Latino//mike1st/mark2nd By SHELLY GARCIA Staff Reporter Developers have seized upon the idea of turning shopping malls into open-air town centers as a way of attracting upscale, suburban shoppers who have grown tired of spending their spare time at a traditional enclosed mall. Now, a Toluca Lake-based company wants to bring the same idea to a different marketplace blue-collar, urban Latinos. Socially Responsible Investing LLC has acquired a 197,000-square-foot shopping center in Panorama City with plans to remodel it into a shopping plaza filled with small retail shops and restaurants, and walkways, or paseos, where families can congregate. A portion of the project would be devoted to office space for housing social services related to job training. “We’re trying to create a plaza that the community can enjoy a safe environment for local residents to come to,” said Cary Lefton, SRI’s chief executive. While Latinos, as a group, tend to spend money differently than the population as a whole, they represent an increasingly important economic force in Los Angeles. Open-air markets, in particular, hold a special lure. In Mexico and South America, town plazas are an integral part of the community featuring street stalls filled with a variety of merchandise. “It’s where everyone used to go and everyone would walk in their Sunday finery and be seen,” said Carlos Garcia, president of Garcia Research Associates, a Burbank-based consumer research firm specializing in the U.S. Latino market. “The whole concept of a place to hang out is perfect for the Hispanic market.” The site being targeted lies just north of the Panorama Mall at Van Nuys Boulevard and Parthenia Street, along a stretch that spans several blocks. SRI acquired the property for $10.3 million from the Fritz Burns Foundation, a group that represents one of the original developers of Panorama City. The plan is to remodel the existing buildings, which have a vacancy rate of about 30 percent, to allow for clusters of stores and restaurants connected to a plaza with paseos lined with small stalls. Because the project merely involves renovating existing structures rather than new construction from scratch, SRI does not need additional city entitlements or council approvals, Lefton said. Construction is slated to begin in about four months, with the center opening next May. With an average household income of about $40,000 a year, consumers in Panorama City are not expected to be heavy purchasers of big-ticket luxury goods or to frequent expensive restaurants. But SRI officials hope that the densely populated area (650,000 people live within a five-mile radius of the Panorama Mall) will be more than enough to support the project. “What motivated us was the demographics,” said Lefton, who also heads the sister company that will manage the development, Agora Realty & Management. “And with the turnaround in the area, it was prime.” Panorama City was originally developed in the 1950s as a planned community of single-family homes for blue-collar workers employed by Lockheed Corp. and other area manufacturers. It began to deteriorate when the area’s infrastructure of parks, schools and recreation areas failed to keep pace with the mushrooming population. Gangs proliferated, and when the recession hit in the early ’90s, retailers and other businesses shut down, bringing more blight to the community. But the economic recovery also found its way to Panorama City and, with the opening of Wal-Mart in the Panorama Mall and the Van Nuys Center at the Plant last year, more businesses are taking an interest in the community. “Wal-Mart found out they could function and thrive in an urban environment,” said Bert Abel, an associate vice president at Grubb & Ellis Co. who specializes in retail leasing. “It established the blue-collar Latin market as a viable market.” Retail vacancy rates in Panorama City have fallen to about 10 percent from highs hovering around 25 percent, and rents have increased by more than 30 percent. “Two and a half years ago, what was hard to rent for $1 a square foot we’re not having any problem renting for $1.35 or so,” said Cesar De La Cruz, a leasing agent for Westcord Commercial Real Estate Services, who brokered the SRI deal and is leasing the new center. If mining the Latino market now makes economic sense, it also requires a different approach from traditional strategies. “The Hispanic market is demographically younger, so things that appeal to children will be very attractive,” said consumer researcher Garcia. “Hispanics love to spend money on entertainment. They (spend more than the general population) on video rentals and music, and they’re heavy movie-goers, much heavier than the general market.” At the same time, Latinos generally don’t go to restaurants with the same frequency as the general population, Garcia said. And when they do eat out, they look for places that can accommodate large groups. “The Latino people are a lot more family-oriented,” said Brian Gluckman, general manager of Old Towne Grille & Buffet, the first (and so far, only) company to lease space in the proposed SRI center. “You usually have three generations (dining together).” Old Towne Grille & Buffet opened its second restaurant in Panorama City because business in its current location in the city of San Fernando another heavily Latino community has outgrown the space available. “I like the location and the timing,” Gluckman said. “When you take these demographics, where there’s 650,000 people in a five-mile ring, if you got 1 percent of that population every week, you’d have 6,500 people, which is a lot of people.” But the economics of retailing are not dependent on the density of population. Some wonder whether a neighborhood with limited household buying power can generate the sales needed to cover the cost of overhead. At the same time, the SRI center would become a third competitor in a radius of just a few blocks. “You really have to ask yourself whether a third mall can work on its own, or can it negatively impact all of them,” said David Diaz, a professor of Chicano and urban studies at Cal State Northridge. “When do you reach overkill for commercial space in the area?” SRI principals, who have been developing commercial centers for 10 years, have had a number of successes with projects built around themes. One of its efforts, the Lindero Business Oaks Center in Westlake Village, is a design center, housing sculptors, fine artists and other crafts. The company also renovated a Torrance shopping center in what Lefton described as a “Yuppie-type community,” and leased it to family and home-oriented businesses, including a gourmet cooking store and Gymboree. As for the Panorama City project, “What we want to do is create more of an on-site street scene,” said Lefton, “and then hopefully the retail will benefit.”