Seated on a couch in his Sherman Oaks office on a recent morning, Henry Dahut talked about the genesis of his Internet startup GotTrouble.com as his three-man documentary crew recorded the event for posterity’s sake. The Web site will revolutionize the way people tackle personal problems, he said, allowing them to get just the right help for a particular problem be it in the areas of law, love or health without the usual search-engine clutter. “We’re providing a calm environment for people in trouble,” explained Dahut, as the soundman lofted a boom over his head and the cameraman moved in for a close-up. Dahut hired the documentary crew to witness the birth of what he sees as an eventual Internet powerhouse. And like any proud parent, he wants his company’s early years captured on videotape. GotTrouble.com, like all Internet startups, faces significant hurdles as it tries to build a national brand while competing to some extent with Internet search engines as well as with the yellow pages. One Internet analyst went so far as to say the company’s business model is doomed to failure, but Dahut believes it will succeed. The attorney is so convinced, he sold his Mercedes and mortgaged his house to plow $850,000 of his own money into the startup. The company has yet to attract a nickel from outside investors, but Dahut expresses confidence that venture capital funding is right around the corner, and an initial public stock offering is only a year away. “You know something, I’ve never slept better at night,” he said. “When you’re truly committed, there is no room for failure.” Unlike a typical search engine, GotTrouble.com is an “event engine,” said Dahut. Users simply choose the particular problem, or event, they face from a drop-down menu, and they receive a list of providers of goods and services who might help. The company derives its revenue by charging sponsors insurance companies, law firms, family counselors, bail bondsmen, money lenders, employment agencies and others a monthly fee to make the referral list. Serious doubts Lisa Allen, an analyst with Forrester Research in Cambridge, Mass., said Dahut’s confidence may be misplaced. While she had never heard of GotTrouble.com, she doesn’t give the company much chance of success. “This is another dot-com idea doomed to failure for a couple of reasons,” she said. Internet companies must cater to a very specific niche to succeed, and Allen doesn’t see having a problem as a narrow enough interest to draw consumers to the site. Additionally, the business is built around an advertising model, which hasn’t proven effective over the Internet. “And trying to build this out nationally across a variety of services in all municipalities is a terrifically big task,” she concluded. If the business model doesn’t work, Dahut counters, why is his company closing in on profitability? He argues that the site does indeed serve a well-defined niche by targeting people facing specific problems. While conceding that building a national base is a big job, Dahut said the task is do-able if the company targets the 3,000-odd counties in the United States rather than attempting to go after each city. A career change Dahut practiced criminal and civil law for 13 years, but realized he had lost his passion for it. He took three years off to find himself, a journey that took him Kto film school in New York and later back to L.A. eight months ago to start a Web-based referral service for attorneys called DefensePros.com. He realized people in trouble are starved for information, and predisposed to make a buying decision. However, most people simply aren’t sure where to turn. “The light bulb went on for me,” he said. Dahut came up with the idea for GotTrouble.com and decided to meld DefensePros into the new site. That gave him the legal component for GotTrouble.com, and now he’s working on adding services for people who have health and love problems. For example, someone facing marital problems could click on “family” for a list of counselors to shore-up a shaky marriage, or find an attorney to help dissolve a marriage that’s over. Those facing a divorce also might need a moving company, a storage locker, an apartment guide or maybe even a short-term loan. Similarly, someone facing drunken driving charges might need a bail bondsman, a new insurance provider or perhaps drug and alcohol treatment.

Over the past two years, as the office real estate market recovered from the recession of the 1990s, many second-tier buildings in the San Fernando Valley lagged behind. But recently, as space becomes tighter and more expensive in luxury office buildings, interest in less prestigious, so-called class-B space has picked up dramatically. Brokers representing class-B buildings report that vacancy rates have gone down to single digits from highs of 15 percent or more just a year ago. Some buildings are fully occupied for the first time since the 1980s. “In the past, we were lucky to have occupancy rates of 75 percent or 85 percent in Van Nuys,” said Mike Toth, a commercial developer who operates Toth Properties. “Now I have one vacancy in the whole building (that I manage in that area), and I’m down to 95 percent full in another building in Mission Hills.” Class-B offices are smaller buildings of 45,000 square feet or less, typically located in less desirable commercial districts or slightly off the main thoroughfare in prime business areas like Ventura Boulevard or Warner Center. Space in such buildings went begging when the real estate recession raged through much of the 1990s because landlords were discounting rates on class-A space, bringing the prices on those buildings to levels comparable to less prestigious buildings. But over the past year, class-A rents have increased by 15 percent or more, driving some cost-conscious tenants back into the market for second-tier properties as their leases come up for renewal. “In the early ’90s, for 10 cents or 20 cents (difference per square foot, monthly) you could have an A vs. a B,” said Thomas Specker, senior managing director at Charles Dunn Co. Inc. “Now the difference can be 50 cents (a foot, monthly). A lot of tenants in class-A spaces are saying, ‘What do I have to pay $2.50 for?'” Statistics point to more interest Recent leasing activity in the West San Fernando Valley illustrates the trend. According to a report by Marcus & Millichap, gross absorption topped 139,282 square feet for class-B space in the West Valley in the second quarter of 2000, more than twice the 60,705 square feet absorbed in the same period of 1999. In the Woodland Hills and Warner Center area, a premier business district, gross absorption for class-B buildings reached 101,939 square feet in the second quarter, up from 67,394 square feet for the comparable period of 1999, Marcus & Millichap reported. “I’m seeing two types of tenants (for class-B offices),” Toth said. “People starting to expand from a small office or a home office situation and tenants whose rents have been raised substantially, and they want to bring their rent down a bit.” Balter, Miller & McHugh LLP, a certified public accounting firm, is a case in point. Seven years ago the company located in Woodland Hills because three of its partners lived in the area and because rental rates compared favorably to less prestigious buildings elsewhere. But when it came time to renegotiate their lease this year, the partners were looking at a 15 percent increase in rental costs, said partner Brian King. Officials realized they would not only save money by moving to Encino, but the location was also more convenient for many of the firm’s clients, who are based on the Westside of Los Angeles. Bargain prices Monthly rents for class-B properties in better locations can range as high as $1.85 or $2 per square foot. That compares with rents of $2.25 and $2.50 per square foot for class-A space in those locales. But on average, class-B properties are renting for about 20 percent less than luxury space, so in areas where luxury space rents for $1.85, class-B space has become even more affordable. But it isn’t just bargain rents driving tenants to these second-tier buildings. Brokers point out that even those who aren’t looking for low rental rates have resorted to class-B properties because they can’t find enough space to meet their needs in more expensive buildings. “If a tenant is location-driven and they have to be in a certain spot, the lack of available space can force them into a B or C location,” said Paulette Toumazos, vice president of office services for Daum Commercial Real Estate Services. She added that in some of these areas, tenants are renting class-B offices at rates approaching the cost in class-A space. Daum, which manages all classes of properties, is seeing class-B vacancy rates fall into the 8-12 percent range, down from a 12-15 percent range a year ago, Toumazos said. “It has been a long time since it’s been a landlords’ market like this, and it was probably when I first started (in the business) 12 or 15 years ago,” she said. Some tenants are also downgrading their spaces because they feel their business environment has grown more casual. “My experience has been that a lot of tenants want to have attractive space, but they neither need nor want for the showy (class-A) space because it sends the wrong message to clients,” said Toumazos. So far, most of the interest in class-B space has been in premier neighborhoods like Warner Center, but brokers believe that if the trend continues, even buildings in less prestigious commercial districts will reap the benefit of the space crunch. That is already starting to happen in Van Nuys, where Toth manages a property that was nearly vacant three years ago despite fire-sale monthly rental rates of $1 per square foot. Today, the same building is renting at $1.25 to $1.35 per square foot, and it is 97 percent occupied. “I have a standard offer for 3,000 square feet, and I don’t have the space,” Toth said.

The husband and wife teaM THAT LAUNCHED CAPITAL OFFICE PRODUCTS FIGURED THE ONLY WAY TO TAKE ON THE BIG GUYS IN THE BUSINESS WAS TO OFFER BETTER SERVICE. SO Far, their straTEGY IS PAYING OFF WITH SNOWBALLING REVENUE AND MORE MAJOR CUSTOMERS. Richard Nelson’s first job out of school was at his father’s office supply store, where he thought he would work for life. But family businesses sometimes aren’t entirely stable. In 1995, his father faced a decline in sales and decided to sell the firm to a national competitor. Nelson and his wife Carolyn, who also worked at the family business, were left without a job. They went to work for a bigger office supply store but soon found it wasn’t the same. Clients complained about a lack of service and an inability to easily find what they needed. So with several years of experience in office supply sales but no know-how on running a business, the couple decided to open their own office supply store in Pacoima. The couple, who had two young children, drained $20,000 from their savings and started Capital Office Products with some financial help from Nelson’s parents in late 1994. They at first relied heavily on Nelson’s father for advice and financial support. “My dad said it would be a good time for us to go out on our own,” Richard Nelson said. “He said it would be easy and painted a pretty picture for me.” But things didn’t start out as easy as Nelson’s father had promised. The first day of business was tense. “It was my husband and I and we sat and looked at each other and said ‘Oh my god,'” Carolyn Nelson said. “But then the fax machine beeped and we got our first order.” The Nelsons were entering an increasingly crowded field, competing with national chains like Office Depot and Staples Inc. They decided that to remain competitive, they would have to emphasize customer service, something they believed was a weakness of the larger companies. So far, the strategy has paid off. The company projects revenues of $2 million this year, up from $480,000 in 1995, its first full year of business. Attracting former clients Carolyn, who had been a saleswoman for her father-in-law’s office supply store, kept her Rolodex after leaving that company and convinced her clients to make the switch, promising lower costs and better service. The couple chose to locate the business in Pacoima because of the easy access to five freeways within a mile, and the low rents. Carolyn focused on building clientele through cold calls to companies throughout the San Fernando and Santa Clarita valleys. She also began making periodic checks on competitors’ prices so Capital could keep its prices in the same range. Richard, meanwhile, concentrated on stocking the warehouse with the most popular supplies, and worked on building up the number of product offerings and delivering them to customers when they needed them. He worked 15-hour days, from 4 a.m. to 8 p.m., to keep up with the load during the first three years of business. They lured clients by designing individual inventory lists for big customers so they didn’t have to flip though a bulky catalog each time they ran out of something. They offered same-day or next-day delivery and set up specific delivery times. If a client had a product not carried by Capital, Richard Nelson searched to find it and bring it to the customer. Office Administrator Vicki Davis with Re/Max of Valencia, one of Capital’s first clients, said she switched from using a larger office supply store after Carolyn Nelson made her pitch. “We like that they give professional service on a personal level,” Davis said. “Carolyn comes in once a week to check on us, she keeps an inventory of our products so that if we forget something she can remind us, and they have next-day delivery or same-day delivery for emergencies.” While Capital is more expensive for some items than the warehouse stores, Davis said the personal service more than makes up for the extra cost. “We never feel like she’s not available,” Davis said. Flurry of growth last year Despite such loyal customers, things didn’t really start to take off for Capital until 1999, when it landed big accounts like MiniMed Inc. and Twentieth Century Fox. The company increased its workforce last year to help with product delivery to all the new clients. “We don’t want to be the biggest office supplier in the world,” Carolyn Nelson said. “We just want a small chunk of business.” The Nelsons recently turned to a program sponsored by the Small Business Administration and Cal State Northridge’s business school. Under the program, MBA students at CSUN study family-owned businesses like Capital and serve as consultants, making recommendations on how to improve operations. The Nelsons are hoping it will help them grow their business to $5 million in revenues in the coming years and help them market the company throughout the San Fernando Valley. Up to this point, the Nelsons had never put together a business plan to guide their growth. With the help of the MBA students, they are doing just that. “We try everything we can to grow our business,” Carolyn Nelson said.

Twenty years ago, I sat down at a Royal typewriter in the Harrison Avenue offices of the Boston Herald American. It was my first job at a newspaper, and I wrote my first 700 words as a newspaper personal finance columnist. It was like coming home. That was more than 3,000 columns and 2 million words ago, all written during a period of massive change. It has absolutely not been one year repeated 20 times. Then, The New York Times was calculating how long it would take Saudi Arabia to buy all the stock on the New York Stock Exchange. Later, others worried Japan would do much the same, starting with our favorite golf courses. During that period, the investment world has sprouted mortgage securities, an entire universe of derivatives, discount and deep-discount brokerage, financial planning, variable annuities, 401(k) plans, variable rate mortgages, and the number of mutual funds has grown from a mere 427 to more than 7,600. Where in 1977 I worked on a Royal office typewriter and was proud to be adept with a financial calculator, I now work on a personal computer with more power and better tools than mainframes from the ’70s. I can spreadsheet, array and optimize. I can access, screen and sort massive databases that didn’t exist 20 years ago, or were available only at a massive annual cost to institutional investors. More important, virtually all of the tools I use in this column are available, at reasonable cost, to readers. You and I can now “do” our personal finances. And we can make them very, very complex. We can visit the local bookstore and peruse 900-page tomes that booksellers should market by the pound. We can also read books with only 300 or 400 pages on the nuances of options and other arcane financial arts. We could do that. But it wouldn’t make a lot of sense. The basics of personal finance are T-shirt simple. They were T-shirt simple 20 years ago, and they are T-shirt simple today. Master them and your financial future is assured. We can capture it all in seven “laws.” Hey, they might even be immutable: -Spend less than you earn. Millions of people still don’t grasp this simple principle, choosing instead to believe they can borrow their way to security and wealth. Unless you spend less than you earn so that you have money to invest all talk about personal finance is fruitless. -Make your saving automatic. Saving can’t be something you do with money that is “leftover.” There is no such thing as leftover money. Saving has to be as real and constant as buying food or paying the mortgage. The best way to do it is to arrange your finances so that you never see the money. That means using a 401(k) plan to the hilt, if you have one, or at least arranging for automatic withdrawals to an investment account -Take free money. Many people who would drive miles for a store sale routinely leave easy money on the table: They don’t take advantage of company-provided 401(k) plans or 403(b) plans. The first benefit is tax savings; the second benefit is the money frequently contributed by employers. -Keep the return on your money. Share as little as possible with the tax man. And be tight-fisted with your commission or advisory dollars. Getting a high return on your investments is good for you only if you get the return. If you get the risk and someone else gets a guaranteed return, you’re losing money. -Owe as little as possible. There was a time when owing money was a good idea. That time is long gone. Mortgage debt should be paid off in 15 years or less; nondeductible debt should be avoided or paid off as soon as possible. -Tend your own garden. The favored selling illusion is that someone else, somewhere else, has opportunities that are not available to regular folks. We have limited control over the return on our investments; we have great control over the amount of money we invest. Concentrate on what you control. -Trust the power of average. For those who want great wealth, competition for the highest returns is essential. For the rest of us, it is necessary only to participate in the broad creation of wealth. That means favoring index investments, unless there is a compelling case to “bet” on a particular competitor in the contest of creating wealth. Question: I have a few questions about a first-time home purchase. I’m a single, 28-year-old male making $4,500 a month. I’m looking to purchase a home for about $135,000. I currently rent a condo for $800 a month and have a $286-per-month car payment for 26 more months. I’m virtually debt free, except for monthly bills and a credit card bill that I pay off each month. Currently, I have $4,000 in checking, $2,000 in savings, $1,650 in a Roth IRA and $25,000 in a traditional IRA. I switched companies last year, so I will not be eligible for a 401(k) until this summer, at which time I will contribute 10 percent. I also plan on contributing $2,000 a year to the Roth IRA. I hope to roll the traditional IRA into a Roth someday. What do you think? It is probable that I will receive a cash “gift” of about $6,000 to $8,000 for a down payment. What are my best options? C.B., Findlay, Ohio Answer: First, give careful consideration to becoming a home owner, because the tax benefits won’t be as large as you’d like to believe, and the transaction costs for selling can be damaging if you sell in a short time. Let’s work through the numbers. While your price range is prudent, the monthly payment on a $121,500 mortgage (the amount you would borrow after a 10 percent down payment) is $891.52, if you can borrow at 8 percent for 30 years. That will give you interest deductions in the first year of about $9,700. If the real estate taxes are 2 percent of the sale price (a typical rate in much of the country) you’ll also have an additional deduction of $2,700 for a total of $12,400. Most people thinking about the tax benefits of home ownership multiply this number by their tax bracket, often 28 percent, and figure their tax savings will be $3,472 a year, or nearly $300 a month. In fact, a single taxpayer has a standard deduction of $4,400 (vs. $7,350 for a married taxpayer filing a joint return), so the actual tax benefit nets to $2,240, or a bit less than $200 a month. (Only itemized deductions in excess of the standard deduction will reduce your tax bill.) In your case, the tax savings, even at only $200 a month, will work to offset some of the expenses of owning such as a higher mortgage payment, insurance and real estate taxes. My suggestion: If you have to empty a Roth IRA account to get the down payment and closing costs together, delay buying. Don’t, however, worry if you can’t make a Roth IRA contribution in the first year after buying. 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.

VALLEY’S EXPERIMENT WITH EXPRESS BUSES IS PROVING A BIG SUCCESS SO FAR Rina Maya has a very unusual expression on her face. She’s smiling. Not tentatively, but broadly. What makes her expression unusual is that she’s riding an L.A. metro bus. And she’s not the only one smiling. Maya is one of an unexpectedly large and growing number of local commuters who are flocking to the new, bright-red rapid transit buses zooming along Wilshire, Ventura and Whittier boulevards. Since their introduction June 24, the red buses have emerged as bright spots along the otherwise gloomy road that the L.A. public transportation system has traveled in recent years. The express routes have attracted so many riders that the Metropolitan Transportation Authority has added 10 percent more buses to service them. “For the first week we had very high demand, and assumed it was because of the free fares,” said Rex Gephart, project manager for the MTA. “We assumed it would decrease as we started to charge full fare. (The next) week was the Fourth of July holiday, and we expected lower demand, but that hasn’t happened. The demand has continued (ever since).” Another pleasant surprise has been the extent to which the new rapid bus system and newly expanded Red Line subway line are feeding off one another boosting ridership on both systems. (The Red Line extension to Universal City and North Hollywood opened on the same weekend that the rapid bus system launched.) The rapid bus/subway connecting stops on Wilshire at Western and at Vermont as well as the one on Ventura Boulevard at the newly opened Universal City station are teeming with riders. In fact, packed rapid buses are regularly almost emptying out at Red Line connecting stations. During the first week of operations to the San Fernando Valley, the number of passengers taking the Red Line each day nearly doubled from the previous week, to about 120,000. (More recent figures will be available at the end of the month.) The buses themselves have been outfitted with electronic transponders that keep traffic lights green; bus stops are farther apart; and boarding platforms are flush with curb heights to facilitate quick boarding and exits. The payoff: commuters are seeing their travel times cut by anywhere from 25 percent to 50 percent. One bus driver is so fond of the new system, he even recently rode it on his day off. He traveled the rapid transit bus and Red and Blue rail lines for a weekend outing to the Queen Mary in Long Beach with his girlfriend. “I love driving them,” said Mike Kalustian, as he barreled down Ventura Boulevard one morning. “For one, they get from one end of the line to the other a lot quicker, and they’re brand new buses.” A closely watched experiment The pilot program, which was rolled out at a cost of $8 million to $10 million, was implemented to determine whether a faster form of above-ground travel would increase the use of public transportation. Planners hoped they would prove a viable alternative to the long-awaited subway system, which, even after long delays and huge cost overruns, doesn’t service most L.A. neighborhoods. Indeed, the routes were selected as a kind of consolation prize after city officials scrapped plans to extend the Red Line to the west Valley and westward from the Mid-Wilshire district along Wilshire Boulevard. Hoping to improve travel time by 25 percent, the city devoted 90 buses to two routes. About two-thirds were assigned to the 26-mile stretch on Wilshire and Whittier boulevards from Santa Monica to Montebello. The remaining third were put on Ventura Boulevard from the Red Line station in Universal City to Warner Center in the West San Fernando Valley. So many riders took to the new buses that two weeks into the pilot program, the city added another 10 buses, evenly distributed between the two routes. Although it will be several weeks before the city completes gathering initial statistics on ridership, checkers stationed along the routes are reporting that business is brisk on the new lines. “It’s a real consistent average,” said Gephart. “Every bus seems to have quite a few people, enough to where if we didn’t schedule these extra buses, we probably would have people standing.” Reading on the bus Daniel Hinerfeld, deputy to L.A. City Councilman Mike Feuer, recently decided to try out the new Wilshire rapid transit bus from his home in Santa Monica to City Hall in downtown. “I thought it was great. It took me about 10 minutes longer than by car,” Hinerfeld said. “It was about an hour, door to door, but the big difference is, I read the whole way.” His two major gripes: there isn’t much legroom and the bus transponder didn’t seem to turn all the lights from red to green. “At major intersections, we sat at red lights. And the tripping of the lights doesn’t work at all in Santa Monica or Beverly Hills.” The latter two cities have not yet installed the roadbed detectors that enable the signal transponders to work. Meanwhile, even in L.A. the bus occasionally stops at red lights, because it will only change them to green if there are 10 seconds or less left in the red sequence. If there are less than 10 seconds remaining in a green sequence when the bus crosses the underground sensor, the light will remain green long enough for the bus to cross. Another annoyance cited by riders relates to the limited number of stops. If a rider’s home or destination isn’t located close to one of them, he or she must either catch a connecting bus or walk up to a mile either way, it can add another 10 to 15 minutes to the trip. Evaluation period Over the next six months, the MTA and the Los Angeles Department of Transportation will be evaluating ridership along these pilot rapid bus routes to see if the numbers merit expanding the system. They will also be looking at the impact of the new buses on traffic. When the signal priority system trips green lights for oncoming rapid transit buses, it also delays intersecting traffic for several seconds. At busy intersections, like the corner of Ventura and Sepulveda boulevards, that means traffic that’s often already backed up for blocks could become even more snarled. Ironically, too much success could foil the whole system, because more buses traveling the route more often would trip the signal priority system so much that it might bring traffic at cross streets to a standstill. “We’re out looking at (the intersections) on a priority basis,” said Sean Skehan, senior transportation engineer for the L.A. Department of Transportation. “Wilshire and La Brea or Fairfax, and Ventura and Sepulveda are the big ones that will be at the top of our list.” So far, traffic is flowing smoothly, or at least as smoothly as it usually flows, Skehan said, and the new buses are consistently beating out their predecessors for speed. In initial tests, the best time for the bus along Ventura Boulevard was 32 minutes for the entire route at 10:20 p.m. The worst was 58 minutes. “That was during peak evening hours,” said Skehan, noting that on the old system, that trip would take an hour and 10 minutes.

Got a plump wallet? Looking for a fancy apartment? Welcome to L.A. As for the rest of you, tough luck renting in a market like this. Apartment construction in L.A. County remains steady at the highest levels since 1990, according to the most recent statistics compiled by the Construction Industry Research Board. Much of the activity is taking place near the urban core of Los Angeles, where the early success of new residential projects has some developers heralding a new era for L.A.’s inner city. But industry observers say new apartment construction is doing little to help fill a desperate need for affordable housing that has been growing since apartment construction bottomed out in the 1980s. About 40 percent of the permits for apartment construction pulled this year to date were in the city of Los Angeles, mostly in communities near downtown L.A., said Ben Bartolotto, a researcher with the Construction Industry Research Board. There were permits for 3,090 apartment and condominium units pulled countywide in the first five months of this year, up from 1,946 during the same period in 1999. “There’s apartment building (activity) everywhere, but the largest projects seem to be closer in,” Bartolotto said. The reason is simple, said Dennis Cavallari, senior vice president of Legacy Partners: L.A., where most land has already been developed, must now embrace high-density infill housing to meet demand. “We try and pursue well-located infill sites that are close to employment centers, that are in upscale neighborhoods, and we try to build toward the high end of the market,” Cavallari said. “You can’t build low-end housing in any of those locations because the costs are way too high (for the rents to cover land-acquisition and development expenses). Dangerous situation The emphasis on high-end apartments is encouraging an unhealthy mix of rental housing in the market, said Joe Carreras, manager of community planning and economic development for the Southern California Association of Governments. The health of the region’s economy is directly tied to its ability to provide affordable housing, according to Stephen Cauley, associate director of the real estate center at UCLA’s Anderson School. That’s because the jobs of low-income people often blue-collar workers in such trades as construction, retail or manufacturing are critical to keep the economy diverse and functional. As a result, multifamily housing is one of the region’s most pressing social and economic issues, Cauley said. “It’s just plain economics,” Cauley said. “If you don’t have housing for people, it’s awfully hard to have economic growth.” Since the construction of new apartments bottomed out in 1993 dropping to World War II levels overcrowding has gotten worse, especially in the county’s southern cities, Carreras said. Meanwhile, the amount of money people are spending on rent as a percentage of household income has risen sharply. Almost 476,000 of 753,463 households in the city of Los Angeles suffer from either overcrowding or rents higher than one-third of household income, according to a 1999 SCAG housing needs assessment. Despite the lack of new affordable units hitting the market, more than half of Los Angeles County households are renters, Carreras said. The existing demand for low-cost units simply can’t be met, and that means younger residents will be pushed out of L.A. or forced to live in worsening conditions. Multifamily housing conference A conference planned for October, the second UCLA Anderson Real Estate Center Multifamily Housing Forecast Conference, is set to explore the factors that impede the construction of affordable apartments. Mayor Richard Riordan is set to be the keynote speaker. Like housing prices, apartment rents are reaching the levels seen at the height of the last real estate boom, excluding inflation, said UCLA’s Cauley. Almost all apartments that are not subsidized are being built for the high end of the market, and there’s simply not enough state and federal subsidies out there to handle the need for affordable housing, he added. “They’re just not making money building those things right now,” Cauley said. SCAG’s Carreras points to a range of issues that need to be addressed, not the least of which is the virtual freeze on the construction of new condos after a rash of lawsuits prompted insurance companies to shy away from covering them. Other issues include a need for tax credit programs and fiscal incentives for cities to encourage development of affordable housing stock.

Procter & Gamble Co., the largest U.S. maker of household products, plans to sell almost 100 Internet domain names through GreatDomains.com, a Chatsworth auction site. The maker of Tide detergent and Crest toothpaste said it will sell flu.com, beautiful.com, thirst.com and other names that it has acquired since 1995, but has since decided not to develop into Web sites. Internet domain names for its 300 product brands aren’t for sale, Procter & Gamble said. Desirable names such as flu.com, which could attract interest from drug companies, might sell for well over $1 million each, said Jeff Tinsley, CEO of GreatDomains.com. “These are some of the most valuable properties available on the Internet,” Tinsley said. Officials of Cincinnati-based Procter & Gamble were surprised by the high appraisal value put on its names, said spokeswoman Terri Carrick. Prices for Internet domain names have been falling since business.com fetched a record $7.5 million in November from Santa Monica-based eCompanies. “We expect the returns to be great, though incremental in the large picture of things” for a company with $38 billion in annual sales, Carrick said. Procter & Gamble registered the names for nominal fees, she said. The average price for domain names sold in May was $27,565, way down from an average of $52,298 for the past seven months, according to GreatDomains.com. The Chatsworth company operates sort of like a real estate agency which is to say, it doesn’t own Web addresses itself, but serves as a broker in marketing the names and finding buyers. If the name sells, GreatDomains.com takes a commission ranging from 7 percent to 10 percent of the purchase price. It hit gold last year with the name drugs.com, which was sold to a San Francisco-based startup running an Internet pharmacy. The name was sold for $823,000, and GreatDomains collected a 10 percent commission. Other valuable names brokered through the site include loans.com, houses.com and shoppingmall.com. GreatDomains allows anyone to list any name for sale, but once actual bidding comes in for a particular name, it does a background check to make sure the name is legitimately owned by the seller and that the buyer has the financial wherewithal to pay the bid price. For big-ticket names, background checks are conducted prior to the name being listed.

Health supplements promise to do just about everything these days except boost sinking dot-coms. Northridge-based ENutrition, a dot-com that provides both nutritional content and e-commerce sales of vitamins and supplements, is among those flailing to survive. It has undertaken cost-cutting measures, including laying off 12 people from its 47-person staff in June, and is even pursuing a survival-through-merger strategy. On June 22, L.A.-based Omni Nutraceuticals Inc. announced it had signed a letter of intent to acquire ENutrition. ENutrition spokeswoman Stacey Johnes said the company actually has been in merger talks with various health-related Web sites, and it is keeping its options open. “We’re trying to do whatever we can not to fall victim to the changes happening to others (in the dot-com world),” she said. ENutrition does have some muscle that other similar sites are lacking. It grew out of Internet efforts by Weider Health and Fitness Inc., which still provides content and financial backing for the site. That Weider connection helped ENutrition attract more than $20 million in two rounds of venture funding in late 1999. But like other dot-coms, many health supplement and vitamin retailers spent millions in 1999 on marketing to get their name out. Low on cash, many are looking at partnerships and mergers to stay afloat or cutting employees and slashing expenses to become profitable sooner and more appealing to investors. “Investors don’t have confidence (in dot-coms) anymore,” said Jupiter Communications health analyst Rachel Terrace. “It’s not surprising that companies are cutting employees and spending.” The health-and-supplement marketplace, like other sectors of the dot-com world, has seen a number of consolidations and downsizings over the past few months. In March, HealthCentral, a medical content site, bought retailer Vitamins.com in a stock deal valued at $103.5 million. In April, Mothernature.com tightened its belt by leaving its ad agency and requiring customers to order at least $100 worth of products. And in May, Healthshop.com closed its doors. “Online, it’s a pretty crowded space and it has been for awhile now,” analyst Terrace said. “There are too many players and not enough dollars to go around. We’ve been predicting this and waiting for it to happen for a few months now.” Terrace said Virginia-based Vitaminshoppe.com, which started out as a brick-and-mortar store, is leading the pack of online supplement retailers. The company hasn’t made money yet, but it has been able to spread its name inexpensively through offline marketing in its physical stores. General Nutrition Cos. Inc., which partnered with Rite Aid Drug Stores to sell its line through Drugstore.com, also is in a good position, Terrace said. ENutrition tried to set itself apart by using content from Weider Publications and focusing its efforts on the fitness market. “We’ve always been more concerned about spending effectively rather than just spending,” Johnes said. Earlier this year, the company struck a deal with Wild Oats, a brick-and-mortar chain of health food stores, to create the company’s Web site and to cross market each other’s offerings.

Quackenbush Quits Facing possible impeachment for misuse of Northridge earthquake insurance settlement funds, Insurance Commissioner Chuck Quackenbush resigned June 28. He still could face civil and criminal charges over accusations that he used money from an insurance settlement fund to boost his own career. The state Legislature had been investigating Quackenbush on allegations that he used money from the California Research and Assistance Fund for his own political purposes. The CRAF was funded by settlement money from insurers accused of mishandling earthquake claims. The state Attorney General’s Office and Senate are continuing their investigations into the fiasco. Quackenbush, who has denied any wrongdoing, was to appear under oath before the Assembly committee investigating him on the day he resigned. His resignation is effective July 10. Assuming a caretaker role over the department until Quackenbush’s replacement can be appointed is Clark Kelso, a law professor. Kelso, on his first day in office, asked for and received the resignations of all six members of Quackenbush’s top management team. Small Porter Ranch OK’d A Los Angeles City Planning Commission approved a downsized version of the proposed Porter Ranch development that eliminates plans for a huge office complex in favor of a new mall. The Porter Ranch project was originally approved in 1990 and called for a 6 million-square-foot office complex and 3,300 homes on hills north of the Ronald Reagan (118) Freeway. But those plans were stalled when the recession hit. The developer still plans to build 3,300 homes on the 1,300-acre site. But the office complex has been replaced with plans for a 3 million-square-foot retail mall. The developer said it decided to cut the project’s size and change its product mix because the market wouldn’t support office space. Some Porter Ranch residents have opposed the project because it would add traffic to the area. The developer is not making major transportation infrastructure improvements. 21st Century Recovery Woodland Hills-based 21st Century Insurance Co., which was nearly put out of business six years ago by the Northridge earthquake, received an A+ rating the highest possible from A.M. Best for the year 2000. Best’s ratings are used as a key gage of a company’s financial viability. 21st Century, which had a high concentration of policyholders in the San Fernando Valley in 1994, paid out more than $1.1 billion in earthquake claims, more than the company had made in its previous 35 years of business. To get back on its feet, the company sold $500 million of its portfolio, took on $175 million in loans and sold a stake in the company to American International Insurance Group. No Northeast Valley Zone With opposition mounting, a City Council committee headed by Councilman Alex Padilla stopped indefinitely a plan to create a new redevelopment zone in the Northeast San Fernando Valley. While the proposal is not dead, the Project Area Committee studying the zone has been dismantled and the use of eminent domain power has been forbidden in the proposed 6,835-acre area. Padilla requested the project be pulled back because he said he is unsure the Community Redevelopment Agency would do an adequate job of supervising it. Northeast Valley redevelopment has become an increasingly divisive issue over the past few months. In June, the Project Area Committee voted to disband, saying it was hopelessly deadlocked. Some residents and business owners opposed the project because they feared their property would be seized by the city to make way for new development. Others, though, saw the redevelopment project as a way to erase blight in Pacoima, Panorama City and other parts of the Valley.

It’s commercial producers’ latest tactic in their ongoing quest to avoid being hassled by protestors in the 11-week-old strike by actors against the advertising industry: Shoot commercials in the sanctuary of private sound stages, rather than on city streets. “Sound stages are a more controlled environment,” said Morrie Goldman, a spokesman for the Entertainment Industry Development Corp. “You don’t have people shouting to disrupt your shot.” Industry insiders say Universal Studios Inc. has as many as five sound stages running full tilt to keep up with demand from commercial producers. However, word leaked out in the tight-knit entertainment community, prompting protestors to picket that site. Universal officials were unavailable for comment last week. Raleigh Studios, which has sound stages in Hollywood and Manhattan Beach, is reportedly doing a brisk business in commercials as well, but officials there did not respond to requests for interviews. Greg Krizman, a spokesman for the unions (Screen Actors Guild and American Federation of Television and Radio Artists), said no one can tell how much work is flowing to the private sound stages, but that’s precisely why commercial producers are going there. It isn’t necessary to apply for a film permit when filming on a set. “It’s impossible to track,” he said. It has become evident producers are going to great lengths to hide their activities, Krizman said. Some producers are taking out numerous location permits with the city to confuse union members, while others are claiming to be shooting documentaries or industrial films when they’re actually shooting commercials. “It’s deliberately falsifying information,” he said. Some 135,000 SAG and AFTRA members nationwide are striking over the way they’re reimbursed for commercials that run on cable TV. Instead of being paid a one-time fee, they want to get paid for each time an ad runs, like they do for spots aired on broadcast networks. Advertisers, on the other hand, want to extend the flat-fee system. They’re also concerned that if they give actors residuals for cable TV commercials actors will expect the same treatment for ads in the budding Internet sector. But not all sound stages are benefiting from the strike; some are reporting a bit of slowing. Los Angeles Center Studios in downtown L.A., for example, depends on commercials to help fill in the gaps during slower summer months, but this year commercial work has fallen off, said Steve Smith, a partner. “Commercials are certainly not our bread and butter. For us it’s great for infill between motion pictures,” he said. “But this summer is noticeably quiet.” Los Angeles has experienced a decline in commercial production days, or the number of days commercials were shot in and around the city outside of sound stages. There were only 420 permitted production days for commercials in May, down from 544 days in the same month in 1999, according to the EIDC. Meanwhile, the number of permitted production days further declined to 277 in June, way down from 529 during the same month last year. But observers say the decline may have been exacerbated by the mislabeling of permit requests by commercial producers. At this point, no one can say when the strike may be resolved. Talks between the advertisers and the actors broke off April 14, and while federal mediators summoned both sides for a meeting in New York on July 20, observers expect the strike to draw on for weeks or maybe months to come. That has industry officials concerned about the long-term damage caused by a relatively narrow dispute. Runaway production was already a problem, but they fear the commercial strike will only exacerbate the situation. “Every time a (commercial) project goes up to Canada, Australia or Czechoslovakia you’re training those crews (in those other countries). It becomes easier the next time around,” said Goldman. Officials with the Association of Independent Commercial Producers, a trade group that represents 280 commercial production companies, confirmed that the strike has some members turning to private sound stages while others are moving their productions abroad. “Our members want to keep working here, but they’ve had to look at alternatives,” said Steve Caplan, a spokesman for the association. The danger of losing commercials, even in the short term, is that it fuels the growth in out-of-town locations of the support services needed to make movies, TV shows and commercials everything from prop and lighting services to caterers and even lumber for set construction, said Caplan. “The people who are really dependent on this (L.A.-area commercial production) are the vendors, suppliers and crew members,” said Caplan. “That’s really who we’re concerned about.”