After years of failed attempts to revitalize the North Hollywood commercial district, local business leaders have one more trick up their sleeves to draw a crowd: a farmers market in the parking lot of the Academy of Television Arts and Sciences on Lankershim Boulevard. “Farmers markets have been very successful in the Valley and we thought that it would be a great boost to the area,” said Joe Hooven, president of the Universal City-North Hollywood Chamber of Commerce, which last week tentatively agreed to undertake the project in March. The proposal is the latest in a string of efforts meant to turn Lankershim Boulevard and the surrounding area into a destination shopping and dining experience comparable to Old Town Pasadena or Santa Monica’s Third Street Promenade. The most notable attempt is a long delayed multi-use commercial and retail center, first introduced 12 years ago, at Lankershim and Weddington Street. A scaled-down version of that original project, now being developed by J.H. Snyder Co., is slowly working its way through the pipeline with a construction start possible in 2002 or 2003. But there have also been arts festivals, arts districts, the Academy of Television Arts and Sciences complex and a proposed business improvement district. Still, disappointment remains among area business owners who say they’ve grown weary of attempts to revitalize the local economy. Many had high hopes for the opening of the new Metro Red Line Station along Lankershim, which would bring commuters to a commercial district filled with shops, restaurants and boutiques. Those hoped-for customers have not materialized. “People get off the Metro, get in their cars and leave, or they jump on the bus and head north,” complained Brian Sheehan, owner of the Eclectic Caf & #233;, along Lankershim. “They’re not the kind of people who are going to drop $25 for dinner.” The 1993 establishment of the annual North Hollywood Arts Festival as part of an arts district has also drawn mixed results from merchants who say the festival provides many customers, but few who return once the festival closes. “You get some who come back, but not a lot,” said Mike Nguyen, owner of the Chinese Delight restaurant on Lankershim. Mary Garcia, head of the Arts District’s Chandler Outdoor Gallery, said the 31 theaters and assorted eateries in the arts district are doing well, but are not providing the shot in the arm to the area that many had hoped for. “Part of it is the bad economy and the other is that it’s difficult to attract a lot of people when you have a lot of different places that people can go,” she said, referring to competing shopping areas throughout Los Angeles. In 1990, area merchants thought the $350-million Academy of Television Arts and Sciences complex would kick-start a revitalization. And while the Academy’s appearance and bronze sculptures brought some class to the area, its surrounding businesses had little to cheer about. “They were supposed to put a hotel right next to it and that would have really changed things, but that hotel never got off the ground,” said Loretta Dash, past president of the Universal City-North Hollywood Chamber of Commerce. “It’s sad. This area really needs a lift and we just keep waiting.” Some still hope the much-delayed establishment of the North Hollywood Business Improvement District will do the trick. “I have no doubt that we’ll be successful,” said Ken Banks, executive director of the North Hollywood Community Forum, which is heading the business district effort. Banks’ optimism is shared by those who see the area’s revitalization as simply a matter of time. “We’ve just had a lot of bad luck in North Hollywood,” said Dash, who is also a partner in the accounting firm of Davis & Dash. “I think the farmers market is going to bring a lot of people into the area,” Dash said. “If you look at Studio City, you see how much businesses have benefited.” Polly Ward, manager of the Studio City Farmers Market, said, “Studio City used to be dead on Sunday mornings. No one would be out. But now, it’s living and vibrant, with people going into shops and restaurants and with families and their kids walking around.” Ward estimated between 2,000 and 3,000 people visit the market during the four hours it’s open each week. “We started with 25 vendors and we just kept growing. Now we have 65,” she said. “But for (the North Hollywood) market to be successful, they’ll have to market themselves and spend money to do it,” she said. An estimated $25,000 will be needed initially to publicize the proposed North Hollywood market, Ward said, with mailers, cable television, newspaper ads and street banners. Hooven said he hopes to raise about $30,000 by offering local businesses a chance to advertise on banners and sun umbrellas at the market and on the chamber’s Web site. Ward said the proposed market probably is “too close” to hers, but it could turn out to be a non-issue if it targets local residents and not those in Studio City. “We really want it to be a gathering place for the community,” Hooven said. That, however, would defeat the purpose of attracting those from outside North Hollywood to the area. Howell Tumlin, executive director of the Southland Farmers’ Market Association, said the popularity of farmers markets in general makes it ideal for North Hollywood, which has a built-in audience because of the sizable population within just a few miles. “Markets have traditionally helped businesses. A growing number of chambers and business organizations inquire with us about setting up their own farmers markets,” Tumlin said. Dale Thrush, a planning deputy for Councilman Joel Wachs, said the market would be another step in the rebuilding of the area’s commercial district. “The market will bring people in and create a good community atmosphere,” he said. “But the real catalyst here is the (Snyder) North Hollywood mixed-use project on Lankershim and Chandler, with a lot of retail space and housing that will revitalize the area.”

You know all those conflicting reports you’re hearing about the economy? Well, the real estate market is no different. While some sectors of the investment market have taken a dive, other property types are bringing near-record prices, according to a just-released report from Colliers International’s investment services group. Overall, pricing for office properties declined by about 5 percent in the first half of 2001, except on Class A properties, the Colliers report revealed. And while the news was somewhat better in the San Fernando Valley, for the most part the region followed the trends region-wide. “I think the Valley has done better than most people would have thought because there hasn’t been overbuilding, except in the West Valley,” said Michael C. Ross, managing director of the Colliers investment services group. “But the San Fernando Valley is a pretty good microcosm of Southern California.” The Colliers report does not break out statistics for the Valley in all categories, but it does highlight some measures for the area. According to the report, sales per square foot for Class A office space in the San Fernando Valley and Ventura County averaged $220 for the first half of 2001, versus $200 per square foot for the same period last year. The Warner Center Atrium, which is under contract according to the report, is likely to fetch about $208 per square foot with a capitalization rate, a measure of return on investment, of 9 percent. In Glendale, the Nestle building is receiving offers at $290 per square foot and another Class A office property at 801 N. Brand Blvd. went for about $240 per square foot, the Colliers report revealed. “We’re pretty close to replacement cost for those buildings,” said Ross. “In some cases it might be over replacement cost.” (Buyers typically seek properties priced below the cost to develop a building, but in areas where there is little opportunity for development or leasing, the offer prices may go higher.) The number of transactions was down throughout much of Southern California, but less so in the Valley, Ross said. “What’s been interesting is the Valley itself has had more transactions than it has had in recent years. (Owners) have done all the leasing they can. They got the properties in as good a position as possible and there has been strong interest by individual investors.” Colliers sees a broader recovery in the second half, as investors begin to look more realistically at the economic indicators. “I think the knee-jerk reaction to the Nasdaq and the technology issues has started to change,” said Ross. “We were in pretty good shape in the San Fernando Valley, but all of a sudden everyone was hit with bad news. When people get hit with bad news they stop and wait. They ask, ‘Should I spend money or cut back?’ And then you realize things are better than you thought.” Conexant Turnaround No, not a financial turnaround. The chipmaker is in pretty much the same shape that most semiconductor companies are in. But Newport Beach-based Conexant Systems Inc., which over the past few years expanded aggressively in the Conejo Valley, has subleased one of its facilities. Ventura Distribution Inc., a home video and DVD distribution company, is taking over the lease on a 50,811-square-foot R & D; building at 770 Lawrence Drive in Thousand Oaks. The company, which assumes the remaining 22 months on the lease, will consolidate three of its operations, employing about 60 people at the facility. Conexant reported a pro forma net loss of $220.4 million on revenues of $200.1 million for the quarter ended June 30. That compares with a net loss of $53.3 million on sales of $530.4 million for the same period in the prior year. The company as recently as April acquired a 43,600-square-foot facility in Newbury Park, and it purchased a 2.5-acre parcel for $1.6 million. John DeGrinis, senior vice president at Colliers-Seeley, represented Ventura and Conexant in the deal. Sweetheart Deal Revolution Studios has leased a 19,200-square-foot industrial facility in North Hollywood for prop storage and pre-production work. The entertainment production company, headed by Joe Roth, former head of Disney Co.’s motion picture division, signed a three-year deal at 13333 Sherman Way valued at $460,000. George Stavaris, a broker with Delphi Business Properties, represented the studio. Bill Kogel of TOLD Partners represented the property owner, Donald Marks. Launched about one year ago, Revolution recently produced “American Sweethearts.” Local ISP Expands ISWest, a business-to-business Internet service provider, has signed a 10-year lease for 10,000 square feet of office space at the Canwood Corporate Center in Agoura Hills. The 10-year lease is valued at $2.5 million. The company is expanding into the new server facility. Cal Trans Move The Conejo Spectrum, a 100-acre business park in Thousand Oaks, has a new tenant. The California Department of Transportation leased 7,000 square feet of office space in one of the complex’s buildings at 1525 Rancho Conejo Blvd. CalTrans is moving its Ventura County field office project engineers to the facility from Moorpark. Dan Sibson, a principal with Investment Development Services Inc., which developed the complex, represented the owner, Conejo Spectrum Building Associates LLC, along with John DeGrinis, Marc Spellman and John Sabourin at Colliers-Seeley. Duane Cody, a broker with Cushman & Wakefield, represented Cal Trans. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

As you tear open your Business Journal on this day after Labor Day, traditionally the first day after the last day of summer, we are also perhaps ending the silly season when it comes to news of the Valley secession movement. That season was appropriately capped the weekend before Labor Day when the Los Angeles Daily News ran a banner headline with type the size many papers would use to announce “WW II Ends” or “President Assassinated” to inform us that the Chatsworth/Porter Ranch Chamber of Commerce was the first local civic group to “formally endorse cityhood for the San Fernando Valley.” That scoop was perhaps motivated by the bad taste left in editors’ mouths after its competitor, the Los Angeles Times, three weeks earlier beat the Daily News with news that the president of Valley VOTE, Jeff Brain, happens to live in Glendale and not Los Angeles. That particular story went on to indicate that this is really not important news anyway by quoting secession advocate David Fleming saying of Brain, “We’ve got him doing chores. He just runs errands.” Sandwiched between those two news events was City Council President Alex Padilla’s commission appointments that many interpret as insults to the secession movement and the reactions that followed. None of this is intended to disparage the Chatsworth/Porter Ranch Chamber of Commerce one of almost two dozen chambers of commerce in the Valley or poor Jeff Brain his colleagues have done enough of that. It is instead, I hope, to put an exclamation mark to the end of the silly season and perhaps point out that election day in November 2002, what some consider D-Day in their struggle for secession, is almost exactly 14 months away. Most of the important issues and questions that we all left behind on Memorial Day remain now that Labor Day is history as well. Nothing has changed the decades of resentment that inspired secession: the potholes and street lights and police patrols that have been neglected, the disparity between taxes paid and services received, the inequities in the business tax process, the inequality in representation at City Hall. The belief remains that all these injustices can be resolved a la Burbank or Calabasas or Simi Valley, examples most often cited when advocates talk about the way some cities do it right and Los Angeles does it wrong. And it’s probably true that these and other political dilemmas can be resolved pretty quickly, given the likely enthusiasm that would accompany our latter-day Thomas Jeffersons into office. But I submit and this is the issue I hope those both for and against secession will address in the coming months that after the thrill is gone, what will be left to govern is not another Burbank or Calabasas, but the fifth largest city in the U.S. Instead of the charm of a suburban community of 100,000, there will be the challenges of a Houston or a Philadelphia or a San Diego. Rather than hearing about how Glendale attracts business to its town, I’d like to know how a new city would deal with the challenges of a giant metropolitan economy. While a new Valley city will certainly have a more consistent business tax system and a friendlier attitude toward business, what it will not have are: – its own water and sewer system, – its own electrical utility (and tell me that isn’t something San Francisco or San Diego, both smaller cities than this one would be, would like), – its own major airport, port or significant transportation hub of any kind. Then consider the fact that the Valley is built out to an extent few municipalities going into business for the first time are, leaving little available land for substantial new development, and I wonder what kind of significant resource the economic development arm of a new municipal government will have to offer. Will a reformed business tax be enough to compete with other comparably sized cities for Fortune 500 companies? Will a more cheerful attitude at a City Hall on Van Nuys Boulevard do the trick? Or will a new Valley city be left to resort to the kinds of gimmicks the Santa Claritas and Westlake Villages of the world must: offers of multi-decade tax rebates to snag a big box retailer? In the war to grow an economy, is the competition Calabasas and Burbank? Or is it Phoenix and Los Angeles? And if the answer is the former, will a municipal government that answers to 1.6 million citizens have the flexibility and ability to move as quickly as a much smaller rival bureaucracy will have? Or will it be as hamstrung by big-city imperatives as the diabolical Los Angeles is? Certainly, a robust business environment is only one goal of the current secession movement. Meaningful political representation and improved municipal services mean more to many people. And some will say that in the impending Internet world, factors like airports and electrical utilities become increasingly meaningless. So be it, but let’s see the evidence. Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].

Early last year, Chavando Group International picked up an assignment to conduct some due diligence on behalf of a venture capital firm exploring a deal. Today, the Sherman Oaks company, with a $20 million venture capital fund of its own, has about a dozen such assignments for other VCs and the research work has come to account for the largest portion of its revenue. “I’m not exaggerating,” said Elias Chavando, managing director of Chavando Group International. “Once a month we get another venture fund telling us they need help.” Chavando Group has always done some investigative work for other VCs, mostly helping to assess software makers, because several of the company’s partners have technical expertise in that area. But the most recent requests involve delving into areas venture capitalists have not researched before. “The main issue now that all the venture funds are concentrating on is, ‘is there a market for the product or service we’re trying to create?'” said Chavando. “We’re going very deep with marketing analysis and focus groups.” Venture capitalists, a worldly lot who pride themselves on their business savvy, aren’t running out to find other experts to evaluate their deals. But with smaller investment funds many have cut staff, and they are utilizing contacts they already know when they don’t have the time or resources to conduct the research in house. “By not having a lot of people in overhead, we’re more efficient, and with transactions much harder to accomplish, if we did all the research in house we’d be losing money,” said Jonathan Fink, managing director of China Channel Network Inc., a company that specializes in funding smaller firms. “So we try to keep our costs down.” Venture capital firms have long employed accountants and attorneys to conduct investigations into the finances of the company seeking funds and the personal backgrounds of its executives to smoke out unusual debts or other financial surprises and flimflam artists. They’ve used university professors and other experts to evaluate technology. But where marketing was concerned, research was typically limited to determining whether a technology was indeed unique or, better yet, patented. If it was, the reasoning went, the market would follow. With the dot-com debacle that followed, many now know better. “We’re back to pre-bubble analysis,” said Richard Koffler, CEO with Koffler Ventures, a firm that works with Tech Coast Angels. “Is it a little stricter? Perhaps the pendulum swung a bit, and we’re past, ‘I’ll cut you a deal in the parking lot.'” As many of the investments made over the past several years soured, it became clear that exclusivity alone did not guarantee a ready market for goods and services. Some ventures, particularly Internet businesses, never found a market. Other entrepreneurs learned the hard way that it would take too much funding to get customers to put their money where their mouse was. Many point out that the heightened emphasis on investigating potential investments is nothing new. It was standard operating procedure that was only abandoned in the past few years as investment fever hit an all-time pitch. If VCs took shortcuts to analyzing investments, it wasn’t just the lure of easy money eclipsing better judgement. When investors were plentiful and just about any startup promised a handsome payoff, he who hesitated might easily be left with an empty portfolio. “What’s changed over the last 12 or 18 months is they have the time to do it,” said Brent Reinke, founder of Gold Coast Venture Forum. “During the dot-com phase, they had to throw money at companies or risk that the company would go with some other VC.” Today, there is far less money chasing deals and investors no longer have to make decisions in the blink of an eye, elevator deals as they once called them. But there are just as many startups out prospecting for financing. Some believe that’s led to a growth not only in companies that can research potential investments but also in companies able to connect startups to financiers. “I don’t have any hard data,” said Tim Lovoy, practice director for Deloitte & Touche LLP’s technology and communications practice in Southern California. “But I would tell you anecdotally, from talking to VCs, they’ll all tell you they now have the luxury of doing due diligence and they’re able to do it more thoroughly. Anecdotally, it would make sense that there may be more of an opportunity for intermediaries.” These days, investment banks are less likely to look at startups because of the time it is likely to take before those companies can go public. Incubators, those that would nurture a new company through the business plan and funding process, have fewer slots for startups. “I probably get four or five calls a week,” from startups and other companies seeking funding, said Ed Pauley, president of Pauley Financial in Van Nuys. Pauley, who has been looking for debt and equity capital on behalf of other firms for many years, said he believes more companies are now seeking to establish themselves as intermediaries in the financing process. Some in the finance community say they are wary of such companies, unsure of the value they bring to the equation. But others point out that many companies that are not candidates for incubators or investment banks need assistance in finding alternate funding sources. “As a rule, people that are looking for money are only looking for money when they need it,” said Pauley. “I’m out there in the market every day looking for people who need money and people who have money. I develop more contacts because I’m out there every day doing it.” Pauley Financial works on retainer, and then receives a fee for successfully finding funding along with an equity position in the companies. Others may work strictly on a fee basis. Either way, these intermediaries say, the slowdown in investment spending has not stemmed the tide of those seeking investors, and their services are still sought, provided they have the right contacts. “The venture capitalists get thousands of these (pitches),” said Pauley. “And so I try to establish relationships with one or two or three so if I send something to them, they’ll look at it.”

Colleges+Universities

Summary Business: Internet real estate services Headquarters: Westlake Village CEO: Stuart H. Wolff Market Cap: $2.35 billion Dividend Yield: N/A* Total Liabilities: $284.3 million P/E: N/A Long-Term Debt: None * Homestore.com does not pay dividends Read Homestore.com’s press releases and things look pretty good for the Westlake Village-based Internet real estate services company. It reported revenues of $129 million in the second quarter, up from $72 million in the same quarter of 2000. “Few companies in today’s environment are generating that kind of top-line growth,” Wolff said. But once you get past the top line, things get murkier. Certainly, today Homestore.com is AOL’s exclusive provider of apartment and residential real estate listings, in an era when home sales are one of the few industries that still have a healthy pulse. It survived a Justice Department investigation into anti-competitive practices, and federal officials cleared its $730 million acquisition of rival Move.com from Cendant Corp., owner of franchises like Century 21 and Coldwell Banker. And, depending on how you’re counting, that top line in the second quarter of this year generated a net income of either $14.5 million, about 13 cents a share or a net loss of $72 million, about 31 cents a share. The $72 million net loss (down from a loss of $98.2 million in the same quarter a year earlier) is derived using generally accepted accounting principles (GAAP). The $14.5 million profit is Homestore.com’s pro forma earnings after $86.5 million in unusual charges are excluded. While any number of items are considered pro forma expenses these days, in Homestore.com’s case it means stock-based charges, amortization of intangible assets, acquisition-related charges and write-downs on investments. Homestore.com is not the only company these days reporting pro forma earnings. And $86.5 million is not even close to the largest gap between the two kinds of figures being reported. In its most recent quarter, for instance, Qualcomm Inc. reported pro forma earnings of $174.3 million and a GAAP net loss of $274.7 million, a difference of $449 million. “It’s the way it is at this point,” said Shawn Milne, an analyst with Wit SoundView. “Look at a hundred other tech companies, it’s the same thing. “I would suggest you look at cash flow. That’s the most important thing.” With so many tech companies reporting pro forma earnings that paint a far more optimistic picture than GAAP results do, analysts have begun paying more attention to other elements of earnings reports. At the end of the second quarter, Homestore.com’s balance sheet reported $175.6 million in cash on hand. It also reported $90 million as restricted cash in the form of a letter of credit AOL is holding. Among the $86.5 million in unusual charges Homestore.com reported is $9.3 million it amortizes each quarter for the marketing deal it struck with AOL in April 2000. In return for the exclusive five-year agreement with AOL, Homestore.com gave AOL $20 million in cash and 3.9 million shares of stock. It also guaranteed AOL higher stock prices at certain points in the future than it is currently trading at. For instance, if Homestore.com is not trading at $65.64 by July 2003, it must pay AOL the difference for 60 percent of those 3.9 million shares. On Friday, Homestore.com was trading at $16.26. The letter of credit reflected in the $90 million of restricted cash on its balance sheet is AOL’s guarantee. Homestore.com has a similar agreement with Budget Truck Group. It gave Budget Group 1.1 million shares in February 2000 in return for a marketing campaign that includes Homestore’s logo on the sides of 45,000 Budget and Ryder rental trucks. Those shares must be worth $64.50 by March 2002 or Homestore.com owes the difference. In a report he prepared on Homestore.com, Henry Blodget of Merrill Lynch said that, while using equity to pay for operating expenses like marketing is certainly appropriate, reporting it as pro forma expenses makes it difficult to analyze the company’s value. “This is not a disclosure issue,” Blodget said. “It is, however, a valuation issue.” Using pro forma results may be an accurate way to measure Homestore.com’s cash earnings, but it is not a good way to measure its operating earnings and consequently makes it difficult to compare it with competitors. As a result, Blodget said, Homestore is “more expensive than it looks.”

Staying Ahead of Health Regs Is Daunting for Restaurateurs One night in July, Muhammed Rahman, his wife and family scrubbed their Van Nuys restaurant until 3 o’clock in the morning. When they had finished, Passage to India, the restaurant Rahman has owned for more than 15 years, sparkled. But the damage was already done. Authorities had closed Passage to India earlier that day because a health department inspector found mouse droppings in the kitchen. The A rating that usually greets diners came off the door and, though the restaurant was able to reopen after the all-night cleanup, even regulars stopped coming. “You know the Indian restaurant,” said Rahman. “If there is no ‘A,’ nobody is coming here. In the last three months, I’m losing business.” Three years after a local television news crew went behind the kitchen doors of L.A. restaurants and showed, in graphic detail, a bellyful of food-handling nightmares, there are more inspectors, more A-rated restaurants and fewer closures than ever. But the business falloff that can result, even with a drop to a B rating, has never been more costly, to say nothing of what happens if a restaurant is temporarily closed down. You might say that for many diners, even a good-but-not-great score leaves a bitter taste. “I try to stay with the A’s,” said Frank McKenna, a Warner Center office worker who was lunching at a local strip mall one recent afternoon. “I’ll occasionally do a B if I’ve eaten there before. But I wouldn’t eat below a B.” So powerful has the restaurant grading system become that most restaurant owners refuse to talk about their experiences on the record for fear of retaliation by the inspectors on whom, they say, their livelihood rests. But privately they claim that a restaurant’s sales can drop as much as 40 percent, even with a ratings slide from A to B. And it can take months to lure customers back. “People would walk up, see the B and walk across the street,” said one San Fernando Valley restaurateur, whose rating dropped after an inspection recently. L.A. County instituted the report card system in 1998 after an undercover sting caught even the swankiest restaurants operating with appalling disregard for safety and hygiene. The report led to the hiring of 74 additional county environmental health inspectors and supervisors, increasing the frequency of unannounced visits and boosting the visibility of the process. Restaurants were required to post their grades and closures are disclosed to the public in entranceways, in newspapers and on the Department of Health Services Web site. The system works this way: Surprise inspections are held and point values are assigned to each infraction, leading to an overall grade. Some infractions, however, like the presence of rodents or cockroaches, lack of hot water or problems with the sewage disposal system will get a restaurant closed immediately, with the reason posted in no uncertain terms on the door. Score averages have gone up consistently since the program was instituted, increasing to 91.4 percent in the most recent year from 91.1 percent in the prior period. The percentage of restaurants receiving A ratings has climbed to 79.4 percent from 76.8 percent last year. And the percentage of eateries receiving B and C ratings has consistently declined. All this leads Department of Health Services officials to believe the program is working. “What grading gives us is a proactive incentive for the operator to do better,” said Terrance Powell, chief environmental health specialist for the consultation and technical services unit of the Los Angeles County Environmental Health Department. That is little consolation to those who believe they are already well motivated, but wind up on the wrong side of the system anyway, as happened to Rashan. A straight A operator, Rashan’s Passage to India was one of 185 restaurants, 25 in the San Fernando Valley, shut down countywide between July 1 and Aug. 18. He believes the four-legged intruder entered from a neighboring store, although he concedes that the blame lies with him, not the process. “This is a problem of me, not the health department,” he says. “I am the enemy of mice and cockroaches, but I didn’t see the droppings. I guess I was busy.” Still, the two-day closure cost about $1,600 in lost sales and, while some customers laughed off the incident, he is certain others have still not returned. “Our customers are all regulars, but if they see the B and C they’re all irregular,” he said. Another restaurant manager said a recent Health Department closure cost him about $2,000 a day. “Sixty-seven percent of our customers eat here twice a week,” said the manager who did not want his or the restaurant’s name used. “They noticed because it was on a Friday, and this was our busiest day.” Customers were given a 50 percent-off coupon for their next visit. Restaurateurs point out that some owners do not have the cash flow to withstand a two-day sales loss (the time it usually takes for the problem to be corrected and the inspector to return and reopen the premises). And more costs pile on, even after the restaurant is reopened. The owner of an Italian restaurant in the Northeast Valley said business fell off 30 percent to 40 percent when his rating went from A to B, costing him about $15,000. “I haven’t been able to take any money out of here since it started,” he said. “I had to take $5,700 from my own pocket.” Six weeks after the inspection, business is still off about 20 percent, and the restaurant owner has begun an ad campaign that offers 50 percent off on the second meal. The cost: another $1,400. “It’ll be something between $25,000 and $30,000 before it comes back,” he said. One problem, say many owners, is that a single cockroach egg delivered with a food shipment from suppliers may yield an army of insects, and regular exterminator visits won’t necessarily protect against violations if the inspector happens to arrive the next day. “When we found a dead one, we sprayed,” said Joe Lei, the owner of Fresh Donuts in Granada Hills. “They found four more, so they closed us because of that.” But the Department of Health Services figures that what they see is what the diner gets. “Our assumption is how we see you when we walk in unannounced is basically how you operate,” said Powell. He adds that the follow-up process, and an appeals process, is designed to assure corrections are made and the restaurant is treated fairly. By the same token, say some restaurant owners, many of the infractions that can quickly add up to a B rating have little to do with the food or food preparation. And a few customers agree. “I pay a little attention, but not really,” said Jason Maier one afternoon while he waited for his Thai food order. “I just make sure it’s not an F. I think sometimes when you’re talking about other cultures, they have different ways of doing things. In the end, it might be a C restaurant, but it tastes better than an A restaurant. All I care about is the food.”

Spectrum Benefits Group Core business: Employee benefits Revenues in 1993: $900,000 Revenues in 2001: $5.5 million Employees in 1993: 1 Employees in 2001: 4 Goal: To balance quality of service with growth Driving Force: Keeping companies in compliance with state and federal employment laws A Chalk Hills employee benefits company believes there’s more to taking care of employees than offering health insurance and 401(k)s The average employee benefits firm probably knows where to send you for a good deal on health insurance for your company. Maybe it can find a good 401(k) plan too. But does it know the TAMARA-listed criteria for judging COBRA compliance? Can it analyze the latest family medical leave requirements as they apply to a company doing business in California? How about Texas? Or New Jersey? Ted Aldershof believes the answers to those questions would most likely be no. And that is the edge he thinks his company, Spectrum Benefits Group, has over the competition in what many consider a pretty cut-and-dried, meat-and-potatoes business. Aldershof insists “the employee benefits business has changed drastically over the years” and yet very few of his competitors let alone companies providing benefits to their employees know that. Spectrum Benefits Group provides employee health and life insurance packages, disability plans and 401(k)s. But so do many other employee benefits companies. What’s different is that Spectrum focuses on making sure clients are in compliance with state and federal laws as well. The need to provide incentives to employees by way of benefits packages may ebb and flow with the job market, but not much. “HMOs have become highly mandated and highly regulated,” Aldershof, founder and president of Spectrum, said. “And pricing is a very small variable; they’re just all going up.” What makes the difference, as far as he’s concerned, is the ability to help a company stay in compliance with the varied and constantly changing rules and regulations, laws and codes that affect employers. “We believe compliance with federal and state laws is as important as any of the employee benefits a company offers,” Aldershof said. So, working with a small staff out of a suite of offices on Woodland Hills’ Chalk Hill, Aldershof says keeping clients out of trouble they never knew existed has become “my mission.” You can figure the insurance industry veteran believes almost any company anywhere could learn from his expertise and, of course, he’ll talk to anybody. But clearly the companies that benefit the most are those that either operate with work forces at multiple sites in multiple states or have seen their businesses grow so quickly they haven’t had time to keep up with the demands that come with a rapidly expanding workforce. Quite frequently, overworked human resources officers based in the San Fernando Valley have little idea of the employment laws they’re supposed to administer in other states. Susan Kunselman, the corporate administrator for Regency Lighting, a lighting distributor with company headquarters in Van Nuys, is responsible for 160 employees in four states. An experienced human resources administrator perhaps could handle the 100 based in Southern California. But the 60 spread out in Dallas, San Francisco, Atlanta and New Jersey present challenges. “In Texas, for instance right now, it’s very volatile in terms of what’s going on with health care,” Kunselman said. Consequently, Spectrum has been busy keeping her up to date on what her company has to do to make sure it’s in compliance with laws that regulate Regency’s employee benefits packages there. Even if a company is not doing business in far-flung locations, it can be difficult to keep track of everything especially if it’s moving fast. “Companies in a growth mode will get new facilities, hire new people, take on new customers,” Aldershof said, “but benefits are always the last thing to grow for them.” U.S. Pole Inc. makes commercial light poles. Five years ago it had five people working out of one plant in Sun Valley. Today it has 266 employees in three locations spread around the Northeast Valley. U.S. Pole hired its first full-time human resources administrator just this past January. “It’s been a tremendous change with a lot of issues to deal with,” said company controller Sonia Wassefi. “Most (employee benefits companies) get their commissions and only call me when they hear from the insurance companies that they didn’t get their check,” Wassefi said. Spectrum, Wassefi said, guides her through the intricacies of employment law, keeping her on a schedule as far as paperwork that has to be filed and deadlines that have to be met. Aldershof spent nearly 20 years in the property and casualty insurance business, 11 with Aetna Life and Casualty, until, he said, “in 1993, I decided it was time to take what I’d learned and set up my own company.” He started with a handful of accounts he brought with him. That first year, working practically by himself, he had $900,000 in revenues. This year, with a slim staff of four, he expects gross sales of $5.5 million. He has just over 200 clients, most with 20 to 25 employees. Aldershof said he hopes to continue to grow his business in the future, but slowly: He wants to average 4-percent to 5-percent growth a year. “That way I can do it with the same number of employees I have now,” he said. And, Aldershof said, “My goal is to be here in 20 years, doing business as it has to be done then, not as it’s done today.”

There is still a video camera trained on the door. Customers still must pass through the double glass security doors to get into the Encino branch of the Washington Mutual bank on Ventura Boulevard. But once inside, things start to get all warm and fuzzy. The bank reopened early last month after an extensive makeover, part of an industry-wide campaign to refocus on customer service and push sales of financial products. Seattle-based Washington Mutual Inc. is in the process of retrofitting many of its existing branches and opening new locations with a concept it calls “occasio,” Latin for “favorable opportunity.” The Encino branch is the first in the Valley to undergo the transformation, but the campaign began in 2000 with the opening of 21 occasio “stores,” as they are now called, in Las Vegas. There are now 10 occasio stores up and running in Arizona, 48 branches on the West Coast targeted for remodeling over the next 18 months and 24 new occasio stores planned for 2002 in Atlanta. Marcia Lansdon, senior vice president for consumer banking for WaMu, said, “Having the customer in the lobby gives them an opportunity to use our other services.” Teller windows have been replaced with teller “towers,” where a customer and bank employee stand side by side and view account information together on the same computer screen. There’s a children’s play area called WaMu Kids with Legos, Game Boys and a TV. Just beyond the front doors is a small retail center offering books on finance, WaMu action figure dolls, banking software packages and $3 impulse items like plastic piggy banks and Slinkys bearing the company logo. Managers don’t have assigned desks but instead walk the floor with cell phones in hand and tellers have ditched the ties and more traditional business attire for khaki pants and denim shirts. At the front of the branch you’ll find a “concierge” who not only welcomes customers, but can take a deposit, give out an account balance or, if there is a wait for service, hand out a beeper so the customer can shop at nearby stores while waiting. So why are banks like WaMu dusting off the welcome mats when just a few years ago the trend was to direct customers to the ATM and the Internet and, in some cases, charge them for the privilege of coming inside for help? According to Hai Vu, an analyst with Jefferies & Company Inc. in Los Angeles, banks are slowly recognizing how diverse customer demands are and are attempting to put a retail spin on the concept by building themselves as brands, much like The Gap or J. Crew Group Inc. would. He said customers may like the Internet and the convenience of the ATM, but they also like to know they can get personal service if and when they want it. “What many institutions are finding out is that steering customers away from the bank didn’t work too well,” said Vu. “On the one hand, the concept did help out with cost cutting and more efficiencies in banking, but you can’t build a business model on that concept alone. Because of the backlash, banks are saying we have to get back to basic branding and name building.” Lansdon said market pressures are part of the motivation for the new concept, but added that WaMu has always tried to stay ahead of the consumer curve when it comes to service. “I don’t really view them as market pressures,” Lansdon said. “We know the consumer doesn’t want to be where the bank wants them to be, but where they want to be.” Lansdon oversees 161 branches in the greater Los Angeles area, including 25 in the Valley. According to Vu with Jefferies, so far the remodeling effort has had only a minimal effect on foot traffic. “The capital investment Washington Mutual is putting into the occasio thing is a lot of money,” said Vu. “So what’s the return? Not much. Therefore, we have to believe this is purely for branding purposes. If you make things stick out in people’s mind, then you’ve planted the seed.” Lansdon said it’s too soon to draw conclusions from sales figures for the Encino store and, because the Vegas stores were all new branches, there’s nothing to compare sales to there. She said the company won’t give out remodeling costs but added that they are about 40 percent lower than building a new branch. Wells Fargo & Co., the country’s fourth largest bank, began its “Warming of Wells Fargo” campaign a few years ago. The company began adding Starbucks Corp. stores in some locations up and down the West Coast and started sprucing up lobbies. In June, the Panorama City Wells Fargo branch was given a fresh look that draws on the area’s Latino culture. While the branch doesn’t have a Starbucks, and there is still an army of teller windows dividing customers from the cash, it now sports warmer color schemes, historical graphics and Mexican artwork. Signs and product brochures are written in Spanish and English. According to Diane Miller, senior vice president for distribution strategies for Wells Fargo, the Studio City branch will get a revamp by year’s end, and several other Southern California stores are being targeted for a Spanish theme over the next year. Wells’ strategy also includes more partnerships with Starbucks, lowering teller windows, adding televisions and computerized stock updates in some markets. Fritz Elmendorf, vice president of communications for the Consumer Bankers Association in Arlington, Va., said some institutions did such a good job of driving customers out of the building that they are going to have to work very hard to clear up the mixed signals. “In any bank, some customers are not profitable, so some banks have said, ‘OK, let’s figure out who these customers are and either drive them out or make them profitable by charging fees, such as to see a teller at the window,”‘ he said. “But that strategy wasn’t as simple as it seemed, and I think maybe the lesson or more current strategy is to go back to focus on selling any way you can.”

The addition of two new faces to the San Fernando City Council has launched a string of disagreements about future projects, rumors of testy council meetings and accusations of back-room deals that favor one local developer over another. Three top city officials have left office since Councilwoman Maribel De La Torre, sister of Mayor Cindy Montanez, and Councilwoman Beverly Di Tomaso were elected in March. The change has created a division on the council, with Montanez, De La Torre and three-term councilman Jose Hernandez in one camp, and Councilman Richard Ramos and Di Tomaso in another. Ramos and Di Tomaso say the majority bloc is pressuring officials out of office in order to green-light projects for San Fernando-based Pueblo Construction Inc. and control bids on future developments, which they think should include a better mix of big-box projects and small retailers. They also assert that Pueblo is getting preferential treatment on planned developments because of political contributions the company made to De La Torre’s campaign, although Pueblo has provided financial support to all five council members in the past. And on top of all the charges thrown back and forth, Ramos and Montanez are both planning a run for the same state Assembly seat in 2002 and, for all intents and purposes, the election campaign has already started. Since election of the new council members in March, Police Chief Dominick Rivetti has taken a new post with the Los Angeles District Attorney’s Office and both City Administrator John Ornelas and Economic Development Manager Sarah Magana-Withers have resigned. The council met in closed session Aug. 22 and agreed to negotiate a contract with someone they have not yet publicly identified as a replacement for Ornelas. At a council meeting scheduled for Sept. 4, they will vote on whether to approve the contract. Ramos, in his second term, and Di Tomaso claim Montanez, De La Torre and Hernandez flexed their political muscle to force the resignations. They say they fear Pueblo is threatening to dominate development in the city and is receiving council support in that effort in exchange for political contributions the company made to De La Torre’s campaign. But Montanez and others say this is a case of sour grapes left over from previous council disagreements, and nothing more than a sign of the city’s growing pains. She said Ornelas, who could not be reached for comment, and the other two employees left of their own free will. “It’s my job here to make sure the bidding process is fair and open to anyone who wants to bring us their ideas,” said Montanez. “Regardless of the appearance of a division among the council, I believe that we all want the same things for the city.” Well, not exactly. In 1999, the council scrapped plans for a theater-retail complex on San Fernando Road that included land owned by the city and Pueblo, because of disagreements over its size and scope. Some council members at the time favored Pueblo’s plans for a smaller complex with a theater featuring Spanish-language movies. The then-majority, including Ramos, is said to have pushed for a multiplex cinema and major department store proposed by San Fernando-based Grapevine Development, which at the time was working with Burbank-based VG Development. Grapevine was awarded an exclusive on the property, but later backed out. But instead of awarding the contract to Pueblo, which owns part of the property, the council voted to solicit new bids, essentially shelving the project. Pueblo has since attracted FAMSA, Inc., a Mexico-based furniture retailer, to its own property and Pueblo co-founder Severyn Aszkenazy said he’s no longer interested in a theater complex on his property. “FAMSA is doing very well and I’m not looking to revive that project,” he said. Nevertheless, Pueblo either owns or is in escrow on several properties in San Fernando and, Ramos and Di Tomaso say, appears to be pulling all the strings in town because of its close ties to Montanez and her sister. “I’m concerned as a teacher and a council member that we aren’t favoring one company over others,” said Ramos. “Don’t get me wrong, my father is a very good friend of the owners, but I’m starting to get very suspicious of how they do business here.” Aszkenazy said his objective, as a San Fernando native, is to promote business and preserve the cultural fabric of the community. He also said he contributed to the campaigns of Di Tomaso and Ramos, a fact Ramos confirmed: he said Pueblo gave Di Tomaso and him $200 each. “I hear comments like, ‘Oh, they’re buying everything,”‘ Aszkenazy said. “But in the city there must be thousands of pieces of property (on the market) and maybe we are working on 10 of them. Is that so bad?” Ramos and Di Tomaso say it’s not that simple. Pueblo recently completed the $2.7 million Library Plaza project, which opened in July, on Mcclay Street. The company has also purchased the old Social Security building, also on Mcclay, and, according to Montanez, plans to build a Spanish-style paseo linking the civic center to the other side of Mcclay Street. Ramos said he and Di Tomaso were never informed about plans for the paseo project. “I heard about this and I said, ‘Wow, we just went through goals and objectives a few months ago and we didn’t have any knowledge of it,”‘ Ramos said. Aszkenazy said he showed the rough plans for his paseo project to Montanez and Ornelas before his departure, but added that there has been no “back-room” meeting with the city to discuss the project. “This is still just in the planning stages,” said Aszkenazy. “In no way have we formalized a deal here or have we made it secret.” Aszkenazy’s wife and business partner, Martha Diaz-Aszkenazy, suggested the political pendulum swings both ways. She said Ramos has long backed projects by Grapevine, whose owner, James Acevedo, also happens to be a political consultant who worked for state Assemblyman Tony Cardenas, a Democrat from Mission Hills. Ramos and Montanez are both planning to run for Cardenas’s seat in 2002 when he is termed out, and Diaz hinted that Ramos may be pushing for Grapevine projects to obtain Acevedo’s political support. “I think that what Mr. Ramos is objecting to is good old American ingenuity,” said Diaz. “I think if we own properties privately, who says it’s wrong for us to put all of our eggs in one basket, and if we decide that San Fernando is a good place to develop, what’s wrong with that?” Acevedo did not return several calls for comment. Di Tomaso praised Pueblo’s library complex but said it would have never been completed without the help of Ornelas and required way too much financial assistance from the city. “We gave them $1 million on a $2-million project,” Di Tomaso said. “The library project is beautiful and they’ve done a great job. But what you don’t know is what happened on the way to getting that project up and running.” Aszkenazy said the city was counting on additional funds from the Los Angeles Community Development Commission for the library project on top of the $1 million it received from the city, but those funds did not come through. He said he was able to secure financing in “other ways” and did so without any additional assistance from the city. Di Tomaso said Pueblo’s projects tend to call for smaller businesses and she wants to see other developers come in with projects with greater revenue potential. “We don’t just need big box projects, but at the same time we can’t expect tiny little book stores to come into the city because they can’t bring the kind of revenue we need here,” she said. Meanwhile, Montanez said accusations that she, her sister and Hernandez are “anti-development” are simply false. She said she is trying to establish a business development foundation that would lobby for federal funding, and the city has a number of projects on the table that have no connection to Pueblo whatsoever. Starbucks Coffee and a Hometown Buffet restaurant will open at Mission Plaza downtown in the next six months. Both of those projects are receiving city assistance. Rydell Automotive Group on San Fernando Road has spent $10 million on an expansion of its dealership, expected to generate an additional $765,000 in annual city sales tax revenue. The city has also received $986,000 in state funds for the Mcclay Street beautification project, and there are plans to restore the Azteca Theatre. Montanez said Pueblo is unfairly being targeted because of politics. “Pueblo is a local company and they hire local people, so I have no problems with saying that they are exactly the kind of developer I want to see come in our city,” she said.