New Roots Nurture Local Trade
New immigrants and the increasingly global nature of business are creating a new economy in Southern California that is thriving despite the worldwide economic slowdown. One secret of this new economy is that it is based as much on small business and real estate locally as on international trade.
In the San Gabriel Valley, newcomers from mainland China are joining earlier immigrants from Hong Kong and Taiwan to spur an already thriving business community. In Koreatown, the Mid-Wilshire area is swelling with new immigrants from South Korea and fresh investment in small business and commercial real estate.
The following stories take a look at how new entrepreneurs and immigrant capital are transforming the local economy.
With partners and family members, Dr. David Y. Lee started buying commercial buildings in the Mid-Wilshire district in 1995. It was a bad time for the Los Angeles economy, and for office space on Wilshire Boulevard.
Major office tenants had for years been deserting Mid-Wilshire for downtown, the Westside and Orange County, and the 1992 riots had further depressed values in the area.
Lee wanted in, and he targeted a 12-story building owned by New York-based Teachers Insurance that was 60% occupied.
“We bought our first building at $30 a square foot, a building that in the 1980s sold for $150 a square foot,” he says.
Lee had the advantage of knowing the community of small businesses in nearby Koreatown (centered along Olympic Boulevard between Vermont and Western avenues). That allowed him to raise building occupancy immediately to 90%.
“Korean businesspeople were not in Wilshire Boulevard buildings before because the Korean companies didn’t have adequate proof of capital to show the lessors, and they wanted only small office space when the owners wanted to rent whole floors,” Lee says.
“But we rented office space to firms of even three people and we didn’t ask about capital adequacy but asked for three months’ rent as a deposit.”
Other landlords might be afraid that tenants without much capital would go bankrupt and be unable to pay their rent. Lee reasoned that this was a small risk to take.
“If the business failed, the people moved out--they didn’t live in their offices,” says Lee, who came to Pasadena from Seoul in 1971 at 17 and later studied at Northwestern University Medical School and became a physician.
Today Lee’s company, Jamison Properties, owns 22 buildings in Mid-Wilshire, with tenancy divided among state and county government offices, trade schools, accounting and law firms and about 30% Korean community businesses. The Mid-Wilshire area, which once housed the classic Bullock’s Wilshire store, the Ambassador Hotel, the Brown Derby restaurant and major insurance companies, still is a far cry from its glory days. But the local Korean community is swelling with new immigrants, who are coming to Los Angeles in different circumstances from earlier arrivals.
“They come with $150,000 to $200,000, and even up to $1 million,” Lee reports. The totals are legally significant because an immigrant with $150,000 who promises to hire one employee can be granted the legal right to stay in the United States. With $500,000 and the promise to hire 10 employees, the government will grant a permanent residence “green card.”
But why are well-heeled immigrants coming from South Korea now? Because of shifts in the global economy.
The large South Korean conglomerate companies, called chaebol, have been restructuring as the Korean economy tries to recover from the Asian economic crisis of 1998. In doing so, companies such as Daewoo, Hyundai and Samsung are cutting older workers, including senior executives in their 50s. Those employees are getting severance pay packages and many have substantial life savings. And they are deciding to move to the United States.
“They are buying small businesses in the Koreatown area and settling here for the education of their children because they need to be trained for the global economy, whether they eventually work in Korea or here,” Lee explains.
The new immigrants typically buy retail businesses, including coffee shops in some of the buildings Jamison Properties owns. Such coffee shops are selling today for $200,000, where a few years ago such a business would go for $40,000.
After paying so much, immigrant families often make a living with husband and wife working in the shop 10 hours a day, helped by adolescent children after school. They usually put up their own money, so they owe no bank or lender and, aside from hiring one or two people, pour their own labor and capital into the enterprise.
The arrival of such newcomers is swelling Koreatown with new shopping centers, even as earlier immigrants from South Korea fan out from central Los Angeles to live in such places as La Crescenta, Cerritos and Orange County.
“They go where there are good schools,” says Michael Chang, owner of a sportswear business with plants in Gardena and Seoul.
The focus of Korean community business has changed. Ten years ago, many Korean entrepreneurs were still engaged in export-import business with the old homeland. But today, “only 10% of the Korean community business is with South Korea,” estimates Benjamin Hong, chairman of Nara Bank in Los Angeles. Most of the earlier immigrants and their families have businesses that serve the general marketplace, or “mainstream.”
That doesn’t mean the slowdown hasn’t affected business. “Things are slower even than three years ago [during the Asian crisis],” says Chang, whose father started the light sportswear firm with $7,000 brought from South Korea in 1981.
The travel business is among those hit hard, reports Koreatown travel agent Janet Park.
Yet, as Lee walks up Wilshire Boulevard showing Jamison Properties buildings such as the Wilshire Financial Tower, which is 99% rented, he talks optimistically, as real estate people usually do. “At $1 a square foot, we have the lowest rents, available parking and a good labor pool nearby,” he boasts.
The insurance companies that owned the Wilshire buildings before Jamison Properties spent $1 a square foot to manage the properties, with expenses for property managers, leasing agents and building managers. They had to charge $2 to $3 a square foot for rent to make money.
But Jamison Properties runs the buildings with three or four people in each location and out-sources building maintenance and janitorial services to other companies. That way it can charge rent of $1 a square foot and make money on each building’s cash flow at occupancy as low as 70%.
Lee retains his internal medicine practice in Van Nuys and sees patients there several mornings a week. “Real estate management is not an intensely demanding business,” he remarks.
Asked to estimate the value of his 22 buildings, Lee says he spent about $300 million to buy them. But their value today is a moot point, he says, because “we’re not selling buildings. We hope to buy four to five more every year.”
Bottom line: The new owners have renewed the economics of the properties as immigrant entrepreneurs are renewing the economy of Southern California, whether in central Los Angeles or the communities of the San Gabriel Valley.
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James Flanigan can be reached at jim.flanigan@latimes.com
