Quarter of All Film, TV Now Shot Overseas By JACQUELINE FOX Staff Reporter The impact of runaway film production on the Valley economy and the region as a whole hit a high mark in 2001, primarily because production houses stockpiled projects in anticipation of Writers and Screen Actors guild strikes that never materialized. According to a recent UCLA Anderson Quarterly Forecast on Entertainment and the Los Angeles Economy, roughly 18,000 entertainment-related jobs were slashed last year, compared to 2,000 in each of the preceding three years. But the ongoing exodus of film and TV projects to, among other countries, Canada, where tax subsidies can save filmmakers as much as 25 percent of their production costs, is not just a jobs issue. It’s now estimated that roughly one in four U.S.-developed projects are shot out of the country each year. Valley business owners representing sectors of the economy even remotely linked to TV and film production are suffering and many are aligning themselves with local business groups to push for federal subsidies they believe will help level the playing field. “The trickledown effect of runaway production is having a devastating impact, not just on our business, but all businesses in the Valley and the region,” said Scott Murphy, president and CEO of Northridge-based Ameritel Inc., which provides telecommunications sales and service to businesses in Southern California, including several small production companies. Murphy estimates he’s lost 20 percent of his business since last spring, has laid off 10 members of his staff some who’ve worked for him for 15 years or more and sales slid from $6 million in 2000 to just under $5 million in 2001. Murphy said, “Every time a studio sets up someplace like Canada or Australia, that impacts all of us, from restaurants to dry cleaners. It’s a problem for every business, regardless of size and product.” Murphy’s story, along with testimonials from industry professionals, actors, Valley business leaders and even Mayor James Hahn, is featured in a new 10-minute video on runaway production co-produced by the Valley Industry and Commerce Association and two unemployed Valley filmmakers who happen to be Murphy’s sons, David and Jeff. “The purpose of the film,” said Greg Lippe, chairman of VICA’s subcommittee on runaway production, “is to put a human face on the issue. It’s not the big studios that are suffering. A large percentage of the businesses affected by cuts in production are small companies, and many of those companies are in the Valley.” Lippe and 15 other representatives of the Valley business community recently took copies of the video, “Runaway Films, Keep Them In America,” to Washington, D.C. where they lobbied for passage of a bill calling for a federal wage-based tax credit for U.S. film projects. Senate Bill 1278, first introduced by U.S. Sen. Blanch Lincoln, D-Ark., calls for a 25-percent tax credit on all qualified wages for TV and feature film productions with budgets of between $200,000 and $10 million that are shot in the U.S. The credit would increase to 35 percent if the project is filmed in a low-income community. Lippe said chances of the bill passing this year are about “50-50.” “Supporters are short of the votes they need to get the bill through,” Lippe said. “So our job now is to go there to push for the support we need.” Christopher Thornberg, senior economist at UCLA who prepared the industry forecast, however, said the high number of entertainment-related job cuts in 2001 was a fluke and employment figures would likely level off this year. However, he also said that, while the film industry remains strong, it is shifting. Thornberg said high-end management and design jobs are slowly replacing the countless low- to medium-budget film and TV productions that had been the mainstay of many Valley-based companies until it became cheaper to do that portion of the work out of the country. “Some movies are being made here, but it’s never going to be what it was five years ago,” said Thornberg. “Paying (production workers) lower wages is the only way to keep the bulk of the filming here, but that’s not going to happen. Whenever a production house can break up the production costs into parcels and complete that part of the project where it’s cheaper to do so, they are going to go for it.” Thornberg also suggested tax credits were a bad idea because they tend to work against natural market shifts. “I always have a problem with any kind of legislation that sets out to do something that the market wouldn’t do on its own,” said Thornberg. “This goes for anything from steel to textiles to the motion picture industry. If a production is leaving, it’s doing so for a very good reason. This is the basis of trade.” Thornberg said the local economy actually stands to benefit from the changes in the industry because, as labor-intensive jobs move to cheaper locations, they are replaced by higher-end design and management jobs here at home that are more profitable in the long run. “The movie industry is not in a slump,” said Thornberg. “Production lots are running at capacity and the reason is production here in Los Angeles is shifting toward the part of the cycle that has to be close to the design process.” And, officials with a state program introduced last year to stem runaway production say they are starting to make inroads. Gov. Gray Davis’ three-year $45 million Film California First program (FCF) offers production companies rebates for filming on public property or using public employees, and reimburses for location, film permit and public equipment fees. Karen Constine, director of the California Film Commission, which administers the FCF program, said more than $7 million was requested by producers of about 1,000 small projects since last January. Constine said the commission has also seen a 12-percent increase in days of production on state property and that the number of actual features filmed on state properties has gone up 25 percent since the program was introduced. She said Los Angeles-based Rising Star Entertainment, for example, tapped the program to shoot its $1 million project, “The Long Ride Home,” in Santa Clarita instead of Canada, saving about 150 jobs locally. “They were ready to leave until they learned about the FCF program,” said Constine. The program does not include wage reimbursement for police officers hired as set security, however. Constine said a proposal for including those costs is part of Gov. Gray Davis’ 2003 budget package. State lawmakers will soon weigh in on a proposal for the state’s own production subsidies. Also included in the governor’s proposed budget is a 15-percent wage-based tax credit for production companies that opt to film their projects within California’s borders.

No-Name Center One of the Most Lucrative in Valley Real Estate by Shelly Garcia It doesn’t even have a name, at least not one displayed at its entrances, but a regional shopping center at Victory Boulevard and Canoga Avenue in Woodland Hills is well known to retailers and shoppers alike. As the story goes, retailers were so anxious to move into the 220,000-square-foot center back in the early 1980s that they put up their own walls to do so. Two decades later, the center has enough staying power to warrant a $2-million-plus facelift. Pacific/Youngman Woodland Hills, which acquired the center from a JC Penney division in the early 1980s, expects to complete the remodeling, limited to the external facades, by the summer. Nothing had been done to the complex since Pacific acquired it and constructed additional retail spaces along the perimeter that stretches from Victory Boulevard to Owensmouth Avenue. “It’s all elective,” said Arne Youngman, a partner with Pacific/Youngman. The center currently houses Nordstrom Rack, Circuit City, Men’s Wearhouse, Goldsmith Golf Centers, Staples, Aaron Bros. and a number of smaller retailers and restaurants. According to Arne Youngman, partner with Pacific/Youngman, a number of the tenants register more than $300 a square foot in sales, a brisk volume for a local center. Brokers say the only spaces in the center that ever turn over are stores that have been closed as a result of restructuring within their organizations. Two large vacancies currently exist as a result of such restructuring. Bookstar, a former tenant, was shuttered by its parent Barnes & Noble and Three D Bed & Bath went out of business. According to Jack Persky, a vice president with CB Richard Ellis, AT & T; Wireless is currently negotiating for space, as are several other companies. Pacific has no plans to add more space to the center. “That shopping center leads that market in rents and in down time without a doubt,” said Chris Wilson, president of Wilson Commercial Real Estate. “Every tenant in the world wants to be in that center. Everybody loves it.” Antelope Valley Sale The Lancaster Commerce Center has been sold to Passco Real Estate Enterprises Inc. for $35.3 million. The retail complex, developed in 1985, includes 26 buildings and 300,077 square feet of rentable space at Avenue K and the Antelope Valley Freeway. The roster of tenants includes Ralphs Marketplace, Target, Pic ‘n Save, 24 Hour Fitness and Ross Dress for Less, along with other regional and national retailers and service companies. Alan Krueger, Gregory Brown and Edward Hanley at Marcus & Millichap Real Estate Investment Brokerage Co. represented Passco, which is based in Orange County, and the seller, an investment group whose name was not disclosed. Bigger Rigging Branam Enterprises Inc., a special effects rigging company, has acquired a 76,000-square-foot industrial facility at Rye Canyon Business Park in Valencia. The purchase price was not disclosed. The company will be relocating from a 21,078-square-foot building in Chatsworth. Branam will employ about 25 people at the new site at 28210 Constellation Road. Branam sold its former facility to Sy’s Carpets for $1.9 million. Scott Caswell, a broker with Delphi Business Properties, represented the buyer in the purchase and the sale of its Chatsworth property. Craig Peters, a broker with CB Richard Ellis, represented the seller, Legacy Partners, for the Valencia property. Vince Norris of Delson Norris represented the buyer of the Chatsworth property. Property Management Cushman & Wakefield was hired by ScanlanKemperBard Cos. in Portland to manage four local properties, including two in the San Fernando Valley. Cushman will assume management duties for Warner Atriums, a 122,000-square-foot office building in Woodland Hills, and Valley Corporate Plaza, a 153,000-square-foot facility in Van Nuys. The company also picked up assignments in Redlands and San Diego for a total of just under 500,000 square feet. The addition of these assignments increases Cushman & Wakefield’s property management portfolio by 30 percent in Southern California, to nearly 17 million square feet. Van Nuys Sale An owner-user purchased a 29,040-square-foot industrial building in Van Nuys for somewhat more than $1.2 million. The purchase includes 1.63 acres. Paul Van Ostrand bought the property at 7800 Deering St. to house his architectural signage building. Nick Gregg, a broker with CB Richard Ellis, represented the buyer. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

Fine Art Takes A Long Holiday Gino: Business at his 45-year-old Tarzana art gallery is off 40 percent this year. By SHELLY GARCIA Senior Reporter It’s not for nothing that they’re called starving artists. The business of art has never been easy, especially in the San Fernando Valley where the tourists that many gallery owners in other places count on to pay the rent are hard to come by and the panache of a Bergamot Station or Venice Beach is conspicuous by its absence. But those difficulties pale in comparison to the current business climate for local art gallery owners. Mounting losses in the stock market, the terrorist attacks of Sept. 11 and rising home prices that leave little for interior decorating have all cut right to the heart of many of these small business owners. “Sept. 11 had a big effect,” said Robert Gino, the co-owner of Orlando, a 45-year-old gallery on Ventura Boulevard in Tarzana that claims to be the longest established contemporary gallery in Southern California. “I would say business is down at least 40 percent. People are coming in, but they’re not buying.” The handful of galleries located in the Valley are not closing their doors, thanks largely to rents that are often a fraction of the going rate on the other side of the hill. But, like Gino, many report business is down by 40 percent or more, and the sharp downturn is taking a toll. “We’ve taken inventory we’ve owned for more than five years and are selling it at cost to produce money to reduce inventory and pay bills,” said Thomas Hecht, whose parents, Charles and Edith, opened Charles Hecht Galleries on Ventura Boulevard in Tarzana 38 years ago. The oldest galleries in the Valley located here when the population was booming, pricey homes were being built and, perhaps most importantly, many of those flocking to the area had brought with them from the East Coast an appreciation for fine art. In the past decade others have joined them, eschewing the tonier Westside for neighborhoods from North Hollywood to the East Valley because rents are affordable. Specialties vary from European old masters to California contemporary. Prices can range from $100 for an oil by a budding, but unknown, artist to $90,000 for a museum-quality work by a listed artist (one whose works are sold at art auctions). The majority of sales are in the $200 to $800 range. For most gallery owners in the Valley, the business is a labor of love a way for former art teachers, artists or patrons to stay in touch with the objets of their desires and share their appreciation with others. “We’ve kind of established a little art community here, and when people come in from the area they say, ‘I’ve never seen art like this,’ so it’s a chance to educate them,” said Charles Borman, a former Cal State L.A. teacher who opened Village Square Gallery in Montrose five years ago. But staying in business typically takes a good measure of pluck. Rents for the kinds of spaces and lighting necessary can be as high as $7,000 a month. Even in the Valley, where rents are more likely to be at least 25 percent less than the Westside, it can take two years to recoup the initial investment of renovations, rental costs and art purchases. And the Valley has some special challenges of its own, these gallery owners say. “It always has been referred to as a cultural wasteland,” said Gino, who prides himself on discovering local artists as well as featuring other better-known contemporary painters and sculptors. “It still is. Many of these people, because of their lack of knowledge, don’t know this is art. They’re so used to going to art fairs in the parks. They come in with swatches and say, ‘I’m looking for these colors to go with my couch.'” The trick is to secure artists with their own followings, but keeping those who can draw a large clientele can be difficult. Popular artists are often spirited away to Santa Monica, Venice or downtown L.A. where their works can bring twice what they do in the Valley. Borman, whose gallery runs a new exhibit every two months, was featuring the works of Cecilia Miguez when another gallery owner saw the exhibit and invited Miguez to show at his West L.A. gallery. “The first year, her pieces were selling for double what they were selling here for,” said Borman. “Then she showed for two more years and now they are selling for $24,000 to $30,000. He’s in an area where people have money and they spend more.” Miguez continues to exhibit her work at Village Square, but now only as part of larger group shows, where she need only devote one or two pieces. Most galleries in the Valley like Hecht, which specializes in European old masters and contemporary fine art, still retain many of the same customers they had several decades ago. “We count on our collectors coming back year after year,” Hecht said. But those collectors no longer buy at the same pace they once did. And newer collectors cannot always be relied upon to boost the local scene, as one gallery owner learned recently. A regular at Orlando was buying one or two paintings each visit and shipping them back to New York, where he lived. Gino had a theory about why the collector, a prominent television personality who seemed to like what he found, never referred any of his friends or associates to the gallery. Then one day, after floating it, the collector confirmed Gino’s suspicions. “He didn’t want them to know what he paid for it,” Gino said. Galleries like Orlando and Charles Hecht have taken advantage of the Internet to expand their potential customer base. Hecht began using eBay about a year ago “and it’s proven effective,” he said. Other gallery owners, like Sunny Meyer, are glad for a restoration business that helps to boost sales. “I think my business is up, but I offer a service,” said the proprietor of Sunny Meyer Fine Art at Lankershim and Magnolia boulevards in North Hollywood. “Restoration art is probably 50 percent or more of my business. That grows as my reputation grows.” Mostly, these gallery owners say, their livelihoods depend on attracting and retaining a client base that stretches beyond the borders of the San Fernando Valley. The regular clientele at Orlando, for example, comes from Santa Monica, Beverly Hills and Brentwood, along with other parts of the country. Said Gino, “I don’t think I would have survived if it were just from the Valley.”

Check the Math, Please Andersen Valley Partner Tony Radaich says indictment doesn’t add up. By SHELLY GARCIA Senior Reporter Employees at Arthur Andersen LLP’s Woodland Hills office wear orange ribbons on their lapels. Orange is the color of the company’s corporate logo. But the employees are seeing red. So is Anthony E. Radaich, one of five partners at the local office. Radaich, along with Gil Green, opened the Woodland Hills office of Andersen in 1983 with two other staffers and built it to its current stature: a practice with more than 70 employees and about 100 clients, ranging in size from small, non-income producing startups to $800 million corporations. Radaich himself has invested 33 years in Anderson. He has been a partner for more than 20 years. He said most of the Woodland Hills staff never even heard of Enron Corp., let alone had any business dealings with the Houston-based firm, which has collapsed amidst charges of impropriety. None of that, he said, matters to the Department of Justice, which in March handed down an indictment charging Andersen, auditors for Enron out of its Houston office, with obstruction of justice for shredding documents related to the misstatement of income and other practices at the energy company. Radaich said that so far, his office has not lost any clients. But since Andersen came forward to say it was investigating the shredding of documents, it has lost more than 60 clients from its other U.S. offices, including Standard & Poor’s bellwethers like Calpine Corp., one of the largest builders of power plants, and homebuilder Centex Corp. Even if the Woodland Hills clients don’t bolt, the partners would share liability arising from lawsuits brought by Enron shareholders in the wake of the company’s collapse. If successful, those lawsuits could wipe out the capital accounts of all Andersen’s partners, whether or not they had dealings with Enron, a cache that ranges from several hundred thousand dollars to $4 million for each partner, depending on the length of time he or she has been with the company and the revenue brought in. This interview took place on March 26, the day before Andersen CEO Joseph F. Berardino resigned. Radaich said he was committed to keeping the company together as were most of the partners, although numerous reports have indicated a segment of Andersen’s partners are actively seeking to sell off pieces of the business both in the U.S. and abroad. Question: Along with many in the Andersen organization, you have been campaigning to make it clear that you are not involved with Enron and should not be punished for what may have been the misdeeds of a few. How much can you really isolate yourself from the corporation, especially when it has always touted its national and international network, implying a close connection between offices? Answer: We’re all part of Arthur Andersen so, unfortunately and especially because of the indictment, we’re all being painted with the same brush. Not one person in this office had anything to do with Enron, and I would bet the vast majority of them never even heard of Enron before all this happened. It is no different than indicting the whole Catholic Church because some priest misbehaved or all of Congress because a congressman did something illegal. Q: Have any documents been shredded here? A: No. Q: Some would argue that there is reason to indict the entire organization because there’s no way to tell whether the situation in Houston is an isolated instance or part of a corporate culture that allows this to happen. A: I disagree. This firm has been around 89 years. It’s built on integrity. Shredding documents is not something that is part of our culture. Right away, when we discovered this had happened, our chairman put out an announcement that this had been discovered and we were dealing with it. We volunteered that information, which I think is an indication that it’s not a pervasive issue. We voluntarily went to Congress and we’re the only ones who really testified and, as a result of that, we took all the heat too. Q: Where does that investigation stand? A: We did do a big internal investigation. That was not released because we were working with the Justice Department and did not want to release our report until there was some agreement reached related to the Justice Department. Q: Haven’t clients wanted to know what the investigation showed? A: The clients didn’t ask. It was more of a, it was an unfortunate thing that happened to you folks. More of a concern of, are we losing people because of this? Are we going to survive? Those types of questions. Q: If it were me, and I were running a company and you were my auditors or my financial advisors, I think the first thing I would ask you is, what have you done to make sure your shop is clean? A: These people are people that know us, they know that we’re not dishonest people. Q: Do you think the clients in Houston thought the Andersen people there were scumbuckets before this broke? A: I hope not. Probably not. Q: And you’re not surprised that your clients were willing to take you at your word? A: Again, they know us and they know that integrity is important to us. They’ve worked with us and know that we’re not dishonest people. That’s not a concern that any of our clients have here. Q: What kinds of questions have clients had? A: Prior to (the indictment) the questions they asked were, did any people on our engagement work on Enron? Have you lost any people on the engagement? Did your office have any involvement in Enron? Continuity was a big concern. Are our people bailing out on us? Q: How are you communicating with clients since the indictment? A: Right now we’re in our busiest time. All the companies with December year-ends are filing their 10Ks, so we’re in constant contact with everybody. We’re keeping them informed of what’s happening on a day-to-day basis. Q: What has their reaction been? A: A lot of our clients have said we’re sticking with you, but we are going to monitor the situation. On the whole in this particular area, they have been incredibly supportive. Just about every one of them has received calls from our competitors at the same time. Q: Do you think the reason clients here have been so supportive is because we in the Valley tend to feel isolated from the larger world and often don’t feel the same impact from some of these remote events? A: The bigger the company generally, the more outside pressure is put on them. A local company that’s not public, most of them don’t have a concern. But in the larger companies, the broader (areas of) coverage, they tend to get more concerned. It’s also stressful and difficult to change auditors. There’s a tremendous amount of knowledge and information that’s institutionalized over the years as you work with a company, and they would like to avoid that hassle if possible also. Q: Is the majority of your client base private? A: It’s probably about 50-50 from a revenue standpoint. We have more private businesses, but half the revenue is from public companies. Q: Are you anticipating having to do more explaining at shareholder meetings that will be coming up later this spring? A: Yes, I’m sure. They’re asking for information and updates. In fact, some of the proposals that are in proxies that I have seen in draft stage are a motion to approve Arthur Andersen with some type of monitoring procedures, that officers of the company have the authority to make a change if something were to change at Arthur Andersen. Q: Andersen has engaged Paul Volker to seek a resolution that might avoid a trial. Do you think Andersen would be better served if this issue were to go to trial or if Volker were able to effect some sort of reorganization plan that were agreeable to the company and the Justice Department? A: You know, I don’t care. I think the biggest thing is time. The sooner the better. The trial is set for May. I have no idea how long those things take. If it takes years, that’s no good. Whatever resolves it the quickest is most important. There’s so much uncertainty among our employees and our clients, that’s the big issue. Q: What do you say to the argument that the whole way fees are structured in your industry auditing versus consulting fees raises the specter that something like what happened in Houston can happen? A: First off, no client is large enough or significant enough to make a difference. The Enron fees were a minute percentage of our fees. If Enron was to walk away, it would not make a difference to us. We’re a $9 billion company, and I think the total fees there were $50 million-plus. Q: Isn’t that a significant amount to the Houston office? A: We share everything worldwide. My income comes from the worldwide income divided by the number of partners. It’s not the Woodland Hills income or the Houston income, so every partner has an interest in every client around the firm, that they be well-served and properly served. Q: So why would the folks in Houston be driven to do what they did? A: I don’t know. And actually we don’t know what they did. Nobody has come out with all the facts. This thing isn’t done, which is another injustice. We are tried, convicted and punished without all the facts out or a fair trial. Q: Could you go out and try and make a deal like those in the overseas offices are trying to make to fold their practices into other firms? A: I don’t know. There’s incredibly complex legal agreements in place, and I couldn’t begin to tell you the answer. And I know some of the brightest legal minds in the world are looking at that right now. Our retired partners have objected to any pieces of the firm going anyplace. Retired partners have amounts they’re going to lose. They left some of their capital in the firm, and that is now at risk. So they have more to lose than actually some of the active partners. My understanding is they’re thinking about or have hired attorneys to help them. Q: Doesn’t it make sense to look for ways to minimize your risks by exploring mergers or other ways to reorganize your piece of the practice? What is motivating you to assume such risk? A: I’m sure that some people around the firm are probably at least investigating what their other options are. (For me,) it’s 33 years. And this crisis we’re in has made me realize I have not done this for the money, that it is these people here that I work with everyday, these wonderful people. It’s the clients I serve. I love this job. If I have to make less money, that’s fine. Q: When did you first hear about the Enron situation? A: The first word I heard was a voice mail saying there was a restatement of earnings, and that we had some of our legal guys looking at it and they’d keep us updated. Then later on, we got the note from Joe Berardino saying there’d been some shredding and we were investigating it and so forth. Since then, it’s kind of been a steady down of no good news leading up to this indictment on March 14. This has all occurred within three months. Q: How much can you do to try to ease the fears of employees? A: They know their job depends on keeping the client, so they are doing everything they can to keep the clients, which means giving them outstanding and responsive service. Q: Is there some feeling that whether these clients stay may have nothing to do with how good they service them? A: Yes. And there’s a tremendous amount of concern out here of, will I still have a job? And you know the next month and a half will be very important to the people that are out here. It’s kind of a frustrating thing for all of us. We’re here. We’ve done a really good job, served our clients well, and in the final analysis that might not mean too much.

Health Care Hikes Hit Valley Businesses Hard By JACQUELINE FOX Staff Reporter Not surprisingly, most Valley business owners surveyed recently about employee health benefits say the costs of their plans have gone up since the beginning of the year. Most also seem to feel there is little they can do about it. A majority of the respondents said, although they anticipate additional increases over the next year, they have no intention of switching to another provider. And, nearly half of those who participated in the survey also said their companies would absorb any future increases rather than pass those costs on to their employees. The responses seem to reflect what many experts have been hinting at for weeks now: that the economic dust from the tech wreck of 2000 and the events of Sept. 11 is beginning to clear, and companies across all sectors of the business community are moving perhaps gingerly out of cost-containment mode. Of the 47 respondents who participated in the San Fernando Valley Leadership Survey, 63 percent said they had seen increases over the last three months. Fifty percent said they expect those costs to go up by 10 percent or less over the next 12 months. But 70 percent of the respondents say they plan to remain with their current provider, compared to 15 percent of the respondents who say they intend to shop around for a better deal. Larry Cohen, CEO of Glyphix, a Woodland Hills-based marketing and advertising firm, said his company has been hit with a 12-percent increase in health care costs over the last few months, not an insignificant amount for a growing business with just 11 employees. But he said the price his company pays to keep his workers healthy and happy is worth every penny. “We expect a lot out of our employees and, as long as we can, we like to accept the responsibility of providing basic benefits, like health care,” Cohen said. Cohen said, despite the increases, he has no intention of switching to another provider because he simply doesn’t think he’s going to get a better deal. But, more importantly, it’s about the workers. “Why aren’t we switching? Well, I think we are getting an average price, first of all,” Cohen said. “But on top of that, our employees have developed very personal relationships with their doctors and we don’t want to do anything to upset that. We are just a small business trying to do our best to do right by our employees.” The survey was the second quarterly survey conducted jointly by the San Fernando Valley Business Journal and Woodland Hills-based Cooper Communications Inc. on issues affecting businesses in the Valley. Martin Cooper, president of Cooper Communications, said the fact that 41 percent of the respondents said they did not intend to pass increases on to their employees indicates many businesses are moving from retrenchment mode into a recovery phase. “I think we’ve just come through an interesting recession period where what a lot of companies have done is take the opportunity to trim fat from the bottom up,” said Cooper. “If that’s true, they are now left with what are their better employees and, if they want to retain those employees, one of the best ways to do that is to provide the fairest benefits packages you can get.” Of the respondents, 38 percent said they would pass some or all of the increased costs in their plans on to their employees and 15 percent said they intended to reduce their packages to save money. Cooper also said he believes the reason so many respondents said they didn’t intend to make changes to their plans has more to do with inertia than loyalty to their providers. “I think that unfortunately, or sadly, too many employers don’t focus enough on various kinds of insurance or don’t shop around enough,” Cooper said. “Most people don’t question the bill, they just pay it rather than hire someone to call up three different plans and compare products. They just consider it the cost of doing business.” Health care costs have been increasing for the last several years and there is scant promise of them leveling off anytime soon. Of the respondents, 57 percent said they believed the increases are primarily due to a desire on the part of the provider to boost profits. But 38 percent support what many providers have been saying in their defense: that they are simply having to respond to increases on their end, particularly hikes in the cost of prescription drugs and the costs needed to cover technological advances in care. “I don’t think that we are shocked to learn that most business owners would feel that way,” said Lisa Haines, spokeswoman for Welpoint Health Network in Thousand Oaks. “It’s medical costs that are increasing and we are challenged to keep up with those changes. Prescription drug costs have gone up by about 13 percent in the last year and we have an aging population and increases that accompany new medical technology. So we have to be able to provide a product that’s viable for us, but also for the consumer.” CHARTS: How have your health care costs changed over the last three months? Remained stable: 28 percent Increased: 63 percent Decreased: 3 percent How are you addressing the increases? Absorb the costs: 41 percent Pass some or all increases on to employees: 38 percent Reduce or eliminate packages: 15 percent Do you plan to stay with your current health care provider? Remain: 70 percent Find a new provider: 15 percent Don’t know or other: 6 percent

Market Seen Softening for Warehouse Properties Real Estate by Shelly Garcia The industrial sector, a stalwart of the greater San Fernando Valley real estate market, has softened considerably in the first quarter of the year. Overall, industrial vacancies for the Valley increased to 4.8 percent in the first quarter of the year, up from 3.8 percent in the same period last year, according to data from Cushman & Wakefield. In the warehouse and distribution sector, the increase was even more dramatic. Vacancies rose to 5.6 percent in the period, compared to 2.6 percent for the first quarter of 2001. In that sector, the softening represents a continuation of a trend begun earlier. For the fourth quarter of last year, vacancies rose to 5 percent, compared to 4.5 percent for the same period a year earlier. Overall, however, industrial vacancies had tightened at year’s end, down to 4.3 percent from 4.7 percent in the last quarter of 2000. Despite the uptick, vacancy levels in Cushman’s North L.A. region, which includes the San Fernando and Santa Clarita valleys as well as Ventura County, remain low. Brokers and developers generally consider vacancy rates in single digits to mean that demand for properties remains high. And the softening is not translating directly to rental rates, Cushman & Wakefield said. For the fourth quarter of 2001, rental rates for warehouse and distribution properties averaged $0.61 per square foot, compared to $0.56 per square foot in the fourth quarter of 2000. Simi Valley Lease Milgard Windows has signed a 10-year lease to occupy the former Bugle Boy facility in Simi Valley. Milgard, which is doubling the size of its operation with the move, has inked a deal for 237,000 square feet at 355 E. Easy St. The lease is valued at more than $15 million. The company, a division of Masco Corp., plans to occupy about 170,000 square feet and sublease the balance of the building. Milgard is moving from another site in Simi Valley. The company employs about 350 people. Scott Caswell and Bruce Simpson, brokers with Delphi Business Properties, represented Milgard in the deal. Robert Flink with CB Richard Ellis, represented the property owner, Pegh Investments LLC. Simi Purchase D & B; Simi LLC acquired a 16,925-square-foot industrial building in Simi Valley for $1.7 million. The facility, on 87,741 square feet of land, is located at 4496 Runway St. Tim Foutz, a broker with NAI Capital Commercial, represented the buyer and seller, Saltzman Family Trust. Camarillo Development The developers of Camino Ranchero, a 12-building industrial condominium project in Camarillo, have sold nine of the buildings and are in escrow on the 10th unit. Rice Development LLC, which completed the complex last June, said the swift selling activity was due in part to lower interest rates, which make it easier for small businesses to own rather than lease their facilities. Prices for the buildings, which vary in size from somewhat more than 10,000 square feet to just over 3,000 square feet, range from $88 per square foot to $99 per square foot. The total value of all nine sales was about $6.3 million. The buyers included: Newman Trust for use by Neuspeed, an aftermarket accessories supplier for Volkswagen, Acura and Honda parts owned by one of the trust participants; Danny Ghinghis, doing business as AAA Flooring Source Inc., a distributor of floor coverings; JC Industries, makers of tape measures for the construction industry; aircraft parts manufacturer Feecorp Corp.; and beauty supply wholesaler Biojouvance Inc. Two of the buyers, Ciccarelli Trust and David Katz and Denney Federman, acquired the properties for investment. Mike Tharp, Fred Ferro and Eric Behlke, of NAI Capital Commercial, represented Rice Development in the deals. Representing the buyers were: Michael Maloney, Maloney and Associates, for Newman Trust; Mike Walsh of Daum Commercial Real Estate Services for Ghinghis; Steve Dulyea, Oxnard Realtors, for JC Industries; Joe Jusko, Colliers Seeley, for Ciccarelli Trust; Kent Pierce, Equity Commercial, for Feecorp; and Jim Meaney, CB Richard Ellis, for Biojouvance. David Katz, Gold Seal Realtors, represented himself and Federman. Doctor in the House WebMD leased 8,477 square feet at 15400 Sherman Way in Van Nuys in a five-year deal. Carlene O’Neil and Madeline Schwartz of CB Richard Ellis represented the landlord, Decron Management Co. Margie Fichter at Cushman & Wakefield represented the tenant. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

Public Storage Raises Rates And Gets a Stock Price Hike Corporate Focus By SHELLY GARCIA, Senior Reporter Exceptionally strong financial performance in fiscal 2001, some clever investing strategies and a renewed interest in safe investments has sent the share price for Public Storage Inc. to near record levels. Shares in the Glendale-based operator of personal storage facilities have risen 9 percent since the beginning of the year, to the $37 range from about $33.83 on Jan. 2. On March 28, the stock closed at $37.01. The price hike reflects a growing interest in real estate investment trusts, the sector to which Public Storage belongs, as a result of the losses suffered in technology and other sectors once preferred for their high growth rates. “These are the anti-dot-coms,” said Jeff Donnelly, vice president with Wachovia Securities in Boston. “REITs have done very well, but Public Storage has done exceptionally well.” Public Storage has attracted a larger portion of the investment community, particularly institutional investors, as growth stocks have faltered and many have turned to strategies that minimize risk. REITs have historically been considered safe investments with modest returns. But analysts say Public Storage also showed an especially strong ability to manage its business over the past year, a factor in its rising share price. “Clearly, the company reported pretty strong numbers, stronger than their peers, and certainly met our expectations,” said John Sheehan, an analyst with A.G. Edwards & Sons in St. Louis. For its fiscal year ended Dec. 31, 2001, Public Storage reported a 9-percent increase in net income to $324.2 million or $1.51 per share, compared to $297 million or $1.41 per diluted share for the 2000 fiscal year. The increase resulted from higher rental rates along with what analysts refer to as clever use of the company’s cash holdings. Michael Mueller, director of CIBC World Markets Corp., said, “Since they started, they bought over one half billion dollars (worth of stock) back, the vast majority at much lower stock prices. It really helped prop up earnings.” The economic slowdown that affected many businesses beginning in mid-2001 did not affect Public Storage, a business that analysts describe as recession-resistant, if not recession-proof. Bad economies often drive up storage use as people seek to store items instead of moving to larger homes or apartments. Good economies can increase the demand for storage because they are often accompanied by job relocations and home remodeling, factors that often necessitate temporary storage facilities. In 2000, Public Storage realized its facilities were running at near full capacity, so the company decided to discontinue its discounting and raise its rental rates at the same time. “One of our goals was to find out whether the laws of supply and demand worked,” said Harvey Lenkin, president of Public Storage. “We wanted to see if we could increase rental rates, and we believed that the inherent strength of our business was good enough to allow us to generate higher levels of rental revenue.” Instead of discounting, Public Storage bumped up its advertising by more than $6 million. (The company declined to discuss its total advertising budget.) The bold move resulted in some decline in occupancy in 2001, to 87.3 percent for the fourth quarter of 2001 from 90.9 percent a year earlier. However, with an 11.1-percent increase in rents to $12.30 per square foot in the fourth quarter, the added income more than made up for the loss in occupancy. Public Storage, with some 1,384 properties nationwide, is the largest storage rental facility company in the industry and perhaps the only one with a recognized brand name. Public Storage has been running television advertising since 1986, but the company stepped up its efforts in the past year and a half, Lenkin said. “In a market like L.A. where we have 160 locations, we have a sufficient number of properties to spread the cost of television, and other firms don’t have that,” he added. The advertising campaign is part of a plan to boost occupancy while keeping its current rental rates higher than in past years. Lenkin said the company is also continuing to work on its price formula in an effort to restore occupancy rates to previous levels. “The combination of virtually removing our discounts in the latter part of the year along with the increase in rental rates was a little more than the markets could bear,” Lenkin said. “We have to find the proper balance.” Summary Business: Public storage facilities Headquarters: Glendale CEO: B. Wayne Hughes Market Cap: $4.2 billion Dividend Yield: 4.2% Total Liabilities: $261.7 million P/E Ratio: 24.6 Long-Term Debt: None *From same store facilities

VALLEY FORUM: What Do Accountants Tell Their Clients? Since the downfall of Andersen has captured the headlines, the accounting profession itself is under the microscope like never before. So, the San Fernando Valley Business Journal asks local accountants: What are your clients asking you about the Andersen controversy, and what are you telling them? Lawrence Ganzer Managing Partner Ganzer, Cagle & Polak Woodland Hills First of all, it doesn’t really concern our clients. We prepare financial statements to owners that are privately held, not public, companies. The incident doesn’t have any impact on us, but we might be affected by some of the rules that can change, creating stricter requirements. Greg Lippe Managing Partner Lever, Lippe, Hellie & Russell LLP Woodland Hills The clients haven’t expressed anything regarding this matter. From the standpoint of our investment clients, questions have risen on how to best evaluate investments we are advising them to consider. Our quality control is very strong and, because of our size, we don’t have the same exposure as Andersen. George Nadel Rivin, Partner Miller, Kaplan, Arase & Co. LLP North Hollywood We’re fortunate here that we don’t have the extent of a consulting relationship with the majority of clients that can create conflicts. We always have a good relationship with our clients. When an issue arises, we mutually work for a satisfactory resolution. Donald J. Miod Managing Partner Miod and Co. LLP Sherman Oaks The clients are concerned about the accounting profession and how it affects “me.” This is clearly a pop mark on the image of the profession, which has to be corrected. This will be good for the profession. I feel that Andersen will implode, lose clients left and right, and mass exodus of employees from the company will occur. I believe that the seniors and some management will go to smaller firms and attract clients. That, therefore, will elevate some of the medium-sized firms to larger firms to create competition. Ken Ray Partner Kirsch Kohn & Bridge CPA’s Encino We represent only closely held entities who are really operating in a different financial world than the clients of Andersen. We have received many comments from our clients and the community about the recent spotlight focused on our profession. They are understandably concerned about the reliability of the financial information that is available to them for making investment decisions. I’ve heard comments such as, “How can this have happened to Arthur Andersen?”

Louise Marquez Turned Mall Into Center of Community By SHELLY GARCIA Senior Reporter About nine years ago, Diana Villafana, the principal at Chase Elementary School, came to the Panorama Mall to ask the center to adopt her school. Louise Marquez, who had just been named marketing manager, turned her down; one school would not be enough. The mall belonged to the whole community. For the next nine years, Panorama Mall sponsored citywide spelling bees and local job fairs. It held clothing drives because moms in the Welfare to Work program didn’t have business attire. It held immigration classes because many of the area’s newcomers couldn’t afford lawyers. There were craft days and reading days and visits with animals from the local wildlife station because some kids had never been to a zoo. Even as Marquez filled the mall’s calendar with these events, she never stopped building the economic engine that would make them all possible. Marquez took Panorama Mall from a property abandoned by many of its original merchants to a thriving business with sales per square foot among the highest of any shopping center. “She was a good businesswoman,” said James Grey, an account executive with KABC 790 Talk Radio. “But the people in the community loved her because (of) her desire to make things right.” Louise Marquez died March 10, just four months after her 50th birthday. To say she battled the lung cancer diagnosed five years earlier does not do her efforts justice. Marquez defied her cancer. She slotted chemotherapy sessions into her day the way others schedule dentist appointments. She didn’t take time off. She didn’t slow down. If you asked her how she managed to do it all, she’d answer with a knowing look and a wise-ass kind of chuckle. “What’s the alternative?” she’d ask. A single mother of three, Marquez worked for several Valley chambers of commerce before landing a job with then-Assemblyman Richard Katz. When he was termed out in 1993, she went to work for Panorama Mall as director of marketing, later adding general manager duties. Panorama City was changing. The middle-class suburb that had grown up around the General Motors plant was giving way to a diverse, inner-city neighborhood of working class Latinos. There was also poverty, the kind that breeds drugs, crime and gangs. The mall had fallen on hard times. Consolidations in the retail industry and the flight of the middle class led to an exodus of retailers like the Broadway. Vacancies skyrocketed. Panorama Mall, the center of the community when Marquez herself was growing up in the Northeast Valley, had become a ghost town. When Latin American retailer La Curacao came along, Marquez knew it would be an opportunity to reinvent the mall in a way that reflected the changes in the community. With its Spanish-speaking sales staff and signage, La Curacao was a place where new immigrants could feel welcome. It was also an opportunity to boost the fortunes of the mall. Instead of sending money home to Mexico and Central America, as was the practice of many Latinos, they could buy the goods relatives needed at La Curacao, and the store would ship the merchandise from its Latin American operations. Unlike money orders and cash stuffed into envelopes, the purchases would generate tax revenue and, in turn, more jobs and development. Many local residents were reluctant to accept the changing profile of the community. They feared the image of the Latino store; they believed it would bring outsiders, and crime. Marquez “worked tirelessly to convince not only the mall operators, but externally to get the community to understand how critical that bridge was,” said state Sen. Richard Alarcon. “I believe that if La Curacao had not come to the mall, it could have fallen under. I absolutely believe that, as the mall goes, so goes Panorama City.” Later, Marquez would doggedly pursue Wal-Mart, believing the community needed a place to buy bedding and kitchenware without traveling by bus to do it, and knowing that the store could help build the mall. But Wal-Mart officials were unwilling to move into the old Broadway building, a two-story structure better suited to a department store. When store executives told Marquez they only built stores from the ground up, she responded as if her child had just asked for permission to stay out late because his friend was allowed to. “So?” she deadpanned, and proceeded to win over the retailer with the mall’s demographics, its young families and a theme that she often returned to Panorama City was a hard-working community deserving of the resources other communities took for granted. Marquez was no bleeding heart liberal. She could stare you down and tell you how it was going to be. She could cuss like a sailor. But she also became a kind of conscience for the larger community. “You know how people always talk about reaching out to their communities and can we all get along?” said Alarcon. “Louise lived it.” She made sure Panorama City was represented in national marketing promotions and civic efforts. She made sure the Voices of America came to the mall so locals could record personal messages for the troops in Afghanistan. She got all the mall’s retailers and those in the surrounding area to ante up prizes for a citywide spelling bee. For the winner, Marquez wangled a trip to Washington, D.C. If she had to kick some butt to do it, so be it. She collected angels. Her wall was covered with certificates of recognition and appreciation. Doyle La Mountain, a Domino’s franchisee, said he’ll never forget the favors Marquez did for him. “I felt like I was special to her,” La Mountain said. “Perhaps that’s the way everybody felt.”

Prop. Q Passage Is Complicated If Secession Succeeds By JACQUELINE FOX Staff Reporter Secessionists were among the loudest opponents of Proposition Q, the police and fire bond measure narrowly approved by Los Angeles voters last month. Now that it’s a done deal, what, if any, of the Valley projects the bond is supposed to pay for will be completed? What, if any, portion of the $600 million bond indebtedness would be assumed by a new Valley city, should a Nov. 5 secession initiative prove successful? The general obligation bonds, repaid by property taxes, are supposed to fund a replacement for the Northwest Valley police station, a new traffic control center in Panorama City and upgrades at other Valley facilities. Funds would also cover construction of a new downtown jail and emergency operations center. But because the bonds aren’t likely to be issued before a possible new Valley city would incorporate, it’s unclear if and how the debt could be transferred to a new municipality, and exactly what percentage of that debt the Valley would be responsible for. There is some question as to whether Los Angeles would still be obligated to issue bonds for Valley-based projects if a new city is formed. Some say the city is locked into completing all of the projects now proposed in the measure and that it would likely opt to negotiate with the new Valley City over division of the debt. Still others say the city isn’t locked in until the bonds are issued, and could decide to restructure the bond program to exclude any projects planned for the new Valley city. Members of Valley VOTE, the group that has led the cause for a breakup, challenged the costs and the timing of the measure during the election campaign, saying it should have been tabled until after a secession vote. They added that previous bond issues were supposed to bring new police and fire facilities to the Valley but never did and, with the city down about 1,000 police officers and crime up 17 percent since 2000, money is needed to put more cops and firefighters on the streets, not build buildings. “The right time to make these decisions as to what facilities a new city would need should have come after Nov. 2, not vice versa,” said Valley VOTE Chairman Richard Close. Close said the Local Agency Formation Commission (LAFCO), the state agency that will ultimately decide whether a secession initiative lands on the Nov. 5 ballot, would likely negotiate a division of the bond debt much in the way it has been negotiating the division of existing assets between Valley VOTE and city representatives. In addition, Close said the promise of future tax revenue bodes well for secessionists because it means the new city might have that much more money available to it, at least on paper, upon its incorporation (probably Jan. 1, 2003). “The bond could actually come back to bite the city of Los Angeles, because that money would be available to the infrastructure of the new Valley city,” said Close. But LAFCO Deputy Executive Officer Sandor Winger said the bonds likely would be issued long after his agency’s job of negotiating a Valley split is finished and the new city would be left to determine on its own what, if any of, its portion of the debt would be. “Prop. Q is now part of the city process, so one must assume that it’s now part of the city’s allocation of funds,” said Winger. “But we won’t get involved because this will all take place long after incorporation.” Winger said the city is obligated by law to issue the full bond, but suggested it could find itself at an impasse with the new Valley city over the issue. The new city could refuse to pay its share of the debt until the upgrades they’re supposed to pay for are underway; Los Angeles could refuse to provide the upgrades until the funds are made available. “The only way that revenue can be taken from the new city is if they receive the services they were promised,” Winger said, “but I don’t know if a new Valley city can challenge the debt. That’s a legal question I don’t have an answer for.” Steve Afriat, campaign manager for the Yes on Prop. Q campaign, agreed the city is locked into the measure’s proposals, including the plans for Valley facilities. But he added that if the new city were to decide not to collect the taxes, it would be shooting itself in the foot. “All the items promised under the measure are already subject to an irrevocable city ordinance, so there’s no way the city can withhold them,” Afriat said. “And I would think, as a Valley resident, I would have more protection with future bonds. Of course, I could (file a) class action (lawsuit) not to pay my property taxes, but why would I want to lose a year or two there waiting for results, while in the meantime the new buildings and upgrades are needed now?” But according to Larry Kosmont, president and CEO of Kosmont Realty Corp. and a Los Angeles-based economic development consultant, the city may actually have a few options. He said, should a new city be formed, Los Angeles could decide to restructure the bond so that it taxed only Los Angeles homeowners and eliminate or put on hold any Valley-based projects. “I believe that, because the debt hasn’t been issued yet, the city could downsize the bond, or do an initial financing for just those projects that would be in Los Angeles and maybe never get around to issuing the other portion of the bonds,” Kosmont said. Another alternative, said Kosmont, would be to restructure the bond but not reduce it, and then use it entirely for projects outside the Valley. And, although he said it was the least likely of possibilities, Kosmont suggested the city could opt to issue the entire bond and enter into some sort of co-payment agreement with the new city. “A co-agreement would seem unlikely to me because today they can’t even get along, so can you imagine a co-payment agreement?” Kosmont asked. Close agreed there is a real need for facility upgrades but suggested the money should have come from the city’s general fund, not taxpayers’ pocketbooks. “No question, it’s criminal the city council found the money to refurbish City Hall, but makes its own police officers operate out of a broom closet,” Close said. “One of the key arguments against (Prop. Q) is that money is needed first to hire more officers, not build new buildings, which would actually take officers off the streets.” The city received $100 million in federal grants in 1998 for training police and fire department recruits, but has come dangerously close to having to return most of the money because, until recently, it hasn’t been able to hire the required number of officers to qualify for the money. So far, the city has spent about $4 million of those funds and the grants expire in February 2003. However, Julie Wong, spokeswoman for Mayor James Hahn, said the city now has enough officers on staff to begin tapping the grants. Using the West Valley police station as an example, Wong added that Prop. Q funds aren’t intended to augment those grants, but rather provide both existing and new public safety officers with better resources. The West Valley station was built for a capacity of 92 but now has more than 300 officers and staff sharing the space.