were among the fiercest in the city, attracting heavy television coverage. A photo of the center in flames, behind a wall scrawled with graffiti--”Look what you have created”--made the front page of The Times. The co-owner of the center, Joseph Kung, bought up 50 copies of the paper and clipped the photos, attaching them to numerous pleas for help from various authorities. None so far has yielded fruit.
Tico Johnson has been working with Kung for three years. He stares at the stores that used to be his livelihood--and that of six employees, four of whom are now laid off. His $40,000 truck, which sprouts a giant cleaning hose, stands idle in the parking lot of this ruined strip mall. Around town, 37 of the 54 customers for Johnson’s commercial cleaning service were burned out.
Johnson is just one domino tumbling in a series of personal financial disasters set in motion by well-organized looters who drove a beat-up Chevy through the front of the Rentronics video equipment store. Johnson says they filled up two red Toyotas, a brown Toyota and a van with televisions and other goodies, then calmly filled bottles with gasoline they had brought in gallon cans, and set the stores on fire as he watched, helpless.
Johnson figures he’ll go bankrupt. As a result of the riots, his revenue has dropped from $26,000 to $7,000 a month, not enough to cover his overhead. He still has to pay off $200,000 he borrowed on his house to meet payroll and buy his trucks. He’s got $80,000 in medical bills due for his wife’s heart surgery. And tuition fees for his sons at USC and Cal State Bakersfield will be coming up. “Eventually I will lose my house,” he says. After 17 years as a cook in the merchant marine, after decades in Los Angeles building small businesses such as this, it looks like years of labor and saving by this one man, a Jamaican immigrant, may have all gone up in smoke.
As of day 60, the other businesses hit by the looters at this center also stand in limbo:
* 99-cent Chinese Food: Thai Silver, 22, bought the restaurant for $35,000 borrowed from an uncle exactly 59 days before it burned down. He has laid off his two employees and is looking for a new location, since it is unclear when this center will get rebuilt. “I can’t wait around with this uncertainty,” Silver says.
* Fatburger: This restaurant is not coming back either--not here or anywhere. It’s the recession, according to a representative of the franchise’s owners, who declined to elaborate further.
* Rentronics: The television and furniture rental store will reopen, but in a new location. Michael Attaway, regional manager for the Houston-based chain, says there was never enough parking at the center. After being driven crazy by building-permit paperwork for the company’s partly destroyed Inglewood store, he is not eager to deal with any situation that includes physical rebuilding. The employees at this location have been given jobs at other Rentronics stores.
* Any Kind Check Cashing: Steven Burningham, chief administrative officer of this check cashing chain, which lost four of its 24 Los Angeles stores in the riot, says he hopes to come back to this location, but isn’t sure whether the building will be rebuilt. All seven employees at this location have been given jobs at other stores in the chain.
It’s clear that even if Kung rebuilds, he will have to find some new tenants. And that’s part of why he is not sure that he will be able to afford to rebuild. His dilemma is a common one: Even if his insurer covers the cost of rebuilding, the new rents may drop by half because of increased fear of a dangerous location, he says. Lower rents would make it impossible for Kung to keep up payments on a mortgage taken out at the height of the market. He says he paid $2.1 million for the center in 1988, but is worried that the value of the center, based on rents, could drop to $500,000.
Kung blames his insurer, Western International Insurance, for the fact that nothing has been cleaned up yet. He says that the company is delaying paying claims for demolition and that it is not allowing him to use the black-owned demolition firms recommended by Johnson that he wants to hire.
Rhonda Ijams, claims officer for the insurer, says that payment of the claim has been delayed because Kung’s partner has been out of the country and that he is free to hire whomever he wants. She says Kung has failed to sign necessary papers to start the demolition. While Kung says he is insured for the $1.5-million value of his mortgage, Ijams says her company is obligated only to cover costs of rebuilding, which will be significantly less than that.
Disputes such as these are flaring up across the city. While some landlords got checks to start cleaning up within days of the damage, others are still waiting. Part of the problem is that many mini-mall landlords are themselves small mom-and-pop operations, with little sophistication in dealing with insurers, lenders and contractors--and very limited resources to fall back on.
Frustrated in his attempts to get action, Kung has taken to showing up at public hearings throughout town lugging a large box of photocopies of his demands detailed in letters that he has written to everybody from Insurance Commissioner John Garamendi to President Bush. He wields a list of nine other business owners that he says are being stiffed by Western International.
Like hundreds of other businessmen, Kung has become a Kafkaesque figure, scurrying from government office to government office with his forms, lost in a bureaucratic maze. He wanted to get his ravaged property reassessed to reduce his taxes. So he went to the downtown county assessor’s office. Go to the West Los Angeles office, they said. He drove 45 minutes down Pico to the corner of Jefferson Boulevard. A woman at the West Los Angeles office gave him a green form and told him to turn it in downtown. Kung drove back across Pico to the downtown office and was told to take it back to West Los Angeles.
Finally, when he got somebody to accept the form, he found out that only the building will be reassessed. Kung will still have to pay the old rate on the land, even though he believes that its value has dropped sharply.
Because so many mini-mall owners bought at the peak of the market and because many of their tenants are going bankrupt, “I think lenders will own a lot more shopping centers,” says Robert Champion, president of Champion Development Co., a developer of commercial property. Even before the riot, mini-mall rental rates dropped 20% in the last two years, he says, hurting small investors.
The fate of many street corners, then, lies in the hands of banks. Seon Hong Kim, senior loan officer of Hanmi Bank, notes that tenants are going to landlords both collectively and individually, demanding rent reductions. The landlords, in turn, are going to Hanmi to ask for payment suspensions and other breaks. The bank is trying to be flexible and has already restructured $8 million of the $10 million in loans affected by the riots, Kim says.
Kung says he has written a letter to his lender asking for relief, in addition to contacting city, county and federal authorities. “The city cannot rebuild without us (small businessmen),” Kung says. Without aid, he says, gesturing at the blackened hulk of his property, “we will walk away.”
