One Block at a Time : Nonprofit Groups Try Hand at Real Estate Development
On a sad stretch of Broadway in South Los Angeles, Ferris Trimble drives past rickety storefronts and graffiti-covered walls before coming to a stop at a vacant corner lot.
Here, across the street from the Paradise Baptist Church, Trimble and the church want to break into the world of commercial real estate development. The site, where charred floorboards mark the remains of a building torched during the 1992 riots, is ideal for a bank or medical clinic, said Trimble, president of the New Life Economic Development Corp., the church’s nonprofit development arm.
“There is a lot of work to be done all around here,” said Trimble of the long neglected neighborhood that hugs the Harbor Freeway. “It’s going to take a long time. But we have no alternative.”
They are better experienced in battling social ills than leasing retail space. But a small yet growing number of religious and community activists in South Los Angeles are looking to the risky business of commercial real estate to revive troubled neighborhoods.
Nonprofit groups like New Life consider themselves the developers of last resort in the inner-city neighborhoods written off by many private builders as too risky. In these same areas of aging warehouses and storefronts, nonprofit developers envision industrial parks and shopping centers, generating badly needed jobs and money for social programs.
While their plans remain mostly just that, inner-city developers say they want to reveal the potential for profit hidden by what they say are unfounded fears and misconceptions about their communities. “People just don’t have faith in the inner cities,” said Van Scott, project manager for Concerned Citizens of South-Central Los Angeles. “The revenue is generated here. But folks would rather be located on the Westside than in the inner city.”
Nonprofit developers in Los Angeles will need much more than faith to rebuild the economy of the inner city, a task so daunting that it has frustrated much larger efforts by government and business. Many doubt that a few community groups, which are short on both cash and commercial real estate experience, can make much of a difference. “The community-based groups are basically mom-and-pop stores in the real estate development industry,” said Eugene Grigsby, director of African American Studies and an urban planning professor at UCLA. “No matter how much good they do, it doesn’t add up to much.”
Still, nonprofit interest in commercial development has gained momentum. On the national level, pending federal legislation would create investment tax credits to help finance inner-city commercial projects. In Southern California, USC plans to teach the basics of commercial real estate development to nonprofits. In addition, the newly founded Los Angeles Community Development Bank is expected to help finance inner-city retail and industrial projects.
A few pioneer nonprofit developers have blazed a trail into the commercial arena. In South-Central, the Vermont Slauson Economic Development Corp. teamed up with a private developer to build a busy shopping center. The East Los Angeles Community Union--better known as TELACU--built and operates a 1.2-million-square-foot industrial park.
Nonprofit developers have already proved themselves capable builders of low-cost housing, having built 15,000 apartments and homes in the region, according to the Southern California Assn. of Non-Profit Housing.
Many local housing developers began to look at commercial projects after the 1992 riots, said Paul Turner, economic development director at West Angeles Community Development Corp., which is affiliated with West Angeles Church.
“Since the riots, everybody said what we really need is capital and businesses and small-business development,” said Turner, who has begun to explore possible commercial projects to complement a new $42-million church complex on Crenshaw Boulevard.
On Central Avenue, Anthony Scott, executive director of the Dunbar Economic Development Corp., takes a visitor through the wood frame and concrete skeleton of a housing and commercial project rising on both sides of the historic Dunbar Hotel, where jazz legends such as Duke Ellington stayed and performed.
The $9-million project will include ground-floor space for a restaurant, professional offices and a child-care center, and affordable apartments on the upper floors. The developer, which restored the hotel into senior citizens housing, plans further commercial projects along Central Avenue.
“You just can’t do housing without providing jobs for people who live in them,” said Scott, a former architect. “You need to do both residential and commercial.”
Complicating matters has been the region’s economic woes, which have depressed rents for commercial buildings, making them harder to finance and build.
Community Build, an economic development and job training organization, has lined up more than half the financing to build a nearly $2-million retail center near Leimert Park. However, the group is now trying to find low-interest government loans so that it can offer rents low enough to compete in a depressed market and yet cover the project’s expenses.
“We have to structure a deal with [low enough] interest rates that will recognize the economic realities,” said Brenda Shockley, president of Community Build.
After working on environmental and low-cost housing issues, Concerned Citizens of South-Central has taken a crash course in shopping center development as it tries to build a $12-million retail project on a site now occupied in part by a long-shuttered Sears store and rusting railroad tracks.
Concerned Citizens, which was founded a decade ago to oppose the construction of a giant trash incinerator, has turned to a private developer, Lowe Enterprises, for advice on designing and operating the proposed center at Slauson and Central avenues as well as attracting tenants. Lowe experts have critiqued Concerned Citizens’ economic and market analyses and allowed the Concerned Citizens staff to observe meetings with prospective tenants.
But instead of building a single project at a time, nonprofit groups might be better off providing low-cost construction financing to private developers or helping store owners buy equipment, according to some economic development experts.
“I’ve always thought your money goes a long ways if you don’t have to put it into land and buildings,” said Linda Griego, director of RLA, formerly Rebuild LA. “I just think it ties up a lot of resources.”
At the corner of Broadway and 51st Street, Trimble of Paradise Economic Development concedes the slow nature of commercial development. Nearly two years have passed since the church bought the empty corner lot and it will be another couple of months before any tenants are signed up, he said.
“We want to get the project moving,” said Trimble, whose group is nearing completion of a nearby affordable housing complex. “But you have to change things one block at a time.”