As chief equity officer for the AIM family of mutual funds, Edgar M. Larsen is responsible for some $125 billion in stocks. The firm, now a veritable fund armada, is further evidence that investment money is sailing west. With little attention, AIM has become the seventh-largest fund company. So far this year the firm has ranked third in net new money, trailing only Janus (Denver) and Putnam (Boston). It’s 9 a.m., Thursday, Oct. 12, and an uncertain world has become much more uncertain. The USS Cole has been hit by a suicide mission off Yemen, oil prices are spiking, and the technology stocks that were to lead us to nirvana are imploding. The Dow Jones Industrial Average is already well into a plunge that will take it down 379 points for the day, and Home Depot is being hacked by power tool-wielding portfolio managers after the latest in a series of earnings warnings. It will close down 29 percent for the day. Even AIM Constellation, its flagship fund and a stellar performer, loses 3.2 percent of its value for the day. That’s more than $1.2 billion. Mr. Larsen, a graybeard in the business, remains calm. Carnage and chaos notwithstanding, he expects AIM to be the best-selling fund complex for the third quarter. I ask what he thinks of the market. “If you own the Nasdaq, you’re down 37 percent and it’s the second time it has happened in a year,” he said. “This (drop) hasn’t been as dramatic as the one in spring, but it feels as bad. In spring it centered on the Internet. This time it’s fiber optics, telecom, semiconductors and wireless. Even the old technology companies Microsoft, Dell are getting hit. There’s hardly anyplace that hasn’t been hit. I asked if it might be a good time to be out of the market. “You can actually lose money by being out of the market,” Larsen said. “The risks of market timing have never been higher. There are no market-timing mutual funds out there for a reason it is impossible to affect. Historically, October has been a bad month. But we’re certainly very oversold at this point.” I asked what the evidence of being oversold was. “Ohhh … lots. Start with the put/call ratio. Everyone is writing puts; no one is writing calls. Then consider the Internet bubble. It has burst. Look at the money that has been lost! They’re selling at 5 cents on the dollar, and you have to multiply that by hundreds of companies. “Today, the technology sector funds are in net redemption. If they are flat, holding their own, it’s heroic.” I asked how that would affect AIM funds, many of which hold large slugs of technology stocks. “We get hurt whenever a company misses its earnings. Nasdaq is in a serious bear market. That’s not what is going on in the Dow, the oils or the REITs. It’s almost like the flip side of 1999 when the average stock fell but the Nasdaq rose. I asked if there was a problem with market liquidity. “When you look at the volatility of stocks Lucent lost 30 percent of its value, Apple 50 percent, in a day then you know we’ve got a liquidity problem. And it’s exacerbated by the new individual investor who is in these stocks. “You just know there is a big liquidity problem if you’re in the Internet space because there’s no value. But if you look at a company like Motorola, you can look at what the pieces are worth. That can mean opportunity in solid companies like Applied Materials, Texas Instruments and Teradyne. That’s one reason Applied Materials is a core holding. Could he give a specific example? “OK. If Nokia is selling for 25 to 30 percent of what it used to sell for and expectations start to rise, then Nokia will be reborn, along with Motorola. The future is your personal phone. This is a secular growth business.” Did he see positives, a near-term recovery for stocks? “Yes. The markets hate uncertainty. Someday the election will be over. There’s a good chance that the spike in energy prices will be over. And it looks as though we’ve seen the last interest rate increase from the Fed. “This is not the time of year when people invest. They’re all worried about getting a capital gain distribution. And, finally, the tax-selling season will end.” Simplified Lifestyle Question: I’m a 58-year-old divorced woman. I work for a bank but make only $24,000 in salary. With overtime and annual bonus, I make about $30,000 plus another $3,000 to $4,000 from managing a couple of rental properties. I have a home mortgage of $42,000 at 8 percent, with 23 years left. I’ve also got $20,000 in Roth IRAs, about $90,000 in mutual funds, $11,000 in my 401(k), and I’ll get a small company-contributed pension when I retire. I’d like to pay off my mortgage because my paychecks aren’t large enough to make extra principal payments. If I sell one fund in December and another in January, I’ll spread the capital gains over two tax years. I could then raise my 401(k) contribution to 15 percent pretax and 6 percent taxable, and get the full match from my employer. Is this a reasonable plan? – I.D.L Answer: Congratulations on a well-thought-out plan. The current mortgage payment brings no tax benefits and won’t be paid off by retirement. Your alternative brings you immediate income tax saving, captures free matching dollars from your employer, and works to smooth out investment returns between now and retirement. While some would argue that it is silly to give up an invested position that could double over the next seven years, the combination of the employer match and the power of dollar-cost averaging will allow you to invest in equities over the next seven years. In addition, you are not proposing to devastate your investments. Assuming a typical defined-benefit pension plan and about 10 years of work, your pension would be about 15 percent of income, or $300 a month, assuming it is based on $24,000 a year. It could be more. Your Social Security will be about $800 a month, tax-free. Your investments and 401(k) plan are likely to grow to about $240,000, which could provide a long-term retirement income of $1,000 a month. More than half of this amount will be tax-free, due to the personal exemption and standard deduction. Questions about personal finance and investments may be sent to Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; or by fax: (214) 977-8776; or by e-mail: scott(at)scottburns.com. Check the Web site: www.scottburns.com. Questions of general interest will be answered in future columns.

After several years of frenetic activity, the retail shopping center investment market finally has slowed down. It isn’t that buyers have soured on these investments. Indeed, there are still plenty of prospects knocking on doors. The problem is that there is very little product to buy. “The market is definitely not as strong as last year,” said Chris Wilson, whose company, Wilson Commercial Real Estate, specializes in retail properties and leasing. “The reason you’re not seeing a lot of sales is there’s very little product for sale.” That is bad news for brokers who work with buyers, but it can be good news for those who handle property listings. Those brokers are finding there is no shortage of takers for the properties that do become available. “If I had a 40,000-square-foot Gelson’s with a drug store adjacent on Ventura Boulevard, I could sell that all day,” said Michael Ross, managing director of the investment division at Colliers Seeley. “I’d have 10 to 20 offers on it. The same thing would go for Northridge, Calabasas and Studio City.” So why aren’t those who own such centers taking advantage of the high demand? Institutional investors such as pension funds and real estate investment trusts typically buy properties as investments for a pre-determined period of time. Many were unable to unload their properties during most of the recession-ravaged ’90s, but did so as soon as the economy rebounded. Unlike private investors, who may buy and sell properties based on market conditions, those new institutional owners are not yet ready to sell their acquisitions. Tight market, fewer listings Even private investors who may have bought properties when the market opened up in 1998 and 1999 are unwilling to turn over their investments because, if they did, they might not be able to find another equally lucrative opportunity in which to invest their money. “If they sell it for a great price, where do they put their money?” asked Ross. Brokerage houses do not track shopping center sales on a quarterly basis. But local retail property investors report that the number of transactions they have completed this year is well below the level of last year. “This year in the first half, I purchased no centers,” said Sandy Sigal, president of Newmark Merrill Cos., which specializes in buying retail centers. “By the end of the year we will have purchased five. That’s about half of what I did last year.” On the other side of the fence, however, Sam Alison, director of retail investment services for CB Richard Ellis Inc., is having what he describes as “my best year ever.” Of the 22 shopping centers in Southern California that the brokerage is marketing for sale, five are in the San Fernando Valley. Two of those are in escrow, and Alison is fielding multiple offers on two more of the remaining three. The most sought-after centers are those in upper-middle-class neighborhoods anchored by supermarkets and drug chains because investors see those properties as impervious to what has become a retail landscape in transition. Movie theater chains are succumbing to financial problems. Some other retailers are losing business to e-commerce. And regional specialty retailers like Strouds Inc., which has filed for Chapter 11 bankruptcy protection, and Restoration Hardware Inc., which recently revamped its management in an effort to stem losses, are finding they are unable to compete with the big-box chains and mass merchandisers. At the same time, there is little or no available land on which to build new centers, virtually assuring the future of strong retailers in so-called good neighborhoods. Record prices Such was the case with Burbank Towne Center at Hollywood Way and Verdugo Boulevard. The center is small only 85,000 square feet and considered old and outdated. But it sold for a capitalization rate of 8 percent, far better than the average cap rate, 9 percent to 11 percent, for centers. (Brokers were unwilling to disclose the price for the center, but in general for these real estate transactions, the lower the cap rate, the higher the selling price.) “Location drove the sale,” said Bill Bauman, senior vice president of retail properties for Colliers Seeley. “In general, in the Valley it is difficult to find large retail opportunities, so any substantial project in a middle- to upper-income area is very attractive to the investment community.” With demand outweighing supply, many of the most desirable properties are selling before they even land on the open market, brokers said. And buyers report that they are becoming more aggressive at seeking out shopping centers. “We do a lot of transactions with brokers, but a good portion of the property I come across is through previous relationships,” said Steve Boss, vice president of West Coast acquisitions for Combined Properties Inc. The Washington, D.C.-based company turned its attention to the Southern California market within the past year and, since then, Combined Properties has signed letters of intent to purchase two properties. With a slower volume of transactions, Boss said he has had more time to actively seek out opportunities instead of waiting for brokers to bring properties to his attention. “I think we’re in a more normal level of deal flow, and you have to work a little harder to find the good transactions,” he said.

In today’s highly saturated retail market, a lot of shopping centers are in big trouble. Many are outdated. Others aren’t pedestrian friendly. Still others don’t provide the right type or mix of stores. Old-style theaters, meanwhile, falling prey to the craze for stadium seating and digital sound, are closing, and retail centers are left with reduced foot traffic and gaudy “Space Available” signs. What’s a shopping center owner to do? The answer may lie with NewMark Merrill Cos. The Tarzana development firm specializes in repositioning shopping centers. The company buys or takes over management of outdated retail centers, does the necessary facelift, brings in name-brand retailers and breathes new life into aging projects. All the problems facing the retail industry have meant boom times for NewMark. Its revenues grew from $1.2 million in 1997 to $5.8 million in 1999. And with malls and other shopping centers scrambling to reinvent themselves, the future for companies like NewMark looks bright, said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. Indeed, about $459 million will be pumped into building and renovating retail centers in L.A. this year alone, up from $408 million in 1999, according to the LAEDC. “With what’s going on in retail and all the repositioning going on, you can sort of forecast bonanza years for (NewMark) moving forward,” said Kyser. The company was founded in 1997 when longtime friends Sandy Sigal and David Frank merged their respective development firms. Today the company has 30 employees and offices in Tarzana, Norwalk, Anaheim, Oceanside and Las Vegas. It owns or manages 4 million square feet of retail space all the way from San Diego to San Luis Obispo, as well as in Las Vegas and Phoenix. Of the 42 properties in its portfolio, the company built 10 from the ground up and acquired and repositioned about 20 more. The rest it manages for other owners. Diamonds in the rough Sigal, the company’s 36-year-old president, said a key to NewMark’s success is finding downtrodden retail centers in established areas and attracting national retailers such as Ralphs, 99 Cents Only Stores and Pic N Save to revitalize the outlets. “We understand what they (the retailers) are looking for, and we can provide a product that will work for them,” said Sigal. “There’s also a certain level of trust where we can say, ‘Here’s how your format could be a little different in a particular area that might make it a little more successful.'” The company also works hard to understand the surrounding community and give shoppers what they want. “What we’re finding is that the companies that are successful are the ones that adapt to each of their communities,” said Sigal. Also, by revitalizing shopping centers that have lost their spark, the company avoids the political and neighborhood opposition other developers face. “Political leaders we’re working with see a dilapidated mall in the middle of their city, and that’s the last thing they want,” said Sigal. “Instead of tearing down a beautiful, green mountain, I’m revamping something that’s already there.” When the company acquired a 378,000-square-foot retail center in Anaheim a year ago called the Anaheim Town Center, the strip mall was only 70-percent leased. NewMark revamped the mall and attracted 99 Cents Only and an Anna’s Linens. The company helped convince Kmart and Ralphs to spruce up their stores. As a result, the lease rate jumped to 90 percent and the operating income from the center increased by $500,000 a year. It’s no mistake that 99 Cents Only and Pic N Save are in the company’s stable of go-to retailers. Where shoppers might have been reluctant to step into a Pic N Save or another deep discounter in the past, customers today are looking for deals, said Sigal. “Now it’s perceived as smart to shop for value,” he said. Sophisticated Latino markets The company is also seeing a dramatic increase in the number of sophisticated and well-financed retailers from Mexico looking to sell everything from furniture to electronics to groceries to Latino consumers. “There’s a very large population of first-generation (Mexicans) who are more familiar with the retailers down south then they would be with a Circuit City,” said Sigal. Frank, the company’s 40-year-old CEO, said he and Sigal carefully seek out shopping centers that would be prime for repositioning. In cases in which the owners aren’t willing to sell, Sigal and Frank will offer assistance in repositioning and, in many cases, managing malls. The company then receives a percentage of the increased value of the project in return for its services. Jeff Gold, senior vice president of real estate for 99 Cents Only Stores, described Sigal and Frank as “basically dealmakers.” “Although it’s a good-sized company, they don’t have a lot of bureaucracy and they know how to get things done,” he said. 99 Cents Only has had to pass on several retail centers that were run down despite good demographics in the surrounding communities. When NewMark took over those same shopping centers, Gold said he could be confident the company would turn them around. “They’ve done a good job taking highly inferior properties and turning them into great, thriving locations,” he said.

The theory behind California Adventure, Walt Disney Co.’s new $1.4 billion Anaheim theme park, is simple: Create a destination resort and you can hold visitors captive for days, or at least until you clean them out. The problem is that many of those Rubes will head back to Des Moines or Butte without ever stepping foot outside Anaheim, and that could be bad news for Universal Studios Hollywood, not to mention L.A.’s tourism industry. “You talk to the tourism folks and they’re quite worried,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp. If the new resort does its job, people will spend several days at the new Disneyland/California Adventure complex and maybe mosey over to Universal Studios or to Hollywood for a half-day or a day, at the most. That would reduce overall spending on everything, from shopping to hotels. “We’d start to get crumbs when we want the whole sandwich,” said Kyser. When it opens in February, the new 55-acre park next door to Disneyland will feature typical amusement park rides, like “California Screamin,” a looping roller coaster, but it will also offer live shows, fine dining and the 750-room Grand California Hotel, the first Disney hotel to be built inside one of the company’s theme parks. Outside the park, in a nearby entertainment mall dubbed Downtown Disney, adults will be able to choose from a wide assortment of entertainment, a sports bar, the House of Blues, a Latin dinner club and a wine-tasting room. By keeping visitors at the resort for several days, Disney can drive up per-person spending. Typically, day visitors spend about $50 a day each at theme parks, but those who stay in hotels spend about $250 each. “Right now, people spend a day at Disneyland, but trying to stretch that has been tough for Disney,” said Christopher Dixon, an analyst with UBS Warburg. “California Adventure will change the dynamics, turning (Disneyland) into a bona fide resort destination where people will stay three or four days.” John Robinett, a principal with Los Angeles based Economics Research Associates, an entertainment and leisure consulting firm, said that when California Adventure opens, other parks, including Disneyland, will likely see a 10- to 15-percent drop in attendance. “Usually, it’s a temporary phenomenon, though,” he said. After a year or two, parks tend to regain ground after local residents have already tried the new theme park and are ready to revisit their old haunts, such as Knott’s Berry Farm or Magic Mountain. Potential boost for Universal Dave Schmitt, a principal with Management Resources, an industry consulting group in Tustin, argued that California Adventure could benefit Universal Studios by boosting domestic and international tourism into Southern California. “There’s a certain synergy when a new theme park opens,” he said. “Tourists will be coming to Southern California for a four- or six-day trip and, after they’ve done California Adventure and Disneyland, it leaves a couple of additional days to do other things.” Kyser said there’s no doubt that California Adventure will provide a boost to Southern California’s economy. The new park is expected to draw 6 million to 7 million visitors a year. The question is how much time those visitors will spend in L.A. County. Kyser suspects most will land at LAX and simply take tour buses to Anaheim. “We end up with the added traffic congestion,” he said. Part of the problem for Universal is that the theme park has been slow to add new attractions, said Kyser. The company had big plans for new attractions, hotels and retail shops that would turn Universal Studios Hollywood into a destination resort in its own right, but the company put the $1 billion project on hold in 1998 in the face of intense opposition from homeowners, trade unions and politicians. “You had all kinds of agendas on the Universal project to the point that it almost got to be the theater of the absurd,” said Kyser. “The need to think strategically about this got lost in the hubbub.” Eliot Sekuler, a spokesman for Universal Studios Hollywood, declined to discuss the potential impact on the park of California Adventure, but he disputed Kyser’s contention that the company has been slow to add new attractions. In spring, the company opened the “Rugrats Magic Adventure,” a live show with actors and dancers dressed up in Rugrats costumes. The company updated its tram tour, adding video screens so visitors can see movie snippets as they visit particular sets. And next year, the company plans to add a live animal show based on the popular cable television show, “Animal Planet.” “We’re enjoying a very good year,” Sekuler said. “In general, there’s a lot of momentum coming off the summer, and we’re expecting a big holiday season.” Mega-rides wanted Kyser said theme parks need a new “mega-attraction” about every year, and the Rugrats show doesn’t really qualify. The park’s last mega-attraction was “Terminator 2:3D,” a three-dimensional movie combined with live action entertainment that opened in spring of 1999. Six Flags Magic Mountain in Valencia, on the other hand, has done a good job developing new attractions, said Kyser. The addition of Hurricane Harbor, the company’s water park, has helped turn Magic Mountain into more of a destination. Magic Mountain unveils a new ride about every year. The most recent addition was Goliath, a 255-foot-tall looping roller coaster that opened this year. Universal Studios does not release attendance figures, but according to Amusement Business, an industry trade publication, the park’s attendance has been flat in recent years. Universal Studios Hollywood had about 5.1 million visitors in 1999, the same as in 1998. Six Flags Magic Mountain saw a 3 percent increase in attendance from 1998 to 1999, when the park had 3.3 million visitors. Amy Means, a publicist for Magic Mountain, said the park isn’t worried about California Adventure. “It’s great for the industry because it brings a lot more visitors to Southern California,” she said. Magic Mountain vies for a different clientele. “We’re the park of choice for thrill seekers,” said Means, noting that Magic Mountain has made the Book of Guinness Records with the fastest roller coaster (“Superman the Escape,” which goes 100 mph) and the tallest standup roller coaster, “Riddler’s Revenge.” Kyser said that only time will tell whether Vivendi, the French firm that’s taking over Seagram Co. Ltd. and its Universal Studios Inc. subsidiary, will pump the needed resources into Universal Studios Hollywood. Until the theme park improves its offerings, though, “it will just sort of be there,” Kyser said.

By this time next year, the population of Sherman Oaks is likely to grow larger and grayer. In the past month, construction began on two senior-living facilities that will increase the population of elderly residents by about 300. Add to that yet another senior facility due to break ground early next year in nearby Valley Village, and the senior population in the Central Valley will swell by more than 600 residents. Although it’s likely that the three companies selected sites in such close proximity by coincidence, each has tapped into what it considers to be an enormous demand for such residences. “Our belief is, even if there were more (facilities) built, there is sufficient market depth,” said Michael Grust, president of Senior Resource Group, which has begun construction on The Village at Sherman Oaks, a 249-unit retirement community at 5450 Vesper Ave. SRG’s $35-million development will include studio, one- and two-bedroom units with services ranging from health care to an Internet cafe. The residence will cater to middle- and upper-middle income seniors with rental rates ranging from mid-$2,000-a-month to $3,000 a month for assisted living facilities. About 80 percent of the complex will be devoted to independent seniors, with the remaining 20 percent designed to accommodate those who need-assisted living quarters. In addition to SRG, Menorah Housing Foundation has broken ground on an 84-unit facility at Noble Avenue and Moorpark Street. And PCS Development Inc. is expected to begin construction on a 336-unit facility at 12629 Riverside Drive in Valley Village early next year. Menorah, a non-profit organization that specializes in senior housing, has a three- to 10-year waiting list in Los Angeles for its stock of 11 senior housing facilities. Rental rates at the facilities are subsidized by federal and other government tax credits. “The need for affordable housing is staggering,” said Pamela Gach, director of property management for the organization. Menorah receives tax credits for its projects, which allows the organization to provide housing at below-market rates. Its Sherman Oaks residence will be geared to seniors with incomes that range between 35 percent and 50 percent of the median income in Los Angeles. While Menorah uses a number of criteria in choosing locations, the agency points out that Sherman Oaks is especially well-suited to its objectives because the area holds a number of seniors who cannot afford the cost of housing in the community. According to SRG officials, its average resident is expected to be an 83-year-old single woman with an annual income over $50,000. Grust said his complex targets those residents, but it also focuses on what it calls “influencers,” children who may want their aging parents to move closer to their own residences. While the project is the company’s first in the Valley, Grust said, “I don’t expect it will be my last one. We feel very comfortable (with the area).” Coach Moves Coach USA, a transportation company, has acquired a 43,850-square-foot industrial building in Sylmar to expand its Los Angeles operations. The transaction, at 12760 Foothill Blvd., is valued at $2.5 million. Brent Weirick of Colliers Seeley represented the buyer. The seller, 12760 LLC, was represented by Greg Barsamian of CB Richard Ellis. Corporate Move CSI Consulting Inc. is moving its corporate headquarters from Agoura Hills to Warner Center. The company has leased 9,648 square feet of space at 5950 Canoga Ave. for an undisclosed sum. Ed Ball and Joel Hayes of NAI Capital Commercial represented the tenant. The landlord, AH Warner Center Properties, represented itself in the transaction. Auto Center Deal A group of local investors has acquired a 1.5-acre auto center in Canoga Park for $1.6 million. Holmes Body Shop, whose principals are among the investors in the transaction, will occupy 15,000 square feet in the center at 7358-7424 Deering Ave. Most of the remaining space in the 24,000-square-foot facility is occupied by two other tenants who will remain at the center. Joe Lopez and Ted Roberts, brokers with Westcord Commercial Real Estate Services, represented the buyers, Deering Properties LLC, and the seller, Rosco Enterprises. Sherman Oaks Lease Interactive Telecom Network Inc. has leased 27,434 square feet of space at the Imperial Bank building at 15303 Ventura Blvd. in Sherman Oaks. Robert F. Chavez and Christina E. Bellinghausen of The Staubach Co. represented the tenant, an Internet services company. The landlord, Galleria Park Partners LLC, was represented by Tony Acerra and Gina Guarino of Douglas Emmett Co. Simi Sale Revolution Eyewear has purchased a 29,769-square-foot industrial building at 997 Flower Glen St. in Simi Valley for somewhat more than $2.5 million. Revolution will move its corporate headquarters and warehousing into the new facility. Craig Weisman of TOLD Partners represented the buyer. The seller, Hillside IV LLC, was represented by Tim Tucker of Mid Valley Properties. Manpower Expands Manpower Inc. leased 3,253 square feet of office space at 15760 Ventura Blvd. in Encino from Douglas Emmett Co. The company is moving from Sherman Oaks to accommodate expansion. Chad Gahr of NAI Capital Commercial represented the tenant. The landlord was represented by Gina Guarino of Douglas Emmett. Staff reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14, or by e-mail at [email protected].

Throughout the nation, the minority business community is enjoying an enormous boom. One bank and a couple of government agencies are hoping to help bring that boom to the Northeast Valley. Wells Fargo Bank recently joined forces with the Valley Economic Development Corp. and the U.S. Small Business Administration to turn a satellite small business development center in Pacoima into a full-service office. It is part of a drive by banks and agencies all over the state to both cash in on the boom and help it along. “The Pacoima office (officially known as the North East Valley Small Business Development Center) has been around since the early 1990s, in one incarnation or another, but always as a satellite of the VEDC,” explains Oscar Machado, a VEDC business consultant. “The key change now is that the SBDC at Pacoima has become more permanent and will get further support from the SBA.” Small business development centers, or SBDCs, are government-supported centers that help prospective and current entrepreneurs start or grow their businesses. According to a 1999 report by the Small Business Office of Advocacy, the number of minority-owned firms has increased 168 percent over the last decade, and the revenues they generate have jumped 343 percent in the same period. Still, minorities traditionally have had trouble obtaining the capital needed to grow their companies. Major financial institutions from BankOne which, together with the U.S. Hispanic Chamber of Commerce, has created a venture capital fund, to Bank of America, which has established national lending partnerships with La Raza and the NAACP have recognized the economic potential of this market segment. They have begun to craft targeted programs that combine loans and banking services with technical and business assistance. Among the available offerings in California are The Urban Enterprise Fast-Step program from Union Bank of California, and loan programs from Wells Fargo for blacks, Latinos and women. Wells Fargo has pledged to make $1 billion in small-business loans to blacks and $3 billion to Latinos over the next 10 years. The bank has partnered with the U.S. Hispanic Chamber of Commerce to launch the Latino Loan program, and with the Web site NetNoir.com to create the African-American Loan program. Through its Woman’s Loan Program, the bank has pledged to lend $10 billion to female entrepreneurs. “We think it’s very important for Wells Fargo Bank to develop partnerships and do outreach (in the local community) as it relates to business financial assistance and consulting,” explains Darrell Brown, Wells Fargo senior vice president and market president for the San Fernando Valley. The bank’s outreach efforts will include training for entrepreneurs in issues such as business management, investing, succession planning, virtual banking and the value of the Internet. Profit motive But this is not just about being a good corporate citizen, says Brown. It’s also about making money for the bank. Consequently, Wells Fargo doesn’t deviate from its traditional loan underwriting policies when reviewing candidates for the African-American and Latino loan programs. The bankers still look for “SAW”: stability, ability to repay and willingness to repay, says Brown. As with any other small-business loan, Wells Fargo carefully evaluates the business, its history, management, market competition, future earning potential and the character of its owners. “If they don’t quite meet some criteria, we might price the loan in such a way to minimize the risk to the bank, which might translate into higher interest rates,” adds Brown. “We try to customize and structure a loan that is unique to each individual, because there are so many variables to consider.” If a business falls outside its loan parameters, Brown says, Wells Fargo might refer the company to a partner, such as the VEDC, for technical assistance. Wells Fargo also aggressively uses all the financial resources available to try to make loans, says Brenda Dulan Ross, senior vice president of community development. This includes using SBA and California loan guarantee programs, microloans and even co-lending. Burbank entrepreneur Carlos Garcia knows how valuable the Wells Fargo effort can be. His firm, Garcia Research Associates Inc., conducts market research via focus groups with Latinos, blacks and other consumers. He has 12 full-time employees and about 60 part-timers. In 1999, tired of struggling to grow his business with a short-term line of credit, he began shopping for long-term financing. With a 10-year history of growth and about $1.5 million in annual sales, Garcia thought he would be a good loan candidate. After considering a number of banks, he narrowed the choice down to City National Bank and Wells Fargo. “Wells Fargo sort of approached us and said they wanted to support us. I said, ‘Let’s give it a try,’ but I was skeptical, because the bank had turned us down a few years ago,” remembers Garcia. “City National Bank also went at us with every bit of enthusiasm.” But after reviewing his application, which showed growth but no “paper” profitability, City National summarily dropped out with nothing more than a form rejection letter. “They didn’t even ask about the business or investigate it. They really didn’t give us the time of day after looking at the application,” says Garcia. Hands-on help In contrast and to his surprise, Wells Fargo took the entrepreneur under its wing. “(The loan officer) helped us mold our application and showed us how to organize the paperwork in such a way that would improve the likelihood of the loan being approved,” Garcia says. “He really went to bat for us. He was so dogged and determined to make it happen.” Garcia was able to obtain a $150,000 SBA-guaranteed loan. “We provide workshops dealing with different issues that businesses face,” explained Antonio Castillo, a business consultant with the Pacoima SBDC. “Most of the companies we serve don’t have access to big firms like Andersen Consulting.” According to Castillo, the free help offered by the SBDC ranges from information on starting a company to assistance dealing with issues such as human resources, marketing, sales, customer service, accounting and e-commerce. The center also has access to a number of SBA loan programs.

Sixteen years ago, William Gervais started Qualstar to develop and sell a product that now sounds downright quaint: data-recording technology involving nine-track tape drives. But things change. Last year, Qualstar Corp. posted revenue of nearly $50 million, most of it from its core business of tape libraries, providing the data backup that many companies now believe is crucial. “These days, everyone sees that (data backup) as mission critical,” said Scott Sutherland, an analyst with Wedbush Morgan Securities. “If everything collapses, they (Qualstar) are the final backup.” And while Gervais, Qualstar’s president and CEO, may not wish an earthquake, flood or computer meltdown on anybody, disasters can be very good for the tape library business. “Every time there’s another computer virus, our business goes up a little,” he said. Qualstar, now based in Canoga Park but headed shortly to Simi Valley, puts everything on tape. Its tape library data storage systems, tape drives and utility software can be used with a number of operating systems to manage large quantities of data in computer networks. The Boeing Co., for example, uses Qualstar tape libraries to store data about space shuttle engines. Gambling casinos use the company’s equipment for the videotape they must keep of activity on their gaming floors. “In fact, their primary growth driver looks to be in the security market,” Sutherland said. That includes the security systems in railroad stations and retail stores. Internet service providers that need plenty of space for online storage also use Qualstar equipment. Gervais said the company moved from being primarily the manufacturer of tape drives to the developer of tape libraries in the mid-1990s, just as the Internet’s popularity was taking off, and demand for data storage started ramping up accordingly. “We always knew this was going to be a big business,” Gervais said. For Gervais and his 100 or so employees, it has been a phenomenal business. In the last decade, revenues have gone from about $8 million a year to $49 million last year. “And we’ve been in 26,000 to 28,000 square feet of space for the last 10 years,” Gervais said. (Qualstar moved to its current facility in Canoga Park when its previous plant in Chatsworth was damaged in the Northridge earthquake.) All that is changing though. By February, Qualstar expects to be ensconced in a new location it is building in Simi Valley, which is twice the size of its current space. That pending move and other expansion plans were fueled by the company’s initial public offering in June. “We raised about $20 million,” Gervais said. “That should give us a few years of growth.” The IPO did not come off without a hitch, however. It had to be postponed because of the Nasdaq’s big drop last spring. “The very day the market crashed was the day we were going to set the price,” Gervais said. Qualstar officials had been looking to move the company for some time, and they say the decision to go to Simi Valley was an easy one to make. “The city of Simi Valley wanted us and the city of Los Angeles didn’t,” Gervais said. Qualstar’s net income for the quarter ended Sept. 30 was $2.3 million (18 cents per diluted share), compared with net income of $1.9 million (20 cents per diluted share) for the same quarter a year ago. Revenues were $13.8 million vs. $11.4 million for the same period the year before. Despite the increase in net income over the same period last year, “The last quarter’s earnings per share did go down,” Gervais acknowledged. “But that’s because there’s 2.9 million more shares out there now (due to a secondary offering).” The announcement of that dilution of earnings per share, explanations notwithstanding, may also account for a recent drop in share price from a high of $16 on Oct. 19 to $8.06 at the close on Nov. 24. That is the assessment of Brion Tanous of First Security Van Kasper, who added that another reason for the Qualstar’s stock selloff was the general downturn in high-tech stocks. “I think it was the volatility of the market,” Tanous said. Nevertheless, Tanous said, “this is a highly profitable company. They grew their business just as they said they would, and they’ve done quite well.”

Like most kids this time of year, Internet geeks and online entrepreneurs have been itching for some new toys. They might end up with one of those trendy Razor scooters or, if they’re lucky, a Playstation 2. But they won’t be getting what they really wanted: a bunch of cool new Web addresses. You see, their old favorite, dot-com is almost used up. All the best addresses in that top-level domain were claimed years ago, forcing newcomers to name their Web sites and even their companies with nonsensical phrases or non-words. Parental types are quick to point out that plenty of perfectly nice dot-net or dot-org addresses are still available. But Web publishers have shied away from those unfashionable domains, shunning them like a pair of store-brand sneakers. Instead, they were hoping that Santa Claus or, in this case, the Internet Corporation for Assigned Names and Numbers would deliver a few domains that could compete with that dot-com cache. Well, it turns out that Christmas came early this year. On Nov. 16, ICANN announced seven new top-level domains that will be put into use sometime next year. The companies that proposed the winning domains and, as a result, get to sell Web addresses with those suffixes are of course ecstatic with the choices. But online reaction to the names was as bitter as the face of a child unwrapping a new pair of corduroys. Judging by comments in online forums from the people who will actually be using them, the new domain names seriously dot-suck. Naming names So what’s wrong with them? Here’s a rundown of the names and the problems they raise: – Dot-biz: This name is meant for companies that weren’t quick enough to grab the dot-com of their dreams. But since the concept behind both domains is so similar, owners of dot-com addresses will surely try to claim the equivalent in dot-biz. And if they don’t get those names fair and square, they’ll certainly make a play for them in court. At least lawyers will love it. – Dot-aero: A domain designed for airlines. But there really aren’t that many of them, and they already have their own dot-com sites. So why bother? – Dot-name: This is meant for personal Web sites, like www.bill.gates.name. But what happens when the guy from Microsoft finds that some other Bill Gates beat him to his own name? You guessed it: more lawsuits. – Dot-museum: Use of this top-level domain will be restricted to accredited museums. Nothing wrong with that, really, except the name seems a bit long just like most museum tours. – Dot-coop: The weirdest choice of all, this name is meant for business cooperatives. But do they really need their own domain outside of dot-com and dot-biz? I think not. – Dot-info: Boy, this really narrows things down, doesn’t it? While more-specific domain names would help people find what they need, pretty much everything online qualifies as information. – Dot-pro: Though this name is meant for doctors, lawyers and other business professionals, it will attract many of the same people who claim dot-name, dot-com and dot-biz. Again, more duplication means fewer new names but of course, more profit for name registrars. More dot-confusion In fairness to ICANN, the group was evaluating more than just names. Several proposals were rejected because the companies that offered them seemed less than stable. Others, such as a dot-kids domain for youth-oriented material and a dot-xxx realm for pornography, failed because board members feared registrars couldn’t effectively monitor content. But by limiting their choices to the proposals offered by would-be registrars, ICANN passed up a chance to create a more rational naming scheme that might actually help Net users find what they’re looking for. I like dot-museum, for example, but it would make more sense in a system that included other common-sense identifiers like dot-store, dot-restaurant, dot-doctor and the like. Instead, we’re left with a nonsensical assortment of top-level domains that are either too specific, too general, or too much like some other name to do much good. Rather than easing the crush on dot-com addresses, this tangle of second-tier brands will end up making the old standard seem more valuable than ever. These aren’t necessarily the last names that ICANN will create, so would-be Web site owners can start putting together a wish list for next year’s stockings. Until then, however, they’ll have to settle for playing with their coal. To contact syndicated columnist Joe Salkowski, you can e-mail him at [email protected] or write to him c/o Tribune Media Services Inc., 435 N. Michigan Ave., Suite 1400, Chicago, IL, 60611.

At First Western Bank, it’s not unusual for customers to wander up to the second floor and pop into the president’s office just to chat. That’s how Tony Palmer likes it. In a financial world dominated by blue chip names and white-knuckle bureaucracies, the president and chief executive of First Western sees opportunity in going against the grain. In the 19 years since it was founded, Simi Valley-based First Western has flourished, not just by remaining small, but also by ignoring conventional wisdom about the way small banks are supposed to work. Instead of carving out a singular niche, as many community banks do, First Western offers most of the same products and services larger competitors provide. It simply does so with an eye to its particular customer base, offering retail banking and business services to its neighborhood clientele and merchant banking products to small businesses nationwide. The strategy has served First Western well. The bank, with seven branches and $200 million in assets, has enjoyed 17 consecutive years of profits. For the third quarter ended Sept. 30, First Western recorded net earnings of $1.7 million ($1.48 per share), compared to $1.4 million($1.43 per share) for the same period in 1999. Meanwhile, assets have grown from about $165.7 million in 1999. Question: What businesses is First Western engaged in? Answer: We’re an old-fashioned community bank. We offer multiple services to everybody. That’s kind of unusual for a small bank. We do Fannie Mae and Freddie Mac real estate loans; we do construction real estate loans. You can build your house. You can finance the long-term loan with us. You can do the home equity line with us. We can do the car loan. We can issue you a credit card. We’ll do your merchant processing, if you happen to be a merchant. We do everything but sell insurance and stock. Q: Most community banks have tried to carve out a niche focusing on a particular service to avoid butting heads with large institutions. Why did you choose not to? A: I think if you were to ask, what’s our niche, it’s probably giving more personal attention. Everyone talks about that. Customized service is the buzzword today. But in reality, the reason for most of the consolidations is efficiency. They’re going to cut overhead. They’re going to cut the cost of doing business and make it more profitable. In the process of doing that they cut out the personalized services. They don’t have the (number of) employees. They use computers (instead). Q: How is First Western different? A: We have people sit down at the teller station. All of our tellers except for one branch have chairs. So it’s a little more relaxed, a little more comfortable. If you have an account with us and you’re overdrawn, you usually get a call from us. You’re not going to get that kind of attention in a big bank. I was with a customer in the Fillmore office who was a Wells Fargo customer. She got tired of taking her accounts into the grocery store and standing among the potatoes, as she put it, and talking about her business. The final blow came when she had to reach a person about a payroll matter. Here you talk to people. We have an automated phone system, but it takes you to a person. And you can request a person. Q: Is it difficult to manage the manpower side with the labor market as tight as it has been? A: It’s been a real problem. All community banks are having that problem. It used to be we would steal employees from larger banks that had training programs. Now the larger banks really don’t have training programs, so we’ve implemented our own training program. We try to hire people, maybe somebody right out of high school, and we bring them in and we put them through a teller training program. We train in marketing customer service, we try to take them through as many steps in the bank as we can. Q: What kind of turnover do you experience? A: High. What happens, once they get trained, somebody else is out trying to steal them. At the lower end (of the salary spectrum), our turnover is probably about 50 percent a year. In the upper levels, it’s very stable. Q: Most of your growth has taken place since 1996, around the same time the real merger and acquisition activity occurred in banking. Did the mergers make you more aggressive? A: As bigger banks got bigger, the service level dropped. It gave us an opportunity to keep providing personal service, and it really paid off. We made a decision not only to be able to provide people, we also took the course of being very current on technology. We re-did all our computer systems. And from that we’ve been able to keep adding (services) as they come along. I wouldn’t call us a brick-and-click bank, but that’s our idea. We want to be on the Internet and provide telephone banking and various technological (advantages) but still combine that with (customers) being able to walk into an old-fashioned bank and be handled by someone individually. Q: Offering the latest in technology-based banking seems to run contrary to the idea of an old-fashioned bank. How do the two work together? A: You have to be able to provide service in an efficient way. We’re not a philanthropic organization. Since 1996, we’ve been working on an imaging system (that will provide computerized pictures of checks at the teller window). Toward the end of the year you’ll be able to do that with your own account over the Internet. Next year, we’re switching from giving back everybody their original checks to giving them a statement with all their checks imaged on the statement. It’s more efficient for us. We don’t have to manually go through the checks and put them in a statement. We don’t worry about mis-sorts that way. The postage costs go down. In addition, if you bank in Moorpark and you have to be in Chatsworth, your picture or your signature is imaged on the screen, so it comes right up at the teller station and they can approve a check right there. So technology is helping to provide a better level of service. Q: How much money do you expect to save with these changes? A: Postage will probably drop $10,000 a month. That, for us, is a significant number. Then we have employee time and I can’t really tell you dollar-wise what the time is going to do. But what it will do is, as we grow, we won’t have to add more people. And the people we have now we can use to make things go more smoothly in other areas. Q: There seem to be more community banks popping up. How are you dealing with the competition? A: There have been more and more. We don’t try to run head on head with a local community bank if they’re established in the area. What’s the purpose? If they’re already doing a good job, then there’s no reason to go in just to beat heads with somebody. There’s plenty of other areas. We’re not so aggressive that we’re trying to open two offices a year. Our plan has been more: let’s open an office, get it up and running, and make sure we’re doing a good job there before we go into another one. Q: How did you end up in banking, particularly after majoring in zoology? A: I graduated from college and was basically drafted into the Army and became a helicopter pilot. I did my tour in Vietnam, from ’70 to ’71. Nixon was trying to wind down the war and so when I got back (from Vietnam) there were no positions for helicopter pilots anymore, so they gave helicopter pilots an early out, which cut my time to two years. I had to make a quick decision on what to do. I had a cousin who was an executive in a bank, and he spoke very highly of it. So I gave it a try. Q: What is your favorite part of the job? A: I think it’s dealing with all the different people and seeing the different types of businesses our customers have. It’s really fun. You go to a business and just see what they do and how they do it. I’m somewhat mechanically oriented about things, so I like to see their processes. Q: Why have you always gravitated to independent banks? A: I just like the people contact, the community involvement, the versatility of doing a lot of different things.

Plans that Lancaster city officials had to dump one retailer for another that would generate more sales tax revenue may have backfired. Last summer, the Lancaster City Council voted to use its eminent domain power to evict a 99 Cents Only store from a popular retail center so a Costco outlet next door could expand. The only hitch: 99 Cents Only was not going to go quietly. That’s because the feisty discount retailer sidestepped California’s well-oiled eminent domain process and filed suit in federal court, alleging violations of its property rights under the U.S. Constitution. The city filed a motion in federal court hoping to have the lawsuit dismissed, arguing that the issue is really a state, not a federal, matter. But a judge in late October rejected the city’s plea and scheduled the matter for trial Feb. 6. As the trial date nears, the dispute over a seemingly insignificant retail space is shaping up as a battle royale, with potentially far-reaching implications over a city’s ability to evict a profitable business in the name of redevelopment. “When eminent domain was created, it was designed to prevent blight and be for the public good: building a library, a road, a park,” said Russell Wolpert, general counsel for 99 Cents Only Stores Inc. “But now it’s been so distorted and perverted. We don’t think the city should be able to select a preferred retailer and kick out the competition.” To that, the city’s attorney says a public good is being served by removing 99 Cents Only. If Costco Wholesale Corp. can’t get the space it needs to update its store at the Valley Central Shopping Center, the company has indicated it might pack up and move to Palmdale. “This is a classic example of redevelopment,” said David McEwen, the Newport Beach attorney hired to represent the city. “We’re trying to prevent a center from having its major tenant go dark. Should Costco leave, the city could lose $400,000 to $500,000 in sales tax revenue a year. The 99 Cents store produces not even a tenth of that.” Heavy hitters The lengths Lancaster has been willing to go to to retain Costco illustrates the enormous clout large retailers wield. Cities such as Lancaster depend on sales tax revenue from the Costcos and Wal-Marts of the world to pay for everything from street cleaning to police protection. So when Costco made noise about leaving, the city was quick to offer up $3.9 million in subsidies. The money would be used to buy the site of the smaller discount store, as well as two other parcels. The land would then be leased back to Costco for $1 a year. The Lancaster City Council, acting as the city’s redevelopment agency, voted June 27 to begin the eminent domain process. At the time, City Manager Jim Gilley predicted 99 Cents Only would be out by December, the deadline for turning the property over to Costco. But Lancaster may have underestimated 99 Cents Only, a publicly traded company with the resources and resolve to put up a fight. Under California’s eminent domain laws, a redevelopment agency can simply take a property and haggle over the compensation later in state court, if a “fair market value” can not be mutually agreed upon. However, 99 Cents Only threw a wrench in the process when it filed suit in federal court in July, arguing that the city is violating its constitutional rights. Under the Fifth Amendment, government must show there is a public purpose served by taking someone’s private property and, in this case, the city can’t demonstrate that, said Wolpert. “This (99 Cents Only) store isn’t blighted. It’s in Lancaster’s premier shopping center,” he said. “Where’s it going to end? Are you going to have a McDonald’s kicked out to put in a Burger King, a Texaco kicked out to put in a Unocal?” 99 Cents Only is seeking an injunction to stop eminent domain, but the company is not asking for any damages. “We’re not looking for any money. We don’t want to shake the city down,” said Wolpert. “We just want to run a business.” Broad constitutional implications Gideon Kanner, outside counsel for 99 Cents Only and an authority on eminent domain, said the dispute between his client and Lancaster has broad implications for property rights. “If you’re going to allow the taking of private property based on someone making more money from it, the right to own private property disappears,” he said. “What makes 99 Cents’ case fascinating and different is that, to the best of my knowledge, there’s no pretense of any kind that a public purpose is being served,” said Kanner, a former professor at Loyola Marymount Law School. “It’s simply a case of Costco wanting to expand.” McEwen said that is simply wrong. He doesn’t believe 99 Cents Only has a case in federal court because, technically, the city’s redevelopment agency hasn’t taken the company’s property yet. The whole deal could fall apart anyway if other tenants at the mall don’t give the nod to Costco’s expansion plans, as required by terms of a CC & R; at the mall. Home Base, in particular, has been slow in responding to Costco’s request for permission to expand, said McEwen. “There hasn’t been a taking yet,” he said. “I think they (99 Cents Only) have gotten way ahead of themselves.” Besides, the city offered to relocate 99 Cents Only, an offer the retailer essentially snubbed, McEwen added. Wolpert said his company chose the site in the first place because it is Lancaster’s best-performing retail center. “We didn’t pick this by throwing a dart on the map,” he said. In addition, the store is one of his company’s top moneymakers. 99 Cents Only often uses it to demonstrate to Wall Street that it can not only survive but thrive in a shopping center that has both a Costco and a Wal-Mart. McEwen concedes that so far it’s unclear what Costco will do now that the city can’t make good on its promise to deliver the space by the December deadline. “I don’t know what Costco’s plans are at this point, and I wouldn’t begin to speculate,” he said. Costco officials did not return phone calls. The fact that Costco hasn’t pulled up stakes indicates to Wolpert that the larger retailer was bluffing from the start. “The idea that Costco would close a successful store that’s already up and running just doesn’t make sense,” he said. Costco’s motives The whole issue raises questions about Costco’s motives in the first place, he said. “It wasn’t until April of 1998, after we opened up, that Costco all of a sudden had to expand. And they just had to have 15,000 square feet right where our store is,” said Wolpert. “We do compete on certain items, and you don’t have to buy a gallon tub of some product to get a great deal (at 99 Cents Only).” Wolpert sees the flap with Lancaster as evidence that the redevelopment process has run amuck and, in this case, the city has tangled with the wrong customer. “What happens in these situations is the government usually runs roughshod over the merchants,” he said. “And they can do it because it’s usually some guy with a doughnut store or a shoe store that can’t put up a fight. “We’re nowhere near the size of Costco, their market cap is 15 or 20 times bigger, but we’re big enough,” he concluded. “They’re not going to steamroll us.”