Like all good mysteries, the ending of Stephen King’s latest experiment in online distribution is far from clear. Critics predicted that, like most of King’s work, this saga would turn out to be a horror story. But the author says his unconventional high-tech tale is headed for a happy ending. King released the first installment of his unfinished novel “The Plant” on his personal Web site two weeks ago. While the 20-page chapter can be downloaded for free, the millionaire author is asking people to pay $1 each time they grab a copy. The catch? If fewer than three out of every four people who download copies actually pay, King says he’ll stop releasing installments after the second one. So no pay, no payoff. “Pay and the story rolls. Steal and the story folds,” King says on the site. “No stealing from the blind newsboy!” The thing is, Net users have been ripping off that newsboy so frequently that it’s a wonder he’s still in business. Pirated music and bootleg films are traded every second of the day without regard for the rights of their creators or their corporate partners. King has experienced this reality firsthand. Earlier this year, hackers distributed unauthorized copies of “Riding the Bullet,” his first e-novella, after cracking its copyright protection scheme. That 16,000-word story, made available online through publisher Simon & Schuster, still sold 500,000 copies at $2.50 a pop, earning King a cool $450,000. But most of those copies were bought up by Amazon.com and Barnesandnoble.com and given away for free. This time, King won’t have to split the profits with a publisher. If 500,000 people pay a buck for the first chapter, he gets $500,000. Of course, he’ll have to pay for Web hosting and marketing as well as for the credit card processing, which Amazon.com is probably kicking in for next to nothing. But even if most people stiff him, he’s likely to come out ahead. King has had the first few chapters of “The Plant” written since the early 1980s. So for him, the process is a little like auctioning off old junk on eBay. If nobody meets his reserve price, he just packs the manuscript back in the attic for another day. This makes me wonder why King is even bothering with that 75-percent payment rate. If he makes as much money as he needs with a lower rate, why wouldn’t he keep publishing new chapters? The point may be moot. King announced last week that more than 75 percent of the people who downloaded the chapter in its first week had paid. “When the dust settles,” he said, he expects “a pay-through rate of 85 to 90 percent.” Of course, the rate may drop as the ranks of his most rabid fans give way to those simply curious about the process. Also, word of his success might convince newcomers that there’s no need to pay, since others before them have pumped up the stats. Still, the early success suggests popular authors might well be able to use the Net to route around traditional publishers. Coming improvements in print-on-demand technology will allow them to deliver real books to stores across the country instead of relying on the unsatisfying process of on-screen reading. The question, then, is whether this would work for lesser-known writers. The cost of credit card processing makes it difficult to turn a profit from small batches of $1 transactions. Marketing is also a problem, since most authors don’t have the luxury of a fan base that will scour the Internet for any word of a new release. Human nature should, I think, be the least of their concerns. The reason most people feel comfortable trading pirated media online is because they figure they’re only stealing from some mega-corporation that doesn’t need their money anyway. Given the option of paying a reasonable fee directly to the creator, most people will usually take the high road. There will always be some who steal whatever they can grab, particularly under the Net’s anonymous cover of darkness. But King’s experiment is proving that even a rich guy can expect most Net users to pay for his products even when his back is turned. 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.

IPC PROVIDES DOCTORS WHO ONLY WORK IN HOSPITALS, TAKING CARE OF patients WHOSE PRIMARY PHYSICIANS ARE TOO BUSY TO SEE them In 1991, when Adam Singer answered an ad for a physician to take care of hospitalized patients, he never imagined that he was on the cusp of an emerging industry. Fresh out of a fellowship program in pulmonology, he was just looking for a way into the profession. “I just wanted to make hay for my practice,” Singer said. What Singer ended up with was an entirely new business, a medical practice that specializes in the care of acutely ill patients. North Hollywood-based IPC The Hospitalist Co., one of a still-small group of practices in the so-called “hospitalist” field, provides physicians who oversee patient care from the time of admission in a hospital through discharge. These doctors handle all facets of the stay, from ordering tests to writing treatment plans and supervising follow-up nursing care or other services needed when the patients return home. Since the company was founded in 1995, it has grown at a blistering pace; from $3.5 million in 1997, it grew to $10 million in revenues by 1999 and this year, company officials are projecting revenues of $45 million. It now operates about 30 hospitalist practices in five states California, Arizona, Missouri, Illinois, Texas and Colorado and openings in another six markets are planned for next year. “Over the next three years, we will be across the country and we will be fairly well-saturated (nationally) in five years,” said Singer, who is president and chief executive of the company. Unusual specialty IPC’s doctors may substitute for a primary-care physician during the patient’s hospital stay, or they may be assigned to patients who have no primary-care doctor. The company is paid for its services by the patient’s insurer or by a referring agency, such as the hospital itself or a skilled nursing care facility where the patient resides. The field emerged during the 1990s as managed care cut the time and conditions allowed for hospital stays, sending more patients to the doctor’s office for treatment. With their waiting rooms full, doctors had less time to attend to those patients who did require hospital care. Many also found that the expertise they needed for treating acutely ill patients was markedly different from the skills required to handle a typical office visit. The National Association of Inpatient Physicians, a professional group for hospitalists, estimates that there are more than 5,000 such practitioners nationally, but most are small, local operations. IPC has taken the practice a step further by virtue of its size and a proprietary technology that allows the company to collect and generate data about treatment and follow-up care. “They are broadly based, so they have a lot of experience in this,” said Robert Elk, chief medical officer for Pacificare of Arizona, which has been working with IPC for about two years. “Number two, they have a good infrastructure. I can find out how efficiently, and from a quality standpoint (how well, patients) are taken care of.” Shortly after taking his first hospitalist job with the Lakeside Medical Group in Los Angeles, Singer found he had almost 200,000 patients under contract. “By 1995, the demands were so great, I had to make a decision whether to stay in the (current) practice or expand,” he said. Singer formed IPC on a shoestring, subcontracting with other medical groups to provide doctors, until 1997, when another physician coined the term “hospitalist” and the investment community began to take notice of the field. With venture funding in tow, Singer developed a business plan, began building a full-time team of doctors and professional administrators and engaged companies like Microsoft Corp. and Oracle Corp. to refine what he calls, “a computer technology that drives the company.” Using personal digital assistants, the doctors capture all the information regarding a patient’s hospital stay personal data, medications, tests taken and results, etc. at bedside, and transfer it to a central database in the company’s headquarters, where the information is analyzed. “The beauty of that step is, I’m able to improve the performance of the doctors,” Singer said. Virtual second opinions Doctors typically arrive at their treatment decisions by calling on their own experience and informal consultations with their colleagues. But with IPC’s network and reporting capabilities, each doctor has the benefit of a wide range of experiences to draw on. They can better determine which treatments are most effective, use the data to develop protocols for doctors to follow, and report back to primary care physicians and specialists. That’s particularly important in today’s health care environment, some say. “It used to be you could take your time about proceeding with a diagnostic or treatment course,” said Elk, referring to earlier days when patients were routinely admitted to hospitals when doctors didn’t know what was ailing them. “But these days, patients who are in the hospital are all very acutely ill, and their condition is rapidly changing. They may require changes in the therapeutic approach more than once a day, and these doctors become very familiar with the kinds of illnesses (they handle).” Some industry observers wonder whether employing hospitalists runs the risk of short-changing patients for the sake of efficiency and cost. But Singer and others point out that the hospitalists improve the level of care patients receive because they spend more time with patients than a primary care physician could, and because they are more experienced in the types of acute illnesses hospitalized patients typically have. At the same time, Singer said, the company’s doctors must be even more receptive to the needs of the patients because they are so ill. “The demand is greater on us,” he said. “Managing such acute illness, you have to be sure that what you do is always best for the patient.”

Los Angeles-area retail sales are projected to grow less this year than last, though boutique stores seemed to fare better than larger retailers in the first half of 2000. According to the Los Angeles Economic Development Corp., Los Angeles-area retail sales in 2000 are projected to grow 6.5 percent from their 1999 level, and another 5.1 percent in 2001. In 1999, sales jumped by 9.1 percent over the previous year. Besides a general cooling of the economy, the slowdown is blamed on heavy competition between mid-range department stores like Macy’s and Robinsons-May. These stores, experts say, are not luring as many shoppers because they are carrying similar goods. But distinctive boutique stores appear to be thriving. “I think small business is hot right now,” said retail consultant Bill Pearson with Retail Analysis and Planning in Pasadena. “That came about as chain stores began to report flat sales.” Pearson has 11 Los Angeles clients, including Dolce & Gabbana spin-off D & G; and the 14-store Diane’s Swimwear chain; all but one of his clients are reporting annual sales growth rates in the mid-teens. Mall managers echo Pearson’s sentiments. “Many of the fashion stores are showing double-digit increases,” said Cindy Chong, general manager of Glendale Galleria. “We are doing tremendous sales.” The Galleria reported that year-to-date sales through June at its specialty stores are up 10 percent over the like period of last year, with apparel leading the way. The mall is projecting its specialty-store sales per square foot this year will top $500, up from $465 per square foot last year. The strong sales, Chong said, are mostly in the smaller lifestyle stores, while the larger anchors are struggling. The smaller-store trend is also evident on Melrose Avenue, which keeps expanding with boutique stores springing up west of Crescent Heights Boulevard. “I think the sameness of big stores and the emphasis on price and sheer tonnage of inventory is boring the customer,” Pearson said. Jack Kyser of the LAEDC calls the department stores “homogenized,” adding: “There is a huge copycat factor.” Al Frank, partner in charge of consumer business services at Deloitte & Touche, sees the same trend, and says that smaller stores are benefiting from being located in exciting areas like Old Pasadena and Melrose Avenue, which are creating an “experience” for the shopper. Frank points to Hot Topic Inc. as a smaller mall store that is hitting the right formula, while traditional retailers like Sears Roebuck & Co., JC Penney and Macy’s are trying to reinvent themselves. “They are getting squeezed; they need to re-create in shoppers’ minds a reason to come in,” said Frank.

Ron Bension is a self-proclaimed “doofus.” The president and chief executive of Sega GameWorks readily admits he’s inept at playing video games. So when Bension joined the company last fall, he began looking at ways to include games that were more user-friendly for those like himself. “From an overall product point of view, we’ve tried to change the focus from video-game interaction to (games that allowed more) social interaction, particularly games that are easy to understand and learn,” said Bension from the company’s new headquarters in Glendale. It was high time for a change. Sega GameWorks a joint venture between DreamWorks SKG, Universal Studios Inc. and Tokyo-based Sega Enterprises Ltd. was born at a time, 1997, when entertainment venues in malls were exploding, and a number of big studios were creating “location-based entertainment” sites intended as sort of mini-theme parks within the community. Unfortunately, the concept largely flopped. Themed restaurants like Planet Hollywood ultimately lost their sizzle, and most have now been shuttered. Walt Disney Co.’s Club Disney outlets were an experiment that never paid off. And Sega GameWorks, after opening 12 outlets around the United States in places like the Las Vegas Strip and the Ontario Mills outlet mall, was bleeding money. Who needs an arcade? For GameWorks, the main problem had to do with technology. The outlets feature such attractions as simulated racing games and go-karts, shoot-em-up video games, virtual roller-coaster rides and a proprietary game called Vertical Reality, where players ride mechanical seats as they do battle with characters on a video screen. When GameWorks began to roll out the concept in 1997, the company targeted a young male audience with technically complex games that required a certain level of expertise to play. But many of the serious “gamers” who were the company’s target preferred to stay home with their video-game consoles or computers, and folks who just wanted a night out had a hard time figuring out how the games were played. “It was a highly intellectual gamer software, and you had to figure it out,” Bension said. “When people want to go out, they just want to have fun, so we created software that was much more user-friendly.” Take GameWorks’ Vertical Reality game, for instance. Players showing up at the original GameWorks’ venues would have to maneuver the mechanical chair to keep it aloft while waging a battle on the video screen. Many people weren’t proficient enough, and ended up unable to get their chair into the air at all. With the user-friendly changes instituted under Bension, the chair moves along with the game, freeing players to concentrate on shooting their opponents on the screen. In addition, GameWorks added some different rides that don’t require aiming and firing at all. One new attraction, for example, pits two people against each other to see which can best copy dance steps that are shown on a video screen. In addition to the game changes, GameWorks also revamped the menus at its outlets, adding salads, pastas and other lighter dishes instead of the squat-and-gobble fried foods and burgers popular with young men. And perhaps most important, it began targeting business users. Many corporate trainers have discovered that GameWorks outlets make ideal places for company outings and team-building exercises; most of the games can be played in teams, and companies can customize programs to best suit their needs. Traditional favorites like golf outings only allow employees to interact in foursomes. Paintball, a kind of war game without the bullets, is considered by many to be too violent for a company-sponsored event. And other sports require a certain level of expertise on the part of players. But getting down and dirty at a GameWorks site doesn’t take much more than a willingness to play, and it builds the trust levels and sense of familiarity with co-workers that companies strive for in these types of outings. “(The event) got everybody laughing, and that enabled the door to open,” said Mary Smith, global advance systems group manager for Dell Computer Corp., who has used GameWorks for a training and team-building session with about 75 of the company’s employees and vendors. “People became familiar with their counterparts and it helped build trust.” Geri Illy, an executive assistant at Feed Flavors Inc., a company that makes sweeteners for animal feed, chose GameWorks for the leisure activity portion of a company sales meeting because the venues the company usually selected dinner cruises and golf outings were booked up. But the participants were pleasantly surprised by their experience. “Initially it was not something everyone wanted to do,” said Illy. “But it turned out to be a lot of fun, and it was very competitive.” Everybody can play Most team-building events focus on competitive exercises because they pump up team spirit and help players to bond with each other. But many traditional activities, such as sports events, are often dominated by the company jocks, intimidating many men and omitting many women. GameWorks provides a more level playing field, the participants say. To avoid alienating female employees, one financial services company often chose events like an evening of theater, a movie or dancing for its twice-yearly team building events. But the men hated the dancing and the theater events and everyone hated the movie. “How can you pick a movie for all of us?” said a company staffer who didn’t want his name used. “With this, everyone can participate. You come there thinking you’re hot, and then some woman is beating you.” Corporate executives who have held sessions at GameWorks also believe that the atmosphere of friendly competition can have a lasting effect when employees return to the office. Following the Dell event, salespeople were more likely to contact the vendors that participated when they had a problem, and they were more likely to trust the solutions offered by their counterparts, Smith said. “I get picky about making sure team events get me some sort of business result,” said Smith. “I don’t take my guys golfing.” GameWorks officials declined to release specific revenue figures, except to say that the revamped formula has helped turn the company around. “Where we once had declining same-store sales, we’ve had increasing same-store sales,” Bension said. The new formula has helped GameWorks attract more women, couples on dates and companies that have to please a wide variety of people. “Where we used to do maybe one to two (corporate events) every two weeks, we now average one or two a week,” said Laurel Clark, director of sales at GameWorks Schaumberg, near Chicago.

Optometrist Thomas Kutrosky has been running his practice at the same location on Weddington Boulevard, a block from the North Hollywood subway station, for 36 years. Since the station opened last month, business has doubled, he says, thanks in part to a subway token dispenser in the reception area of his office. “A lot more people come into my office,” Kutrosky said. “Some come in for tokens and see what I do and come back (for an eye exam or glasses).” The subway opening on June 24 has brought with it more people, if not yet actual customers then at least increased foot traffic for North Hollywood businesses. The parking lot at the North Hollywood station is generally full, and people wander in and out of the station throughout the day, with traffic being heaviest in the mornings and evenings. According to the latest numbers from the Metropolitan Transportation Authority, the North Hollywood station is the seventh busiest in the 16-station system, with an estimated 19,488 daily boardings and arrivals. Many business owners in the area say they have changed their own transportation habits, taking the Red Line trains to business meetings and restaurants downtown. “In the last month, (the Red Line) has changed a lot of people’s minds who were not really in support of it,” said Larry Applebaum, owner of musical instrument repair shop MusicTek and president of the Universal City/North Hollywood Chamber of Commerce. “For us, it’s vindication that (the subway) is being used and people are grateful for it.” Applebaum said one of his customers was so thrilled with the subway that he sold his car and now commutes by train downtown each day. That kind of enthusiasm may be rare, but there is little question that merchants who were once doubtful about the subway are now welcoming it, because it is driving traffic to their neighborhoods. Kutrosky said he was nearly forced to close down his business during the six years of subway construction, when motorists steered clear of the area. Now he rides the subway to occasional meetings with colleagues on the other side of the hill, and his wife rides it to her downtown job every day. “I was pretty pessimistic a couple months ago,” he said. “Everyone said they wouldn’t ride it. But now they’re riding it.” Merchants near the Valley stations have high hopes about the new subway. Many report seeing new business since it arrived, though few have been overwhelmed. David Dion, owner of women’s clothing store VaVoom, which sits directly across from the subway station on Lankershim Boulevard, said it has had a negligible impact on his business so far, though a few customers who identified themselves as subway riders saw the shop and wandered in. “When more people are here, maybe it will help,” Dion said. “I’m cautiously optimistic.” Dion himself takes the trains and buses to the garment district downtown. “I think it’s cool,” he said. “I wish I could use it more often.” Less enthusiastic is Brian Sheehan, owner of Eclectic Cafe on Lankershim Boulevard a block or so south of the station. He hasn’t seen much of an impact since the subway arrived. “I think people in Los Angeles who dine out are the type of people who don’t want to give up their cars,” Sheehan said. “It also might be too soon. But so far, nothing’s been increased and we haven’t had very heavy traffic.” Sheehan is still paying off half of the $120,000 loan he took out to keep his business going during subway construction. Sheehand believes business is probably better for merchants near the Universal City station, because many tourists get off there to visit the Universal Studios theme park. He just wishes more would stay on for the North Hollywood station. “The question is, are they going to continue on one more stop to NoHo, and I don’t think the area has enough attractions to do that,” Sheehan said. The El Portal Center, a block north of Sheehan, is hoping to be just such an attraction. The playhouse, the largest in the San Fernando Valley, hasn’t seen a big change in business since the subway opened, but director Pegge Forrest said she’s still optimistic. Forrest plans to market the theater to the Hollywood community, believing the subway will make it more convenient for people living on the other side of the Hollywood Hills to make the trip. Her goal is to boost the theater’s current 7,000 annual subscribers to more than 10,000. “The (MTA) is really trying to help us,” Forrest said. “They have us on all their maps and books and they hand out our flyers for shows. People are starting to see that we’re here.”

By Staff Reporter The rich are arriving in droves at L.A. hotels. As the local hotel industry posts another record year, the biggest increase in occupancy is being seen at luxury hotels in Beverly Hills and Santa Monica, where business executives from Europe, Asia and Silicon Valley are checking in while searching for opportunities in booming L.A. industries like tech and entertainment. The super-strong national economy, combined with rapid economic growth in many other parts of the world, have made those corporate travelers comfortable paying top dollar to stay at some of the most luxurious accommodations in the United States, if not in the world. The types of wealthy visitors flocking to L.A. also reflect the dynamics of the local economy. In search of creative Internet content, Silicon Valley millionaires are hobnobbing with local entertainment big wigs; European merger-and-acquisition specialists are hitting town in search of deals, and an assortment of wealthy tourists from Asia, the Middle East and Latin America are rediscovering the city. Particularly noteworthy is a big increase in the number of overseas visitors during the first part of the year. According to the Los Angeles Convention and Visitors Bureau, the number of European visitors to Los Angeles was up by 14.2 percent for the first four months of 2000 (the latest available data), compared to the like period in 1999. The number of visitors from Asia is up 8.2 percent over that same period. “This is a significant increase,” said Mary Carley, associate vice president for international marketing services with the LACVB. “Overseas visitors spend on average of 15 percent more per day than domestic visitors, and Europeans in particular tend to be drawn to the high-end hotels in Beverly Hills and Santa Monica.” According to the latest data from PKF Consulting, which tracks the local hotel industry, the occupancy rate at Beverly Hills hotels jumped to 77.2 percent in May (the most recent month available), a sharp spike from 63.6 percent in May 1999. Countywide, the occupancy rate for all hotels increased to 77.7 in May, up from 72.6 percent in the year-earlier month. Beyond Beverly Hills It’s not just Beverly Hills that saw a hefty increase. High-end hotels those charging more than $150 per room per night across L.A. County saw their average occupancy rate rise from 69.0 percent in May 1999 to 76.3 percent in May 2000. Clearly, Los Angeles is attracting a lot more visitors who are willing to spend top dollar to stay at some of the priciest hotels. “When you’ve got the occupancy rate in Beverly Hills reaching the 80 percent region, you know that the super-rich are coming to L.A.,” said Les Benson, president of the Hotel/Motel Group of the Southern California Business Association. “Clearly, this is a very strong year for the hotel industry.” Local hotels report strong increases from a wide variety of big-spending visitors, including domestic business travelers from the Bay Area and East Coast, music and other entertainment industry types from the United Kingdom, oil tycoons from Saudi Arabia, and wealthy tourists from Latin America. “During the first six months of the year, we’ve been seeing increases from the entertainment industry, which is the majority of our business during that part of the year,” said Jack Naderkahni, general manager of L’Ermitage Beverly Hills. “During the summer months, we’re seeing more leisure travelers, and there has been a return of visitors from Japan and an unusually high number of visitors from Latin America, Brazil and Argentina who typically go to East Coast cities such as Miami or New York.” The 124-room L’Ermitage, reopened its doors last year after a $60 million renovation, with room rates starting at more than $400 per night. The hotel is one of L.A.’s most exclusive accommodations. According to Naderkahni, the high price tag has not been a deterrent to filling rooms at the hotel, which he said is ahead of its sales projections for the year. Meanwhile, the Regent Beverly Wilshire also has had little trouble filling the 125 new rooms it added last year, according to Bill Doak, director of marketing. “We’ve seen a considerable increase from last year,” he said. “We’re seeing more business and more leisure travelers this year. Because of the high oil prices, there are a lot more visitors from the Middle East, but we’re also seeing pretty substantial increases in the number of visitors from Latin America and Mexico, even if they’re still a relatively small number, and also from Asia and Europe.” Wealthy visitors from the Middle East have for a long time come to L.A. for lengthy vacations to escape scorching heat back home during the summer months. High crude oil prices mean that this year they don’t have to skimp on their accommodations. Attracted by dot-coms Notwithstanding the influx of super-rich international business executives and tourists, the bulk of visitors coming to L.A. are domestic travelers. Among them, visitors from the San Francisco Bay Area are the largest contingent, making up almost 8 percent of the total number of overnight visitors last year. Those visitors from Northern Californian include a slew of wealthy Silicon Valley executives coming to L.A. to forge links with the entertainment industry and local Internet and new-media entrepreneurs. Another trend Stephen has noticed this summer is that more and more executives are combining business and leisure travel. They extend their business trip and fly their families out to spend a few extra days vacationing. As in Beverly Hills, the Santa Monica high-end hotel landscape has seen an increase in supply since last year, with a number of new facilities opening along the beach. But the new supply has had no adverse effect on either the occupancy rate, which at 83.3 percent for the year to date is the highest in L.A. County, or the average daily room rate, which at $182.98 per night is up 7.1 percent for the year. “Business is very strong in spite of the stock market fluctuation,” said Sig Ortloff, general manager of Le Merigot Beach Hotel, which opened in Santa Monica last fall. “Many people seem to have made their travel plans in advance and are committed to have a good time and enjoy their vacation.” Ortloff believes, however, that demand will start to level off by next year and that competition will become fierce as more hotels go after a limited number of affluent travelers. Indeed, luxury hotel business will slow down a notch next year, as a less boisterous national economy threatens to make travelers and businesses less inclined to pay top dollar for accommodations. “Traditionally the hotel business is the first to be affected by an economic slowdown and the last to benefit from a boom,” said Ali Kasikci, general manager of The Peninsula Beverly Hills. “And especially the high-end market is a direct reflection of the health of the economy.”

Waiting outside his Pico Rivera apartment building for a ride to work, Jose Olloa says he isn’t thrilled about the neighborhood where he lives. But he’s there because the day-care center across the street is affordable, and once he buzzes himself into the apartment complex, “inside, it’s safe,” he says. It’s not just Olloa who feels safe at Courtyard Apartments. Bascom Group LLC, based in Irvine, felt secure enough to buy the complex in 1998 and launch a massive renovation that involved spending $1,200 on upgrades for each of the 141 units. (About $170,000 total.) Bascom is one of a growing number of companies that are renovating marginal L.A. residential properties and filling them up with a better class of tenants at higher rents. “We’re seeing a renaissance in the renovation of apartments,” said Jerry Fink, a managing director at Bascom. “Today, the real buzzword is value-added. Everybody is saying they did something better than the other guy did to raise rents or reduce costs.” Rehabilitation of old Los Angeles structures actually has been in vogue for several years, but as more and more such buildings in the most desirable areas are scooped up, the trend is spreading farther afield. Investors are now more willing than ever to look outside prime neighborhoods and undertake projects in places like Pico Rivera, Palms, Koreatown and Canoga Park, said Laurie Lustig-Bower, senior vice president for CB Richard Ellis. “It’s kind of like the shared mentality,” Lustig-Bower said. “Now there’s a rush into those neighborhoods.” The push has been fueled by strong job growth, which has drawn new arrivals to L.A. and returned L.A.’s housing market to its pre-recession level. Big rent hikes In renovating its Pico Rivera complex, Bascom put a new layer of stucco on the outside of the building while installing new lighting, repainting the hallways and replacing the green shag carpeting that dated back to the building’s construction in 1971. The company also instituted new policies on noise and timely rent payments, and reached out to sheriff’s deputies to increase security. Two years ago, a “rent reduction” sign hung outside what was then known as the La Paz Apartments. But at the renamed Courtyard, monthly rents have increased from $585 to $725 for a one-bedroom apartment, and from $750 to $900 for the largest two-bedroom units. Though that might seem pricey for the area, occupancy has climbed from 52 percent to 96 percent, while gang activity in the complex has dropped. The result is that net operating income is expected to nearly double this year, to more than $800,000 for the entire complex. Developers face different challenges in other reemerging neighborhoods. Hollywood, for example, is filled with beautiful, old apartments that have the roominess and features that people want, said Greg Schem, managing partner of Elkor Realty Corp. But many of the buildings are trapped in another time. “We’re finding building that have barbed wire and bulletproof glass on the entryways,” Schem said. “That’s not needed anymore. The areas are safe and desirable.” More than just the tight market is driving the renovations, according to Sean Baker, who owns more than 1,400 apartment units throughout the region. “Los Angeles was built in the 1960s, and it’s time for everything to be improved,” Baker said. “Everyone was looking for A-quality properties, and those are just becoming fewer and farther between, so people have refocused their attention on C-quality properties, in maybe C or B areas.” Dislocated tenants Sean Deasy, a senior vice president with CB Richard Ellis, said undertaking renovations involves less risk than building new apartments. Among other things, there are seldom neighboring residents who will oppose the work, and the turnaround time is quicker. The payoff can be big, too. Adding $100 a month to the rent for just one apartment can increase the value of the building by $17,000, Lustig-Bower estimates. But that doesn’t necessarily bode well for low-income tenants. “Slowly, if people can’t afford to pay the increase in rent, they’re moving farther (into worse neighborhoods,)” Lustig-Bower said. The competition to find renovation projects that pencil out has local investors looking in new directions. Sean Baker, owner of Upside Investments Inc., is now buying rundown complexes in North Hollywood, Reseda and Canoga Park. “That’s where the economics make sense now,” said Baker, who recently bought a 180-unit building near a new business park in Northridge. “Rather than fight everybody, we’re staying on the fringe where the growth is coming to. “That’s the only place to make a good investment now.” But private investors are only willing to take on so much risk, which leaves some of the most rundown inner-city housing with little hope of being renovated. “There’s been a lot of rehab, but in areas that really need the housing, it’s probably not happening,” said Jack Kyser, chief economist with the Los Angeles Economic Development Corp. The D-quality neighborhoods are not attracting institutional capital, and never will, added David Kim, managing director at Bascom. “The potential for upgrading the property in a war zone becomes very poor,” Kim said. “That’s not going to change.”

Allow me to introduce Scott Burns’ soon-to-be-famous Missing Margarita Plan for making your first million. T-shirts to follow. It started with a simple demonstration of the time value of money from the managing director of a large Dallas insurance agency. He takes a sheet of paper and puts two numbers on it: Age 65 $1,000,000. Then he asks, “Do you think you can get money to grow at, say, 9 percent?” If you agree, and most people do, he tells you that a 9 percent return will double money in eight years. “Now let’s work it backward.” And he produces a series of figures like this: Age 57 $500,000 Age 49 $250,000 Age 41 $125,000 Age 33 $62,500 Age 25 $31,250 “Doesn’t look so difficult, does it?” he says. And it doesn’t. If you can put together $31,250 by the time you are 25, or $62,500 by the time you are 33, you’ll have enough saved at that time so you won’t have to save another dime for the rest of your life. To put this baseline figure in some perspective, the $31,250 is about a year of income for a college graduate with a few years of work experience. Take it back another eight years and the cost is $15,625 about the price of a Volkswagen convertible. A million dollars may not be what it once was, but it is still an awesome figure… far more than most people accumulate in a working lifetime. Yet if you look at it from the other end of a career, the possibility of a million-dollar retirement is no more than a year of income or, maybe, the shiny car that some parents buy for their teen-ager. Think about that. Early saving can produce some major lifetime benefits, including eliminating the need to save more, later, for longer; end worries about Social Security; eliminate worry about corporate pensions; and provide an above-average retirement income for as long as you live. Still nervous about getting the original sum together? I understand. So let’s extend the deadline another eight years: If you can’t put the money together by age 25 or age 33, you can still retire with a cool million if you manage to put together $125,000 by the time you are 41. Alas, while these figures are less intimidating than $1 million, it is still far more than most people accumulate. So the question remains: How do you put the original stake together? One answer is obvious: You pick your parents or grandparents as carefully as possible. A gift from a generous parent or grandparent when a person is young can do a great deal more than a much larger inheritance later. You can confirm this by talking to Donald Trump. But there is still another answer. One that does not require anything but having the fortitude to save every year: Use an IRA. Whether the contribution is tax deductible or not, the annual earnings are tax deferred, and a contribution of $2,000 a year will accumulate to the stake you need. If, for instance, you put aside $2,000 a year from age 21 to age 41 and earn 9 percent compounded, you will accumulate just more than $120,000. Similarly, if you put aside $2,000 a year from age 21 to age 33 and earn 12 percent a return available in growth stocks you will have $62,000 by the time you are 33. If you save, in other words, it can be done. Not as a lifetime savings project. Not as relentless drudgery. Just put aside $167 a month for somewhere between 12 and 20 years when you are young, and you’ll have a cool million at 65. That calculates out to about the price of a margarita a day. So if you can miss one margarita a day, you can be a millionaire. Easier said than done, of course. But consider trying to do the same thing from the other end of your working life. If you start saving at 50 (when most people do) you’ll need to put aside about $26,000 a year to accumulate the same million by the time you are 65. It may be difficult to give up a margarita a day when you are in your 20s but it’s virtually impossible to save more than $2,000 a month when you are in your 50s. Is a million more than you’ll ever need? OK. You can scale back. Give up fewer margaritas. Question: I work for the U.S. Postal Service, and there have been “rumors” flying around that an “early out” package will be offered. There would be no incentive bonus money. However, I would be offered both five years of age and five years of service to add on to what I currently have. I have been with the Postal Service for 25 years and am 49. This would give me a pension of about $30,000 per year right now, which would include about a 1 percent reduction, since I still would not be 55. I would still need to find another job. Here is my thinking. If I stayed with the USPS until I was 55, I would get about an additional $5,000 per year, if I retired then. However, if I were to get another job at the same pay rate and bank the pension, I would have more than $150,000 banked, not including interest. It would take 30 years for the increased pension to catch up. Am I correct in thinking that I should take the offer and move on? M.H., Eden Prairie, Minn. Answer: The “5 and 5” plan is typical of what large organizations with defined-benefit pension plans offer when they are looking for major staff reductions. They add five years to your experience with the company and five years to your age. This means that a worker who was 60 would be able to retire as though he had worked another five years and was 65 years old. The offer is a significant sweetener, particularly if you can remain on the company’s medical insurance plan. Should you take it? It’s not that clear. There is no final calculus for this kind of decision because it involves so many variables. The answer depends on your exact situation. Here are a few things to consider: Do you have an accurate estimate of your pension? Are you readily employable? If not, the first step out could be a long step down. What about medical insurance? Will you have to buy it on your own? Do you have any ailments that could make getting it difficult or ultra-expensive? Does your wife work, and can you get your medical insurance through her? The most powerful years in a defined-benefit pension plan are the years from 55 to 65. During that period, the amount of your pension normally doubles, even if your salary were frozen for the entire period. If your salary increases, your pension will be still higher. 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: [email protected]. Check the Web site: www.scottburns.com. Questions of general interest will be answered in future columns.

Big-box retailers weren’t exactly what the city fathers envisioned when they incorporated Agoura Hills. In fact, they incorporated largely to put the brakes on growth. But faced with a need to raise millions for road improvements, Agoura Hills officials and residents alike are now weighing a development plan that would include at least one, if not two, big-box stores. The development proposed by Selleck Development Group Inc. would plunk a 24-acre retail center down on the south side of Agoura Road. It is the kind of project most residents would have rejected out of hand a few years ago. But these days, the community is torn between its desire to retain its rural, scenic landscapes and the need to fix roads like the Kanan Road interchange, which is so overburdened it regularly backs up onto the Ventura (101) Freeway. “I think there’s a split in the community over how much development should go on,” said Dave Adams, Agoura Hills city manager. “But both the council and the community are more open to development, realizing we have to have a new funding source to get these (road improvements) done.” The dilemma came home to roost with the Selleck proposal, which was set into motion late last month at a meeting with city officials. Selleck who also developed Van Nuys Center at The Plant, a retail complex in Panorama City hopes to build a 300,000-square-foot shopping center on a parcel that now houses a collection of small businesses and an animal shelter. Daniel F. Selleck, president of the development company, said his firm is in escrow to acquire five of the six separately owned parcels needed to build the complex. Late last month he received tentative approval from the Agoura Hills City Council on a plan to widen Agoura Road, a precondition to getting any development approved for the site. Project moving ahead Selleck already has acquired a site to relocate the Los Angeles County animal shelter that now operates on the property. An environmental impact report on his proposed development is due to be completed within the next few months. “The EIR is going to study an option of two large-scale retailers along with some other freestanding restaurants and a single large retailer and more multi-tenant retail and, I believe, the city is going to pick a third alternative (to study) as well,” Selleck said. Building the retail center would require rezoning the parcel, and would bring the kinds of mass-market retailers Agoura Hills has long shunned. The accompanying road improvements also would cut into the city’s cherished hillsides. On the upside, the project could boost the city’s annual tax revenues by 30 percent, and Agoura Hills may not be able to afford to forego that windfall because the state has thrown much of the responsibility for funding roadway improvement into the city’s hands. “We have a $10 million commitment (from Caltrans to widen the Kanan Road freeway exit), but we have to come up with a local match,” said Jeff Reinhardt, an Agoura Hills city councilman. Since Agoura Hills was founded in 1984 with the express purpose of allowing residents greater control over development, the city has pursued a course of slow growth that has preserved 40 percent of its land as open space. But in recent years the city has found itself smack in the middle of a growth spurt along the so-called Tech Corridor that runs from Calabasas into Ventura County. Several roads must now be widened, including the Kanan interchange, which Councilman Reinhardt called “dysfunctional” because the two-lane exit is so overburdened. The city’s annual budget of $6 million is not enough to get the repairs done, and officials have resisted imposing business taxes to raise the money, leaving retail development as the only option. Benefits of big-box deal The Selleck project, the first large-scale retail complex Agoura Hills has seen in 10 years, could bring 200 to 300 permanent jobs to the city and about $700,000 to $800,000 in added annual tax revenues. “Citywide, annual sales tax revenues are about $2.4 million,” said Dave Adams, Agoura Hills city manager. “So (tax revenue from the Selleck project) is a big factor. We’ve got some huge road problems we inherited from the county that we have to come up with funding for.” Small, local businesses don’t generate the levels of tax revenues a big-box retailer could, and small businesses have not fared well at the southern end of the city. “The majority of residential is north of the freeway,” said David Anderson, Agoura Hills planning and community development director. “Anything that happens on the south side of the freeway would largely be of a more regional nature, simply because the freeway acts as a barrier (to Agoura Hills residents shopping south of the freeway).” But the design and type of retail center being proposed by Selleck remain sticking points with the community. Big-box development on the site would be visible from the freeway, changing the landscape and transforming the community’s fiercely guarded image to passersby. Neighbors also fear that big-box retailers would draw traffic from neighboring communities, adding to congestion, and might jeopardize the small-business owners currently operating in the community, many of whom are also residents. “We’re concerned that some of the businesses would suffer from the competition (from big-box stores),” said Jess Thomas, president of Old Agoura Homeowners Association. “If they put in a Target, they can put out a lot of these small businesses that sell specialty goods. And that could lead to business blight.” Still, residents met Selleck’s proposal to widen Agoura Road with some satisfaction, because the design would avoid the kind of cookie-cutter roadways that are often found in newer suburban communities. “It’s better because it actually protects more of the older oak trees and lets the road meander instead of being straight, which we think adds to the character of the community,” said Thomas. In the end, the homeowners say, they could accept a big-box center too, if it were designed in a way that would preserve the rural ambiance they’ve worked so hard to instill.

For much of the past three years, it was pretty much a given that L.A. city officials would deregulate the Los Angeles Department of Water & Power by the year 2003 or risk losing major commercial customers to competitors willing to offer cheaper electric power rates. But now, as those officials eye the doubling and tripling of electric power bills in the San Diego area as that region has entered a fully deregulated market, L.A. city officials are no longer convinced that deregulation is necessary or even desirable. “Deregulation is not as good as we thought it was going to be,” said L.A. City Councilwoman Ruth Galanter, who chairs the council’s energy and resources committee that oversees the DWP. “We may not want to go to the open market; certainly we should stay out until all the kinks are worked out of the current deregulation program.” Under the deregulation law passed by the state Legislature four years ago, municipal utilities like the DWP were allowed to choose whether they would join the open marketplace or remain regulated monopolies. The ultimate decision about whether or not to deregulate a municipal utility which must be made by early 2003 is actually up to the city councils, since they have the ultimate jurisdiction over the utilities. The state’s three investor-owned utilities Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electric were given no such choice: They must open up to competition no later than March 2002. In return, the investor-owned utilities were allowed to speed up collection of payments from their customers to cover billions of dollars in debts left over from costly investments in alternative power generating facilities. To help offset this, the state froze power rates for residential and small business customers of these utilities until the debts were paid off or until March 2002, whichever came first. San Diego Gas & Electric, the smallest of the three utilities with the least amount of debt, finished paying off its debts this past spring. As a result, the rate freeze was lifted and the utility was required to buy its power on the open market. But electricity is now in short supply, due to a dearth of new power plants and skyrocketing demand for power driven by the booming economy and the high use of computers. So SDG & E; customers in San Diego County and southern Orange County have seen their power bills surge, doubling on average and in many cases tripling or quadrupling. L.A. DWP General Manager S. David Freeman said the market is definitely not working as intended. “Everybody thought prices would go down with deregulation, because there was supposed to be more competition,” said Freeman. “But that’s not the case. This is turning into a summer of despair for those people in San Diego.” Freeman, who has been publicly cautious for the last year or so about whether his agency should be deregulated, said that the situation in San Diego only reinforces a go-slow approach to actual deregulation. “We’re not going to rely on a market that hasn’t proven itself yet,” Freeman said. “That doesn’t mean we shouldn’t be prepared for deregulation if the market does settle out.” To that end, Freeman has spent much of his three years on the job slimming down his agency and getting it ready to compete in an open electricity marketplace. In 1998, he reduced the DWP payroll by 2,000 positions; more recently, he has unveiled a plan to sell off the DWP’s 20 percent stake in a Nevada power plant and use the proceeds to modernize and expand the agency’s generating stations in the San Fernando Valley. “We need to make sure we are self-reliant, so that we don’t experience what’s happening down there in San Diego,” he said. “Ultimately, we’re going to be an advertisement for folks to come to the city of L.A. for cheaper and more reliable power.”