All Buttoned Down? : New Garment District Plan Attracts Many Minority Owners
At first glance, Los Angeles’ busy Garment District near the intersection of Olympic Boulevard and 11th Street would appear to be an ideal place to do business.
Dozens of trucks line the streets in the morning while drivers unload huge boxes of clothes. Shopkeepers trot behind rolling racks of new garments, from T-shirts to tuxedos. Buyers for retail chains pop from one small store to the next, looking for the latest in fashion or the cheapest of close-outs.
But despite all the hustle and bustle, some shopkeepers say that it’s no place to do business. And today, developer Lowe Enterprises and a group of small, mostly minority-owned clothing wholesalers are expected to announce plans to build their own facility nearly a mile away from Santee Alley, the heart of the garment district.
The new building may be the catalyst for a major shift in the Garment District and a boost for the southern fringe of downtown Los Angeles.
“Wholesalers want a safe, clean, uncongested place to do business,” said Greg Hoxworth, senior vice president of Los Angeles-based Lowe.
“We’re going to give them what the current garment center can’t.”
Although many lenders remain skittish about loaning money on new commercial projects, Lowe and the shopkeepers have devised a plan that they believe will persuade one or more banks to finance construction of the LA Wholesale Apparel Mart, a 600,000-square-foot, $135-million project south of the downtown core off the Alameda Street exit of the Santa Monica Freeway.
Breaking from Garment District tradition, the wholesalers will each own their stores instead of renting them. Their down payments will boost Lowe’s equity and make the project less risky for a lender.
About 100 wholesalers have already agreed to make $20,000 down payments on the for-sale units by the end of the year, Hoxworth said, and another 200 companies have “expressed strong interest” in buying units.
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“Lowe has come up with a pretty good idea,” said Stan Ross, managing partner in the Los Angeles office of real estate consulting firm Kenneth Leventhal & Co.
“The cash that the merchants are putting up will make it easier for Lowe to get a loan, and a bank is going to love the fact that they already have more than 100 sales contracts.”
Officials at Lowe believe that the new building could eventually shift the center of the city’s longtime Garment District away from its traditional home.
Lowe will build the complex on a 20-acre site roughly bounded by Bay, Alameda, Wilson and 7th streets. The gritty area is primarily home to a gaggle of dilapidated warehouses, a few old office buildings, manufacturing plants and debris-filled lots.
Demolition of an old produce and toy warehouse on the new site will begin in January, Hoxworth said, and completion of the new complex is expected in the fall of 1994.
The idea to build a new complex outside the Garment District’s current boundaries was hatched by the Korean Garment Wholesalers Assn., a group of more than 300 business owners.
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“The district is just too congested, it’s hard to make deliveries, crime is too high and homeless people are scaring some customers away,” said Sang Ho Kang, a Korean wholesaler who played a key role in the negotiations with Lowe.
Equally bad, Kang said, are the huge rent increases over the last several years by landlords who own the buildings that house the small retail and wholesale shops on the fabled Santee Alley and the rest of the Garment District.
The district’s tight rental market has also allowed many landlords to demand exorbitant “key money”--additional, lump-sum cash payments that tenants are forced to pay when they move in or want to renew a lease that is about to expire.
To gain more control over their costs and escape the district’s other problems, the group approached Lowe two years ago and asked if the company would be interested in building a new complex in which wholesalers could own their own shops instead of rent them.
Kang said the group picked Lowe because the company had purchased 112 acres about a mile east of the district through a joint venture with Copley Real Estate Advisors in 1988 and had since completed a couple of smaller but successful garment-oriented buildings nearby.
Lowe eventually agreed to build 268 shops averaging about 1,500 square feet each on the 20-acre parcel.
Although the company plans on renting out about 20% of the shops to generate future rental income, the remainder will be sold at prices ranging from about $250,000 to $450,000 each.
Kang said both the Korean group and Lowe have been working hard to involve companies owned by several ethnic groups active in the Garment District--including other Asians, African Americans and Latinos--and several have already made down payments.
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In a sense, the new complex will function much like a giant shopping mall: All the shops will face inward toward the center of the building instead of facing the street.
“The shops on Santee Alley are right on the street, and that creates a lot of security problems because anyone can just walk right in,” said Ray Kang, one of the project’s architects.
“By turning the shops inward so they face each other, buyers will still have plenty of access to the wholesalers but security guards will have an easier time keeping the homeless and criminals out.”
