Even though huge San Fernando Valley redevelopment project area seems dead in the water after a City Council committee questioned the ability of the Community Redevelopment Agency to pull it off, the CRA is quietly moving to expand its scope of influence and power. Specifically, the CRA is seeking to create two other new redevelopment areas (in downtown and San Pedro) and to expand or revive several others. It wants to expand the existing Little Tokyo area, to regain its power to evict tenants and property owners in an existing project area in North Hollywood, and to revive that same authority in five other areas around L.A., including Chinatown and Hollywood. “This represents a substantial drive to start new areas or to complete work in areas that we are already involved with,” said CRA Administrator Jerry Scharlin. But Councilman Alex Padilla doesn’t think the CRA is in any position to expand. And he made that clear when the council’s Housing and Community Redevelopment Committee decided to put the 6,835-acre Northeast Valley project on indefinite hold. “The (project) is simply too large for the staff and other resources the CRA currently has,” Padilla said. “If the CRA can’t tackle a project of this magnitude in my district with the resources they have, then we must look very hard on a case-by-case basis at whether other new project areas should be created.” Others outside City Hall agreed. “I am very concerned about the budgetary implications of trying to do more than the agency is already doing,” said J. Eugene Grigsby, director of the Advanced Policy Institute at UCLA, who did a study two years ago evaluating the CRA. “There is no question that many areas in this city still need redevelopment, but the big question is, how you pay for it? You typically don’t see any positive revenue streams from a redevelopment project until five or 10 years out. So where is the money going to come from to start these projects?” The expansion proposals are contained in the CRA’s 2000-01 budget plan, which will be considered by the L.A. City Council later this month. The $389 million, balanced spending plan essentially paints an improved picture of the agency as revenue from existing projects has picked up in recent years and debt service has fallen. The budget even includes a request by Scharlin to add 20 people to the CRA staff, which now stands at about 180 people. If approved, the new hires would begin to reverse staff cuts that have seen the agency shrink by nearly 50 percent over the last 10 years. It also calls for $8 million for studies and other work needed to move ahead on the proposed new project areas and additions, which are likely to take at least a year to establish. How would the financially strapped agency pay for that expansion if it eventually goes ahead? In his June 1 memo to L.A. Mayor Richard Riordan and the City Council, Scharlin acknowledged the possibility that more funds might be needed to start up new projects or expand existing ones. And that money may have to come from city coffers. But, he said, “In our view, the financial status of the agency should not exclude the possibility of approving new redevelopment areas. It is our belief that every community that is blighted, as defined by redevelopment law, should have available to it the tools of redevelopment.” Just a year ago, the CRA was mired in a financial crisis, facing an operating deficit of up to $8 million a year because tax revenues from redevelopment projects weren’t coming in fast enough to cover staff and resource costs. Then-Administrator John Molloy resigned after tangling with the City Council over the need for more staff. Mayor Richard Riordan quickly named Scharlin to take his place. Scharlin warned recently that there is only a narrow window of opportunity to create a new redevelopment project in the downtown area. In the last year or two, developers have shown renewed interest in the region. But later this year, the Central Business District redevelopment area is due to hit a court-imposed $750 million cap that would force the CRA to turn over any additional revenues from the project area to other government agencies. That could prevent the CRA from using those funds to start new projects in the area. So the CRA wants to close out the existing project area and create a new one so it can continue to revitalize areas in the historic core; the exact boundaries would be defined after studies are done determining the extent of blight. The CRA faces no such legal difficulties in the harbor district, the location of the other proposed new project area. Rather, CRA Deputy Administrator Don Spivack said the district just west of the existing Beacon Street redevelopment project area contains many older housing units and “obsolete” commercial buildings. In the Laurel Canyon project area in North Hollywood, the CRA wants the City Council to grant it the power of eminent domain. Spivack said that when the redevelopment area was initially approved after the 1994 Northridge earthquake, it only allowed for the rehabilitation of existing structures. The CRA did not then have the authority to use the power of eminent domain to buy out property owners and assemble large tracts of land for redevelopment. But the City Council waived that eminent domain ban when it authorized the CRA to find a developer to redo the Valley Plaza retail center. The CRA is now in exclusive negotiations with J.H Snyder Co., which has proposed a combination of retail and entertainment development for the aging plaza. Snyder is now in the process of acquiring the land, and any holdouts could be subject to the CRA’s use of eminent domain power. The CRA is now seeking to obtain that same eminent domain power for the entire Laurel Canyon project area. In addition, the agency wants to revive its eminent domain authority in five other areas: Hollywood, the south end of the Alameda Corridor near L.A. Harbor, Chinatown, Pico Union East and the existing Little Tokyo project. Back in 1986, Spivack said, a change in state law forced the CRA to seek 12-year eminent domain authority for those and other project areas. That power expired in 1998. “In all of these areas, we believe there is still blight and we will have to prove so before we seek extension of eminent domain authority,” Spivack said. “But with the economy the way it is, we are expecting more projects to come down the pike in the areas where eminent domain authority has lapsed. Without that authority, it is doubtful the developers could ever assemble the land they need to make the projects work.”

Northridge Hospital Medical Center is trying a novel experiment that is being closely watched by other hospitals trying to ease conditions for thin-stretched emergency room staff. In January, it opened its new pediatric express care unit, an after-hours division intended to treat relatively minor childhood ailments like broken bones, sore throats, rashes, fevers, cuts and infections. At Northridge Hospital, like at most hospitals, these cases were putting a major strain on the emergency room. When kids have such problems after working hours, parents usually have no choice but to bring them to an ER but ER staff must be available to handle more severe, life-threatening problems. “This hospital tries to be in touch with the community,” said Dr. Paul Karis, medical director of emergency services. “It was obvious that pediatric services were needed, especially after hours.” The express clinic acts like other urgent-care facilities, treating patients who aren’t suffering from immediate life-threatening emergencies. Its hours of operation are from 5 p.m. to 1 a.m. on weekdays and 9 a.m. to 1 a.m. on weekends and holdiays. (Outside those hours, patients are treated in the ER, like before.) Northridge Hospital is the first facility in the San Fernando Valley and one of few general care hospitals nationwide that has opened an after-hours pediatric clinic. The hospital spent more than $500,000 to build the pediatric unit, and continues to lose money on the cost of staffing it with pediatricians, physician assistants, nurses and technicians, Karis said. About 15 patients show up at the pediatric express unit on the typical night. The hospital predicts it needs at least 20 patients a night to break even, and more to build up the program. Northridge is a nonprofit hospital, so any money made at the pediatric express would be funneled back into the hospital. If the unit is unable to break even by Dec. 31, the program will either have to find alternative funding through grants or private donations, or be scaled back or scrapped, Karis said. But the experiment has gained the attention of health maintenance organizations looking for innovative ways to cut medical costs. Health insurers tend to favor urgent-care units like pediatric express because they are typically much cheaper than ERs. The average per-patient cost in the pediatric express is $100. The ER, where patients get more-intense treatment and problems tend to be more serious, generally costs patients at least $500 each. Karis said three HMOs have approached the hospital about signing a contract to send members to the clinic. But Northridge Hospital has no plans to do so because the HMOs are unwilling to pay enough to make it financially feasible for the hospital, Karis said. “Let’s face it, hospitals unfortunately have a bottom line now,” said Dr. Seymour Silverberg, chief of pediatrics at Northridge Hospital, who first brought the idea forward. “We presented it to the hospital as something that would pay for itself and something the community wanted.” Silverberg got the idea for the pediatric express after hearing about a similar program at a Denver hospital. He and Karis began researching Northridge Hospital’s records, and found that most visits by children were happening at the emergency room after hours, and many of the cases were not severe. While the pediatric unit doesn’t reduce the cost of running the ER (the same number of physicians and staff still work there), it has reduced the ER’s workload. And for kids who aren’t in need of life-saving care, it’s a more tranquil environment than the emergency room, with Winnie the Pooh paintings in the halls and Cinderella posters in the rooms. It’s also considerably more convenient for patients. The average stay at Northridge Hospital’s ER is four hours. For the pediatric express, the average stay is an hour. Because of that, Karis said, the clinic has attracted people from as far away as Santa Clarita and Simi Valley. “Sitting in a waiting room (at the ER) is not avoidable,” Karis said. “You see a lot of things even if you’re in a room. ERs are high-stress and fast-paced places. There’s a lot of noise, a lot of action and it takes a long time.” ERs aren’t rated G Northridge’s emergency room is one of only two trauma centers in the San Fernando Valley. The 20-person ER staff handles between 140 and 150 patients a night, including everyone from gunshot victims to car accident survivors and heart-attack patients. It can be a difficult scene for young kids to watch. About 30 percent of the hospital’s ER patients were under 18 in 1999, before the pediatric express started. Most kids come in at around 6 p.m., when many working parents get home and discover their child is ill. While adults may put off going to the doctor for a fever or cold until the next day, when it comes to their children, they tend to be more expedient. “Parents really worry about their children and they want them to be OK,” said Dr. Fasha Liley, one of several pediatricians who staff the center. “Most parents don’t want to see their children suffer.” Jim Lott, executive vice president of the Healthcare Association of Southern California, said children’s hospitals across the country have been running urgent-care units geared at children for the last 20 years, but the trend hasn’t spread to other hospitals. “The San Fernando Valley has a great need for this kind of service,” Lott said. “This is somewhat cutting edge for a general acute-care hospital.” Indeed, other hospitals in the area have begun calling Karis to get more information about the program.

Executive summary The creation of business improvement districts reached fever pitch in the Valley in 1999, with seven new BIDs approved in neighborhoods stretching from Studio City to Reseda. BIDs allow a group of business or property owners to tax themselves to pay for improvements to the neighborhood. BID contributions are either based on property values or merchant sales taxes. They must be approved by a majority vote of businesses or property owners in the designated area, and by the City Council. Most Valley BIDs on the list have been in the works for several years, but they were just approved in 1999. The oldest BIDs in the greater Valley are the Lancaster Downtown Parking and Business Improvement District and the Old Pasadena Business and Professional District, both established in 1989. Most Valley BIDs are just getting started and are expected to take at least another year before they begin showing evidence of change. Plans in the works by BIDs include streetscape improvements, such as added lighting or public art, as well as major projects like new public parking garages to entice more pedestrian traffic. The pacesetter Studio City Business Improvement District Covering six city blocks and with an annual budget of $300,000, the Studio City Business Improvement District clocks in as the top BID in the San Fernando Valley. The Studio City BID, established in 1999, covers 250 property owners along Ventura Boulevard between Carpenter and Rhodes streets. It plans to improve the streetscape by adding trash cans and more street parking. It is also planning to market and promote the area more aggressively, add security patrols and eventually build a public parking garage. In terms of budget, the Studio City BID is tied with the Canoga Park Improvement Association as the biggest in the Valley. The Canoga Park BID, also a property-based assessment area, covers four blocks and 230 businesses along Sherman Way between Topanga Canyon Boulevard and Canoga Avenue. The group is planning landscape and lighting improvements along the street, as well as a marketing campaign for the area and security patrols. “The major thrust for the Canoga Park BID would be, in the short term, to look at community development for the neighborhood and businesses,” said Vicki Gilkey, program manager for the BID. “We want to create a community.” The Canoga Park BID was organized in January and has focused its initial efforts on cleaning up the area by hiring the Hollywood Beautification Team to landscape the area and using volunteers to keep the street and sidewalks clean. The next step will be to form a neighborhood watch and business watch program to increase security. The BID has also teamed with nonprofit group Local Initiative Support Group, which has given the BID loans and matching grants to help with the revitalization effort. “We want to instill pride in the community,” Gilkey said. “That’s something we’ve lost in Canoga Park.”

The condor, the kangaroo rat and the blunt-nosed leopard lizard are just some of the animals considered endangered in this state, but there’s another species that could be added to the list: the California bankruptcy attorney. It seems trade in Chapter 11 reorganizations, one of the most lucrative types of bankruptcy filings, has all but dried up in Los Angeles, and that has lawyers scrambling to fill the gaps. The hot economy provides part of the explanation. Good times mean fewer Chapter 11 filings. But local attorneys say much of the blame lies with the state of Delaware, which has built a multibillion-dollar cottage industry out of handling bankruptcy cases. “On the West Coast, it’s been awful,” said David Gould, a bankruptcy attorney with McDermott, Will & Emery LLP in L.A. “Delaware has been adept at creating a very user-friendly system, and what business is left has gone there.” Benjamin Seigel, a bankruptcy attorney with Buchalter, Nemer, Fields & Younger PC, said many longtime bankruptcy attorneys have been forced to go into other fields, such as corporate law, intellectual property and human resources law. “My personal involvement in Chapter 11 bankruptcies stayed pretty constant even into the late ’90s,” Seigel said. “But in ’99 and 2000, I’ve seen a substantial decrease (in Chapter 11 filings).” It turns out that many corporations see the courts in Delaware as more predictable, with a reputation for quickly approving prepackaged bankruptcy reorganization deals. And because most of the corporations were incorporated in the state to begin with, the law allows them to have their reorganizations handled there. The United States Bankruptcy Court in Delaware has only three judges, and their track records are known. By comparison, the court’s Central District of California which covers L.A., Orange, San Bernardino, Ventura and Santa Barbara counties has 23 judges, making it a crap shoot which judge a company is going to draw. Central District judges, meanwhile, have a reputation for being sticklers for procedure, while the courts in Delaware tend to be more “results-oriented,” as one attorney put it. ‘Accommodating’ judges “I think in general, the Delaware courts are service-oriented,” said Richard Pachulski, a principal with L.A.-based Pachulski, Stang, Ziehl, Young and Jones PC, which hired a veteran bankruptcy lawyer in Wilmington, Del. and opened an office there. “They’re very accommodating in setting up hearings, the judges have a terrific judicial temperament. A variety of those factors cause corporations to want to file there.” Meanwhile, the economy has a lot to do with the slowdown in local bankruptcy work. In 1991 there were 23,989 Chapter 11 filings nationwide, but the number dropped to 8,491 in 1999, according to the Administrative Office of the U.S. Courts. In California, the number of bankruptcy cases went from a high of 4,384 in 1992 to 821 cases last year, according to the same source. Delaware, on the other hand, went from 41 Chapter 11 filings in 1989 to 2,013 in 1999, as the state cemented its reputation as the “in” place for corporate America’s bankruptcy scene. UCLA law professor Lynn M. LoPucki said corporations like to file in Delaware because judges there have a reputation for being pro-management. As a result, bankruptcy law has become a huge cottage industry in Delaware. In a recent study, LoPucki found that 56 percent of the 105 public companies with assets over $200 million that filed for Chapter 11 in the U.S. between 1995 and today did so in tiny Delaware. The estimated combined assets of the companies that have filed for Chapter 11 there since 1990 are $91 billion. If you consider that it typically costs a company 3 percent of its assets to conclude a Chapter 11 case, then bankruptcy law brought Delaware’s economy $2.7 billion over the last decade. “If you want a couple of billion dollars for your economy, this is the way to get it,” said LoPucki. Battle in Congress That might explain why the state’s Republican U.S. senator, William V. Roth Jr., fought so vigorously last year when U.S. Rep. Howard Berman, D-Mission Hills, attempted to amend the bankruptcy law to require companies to file where they are headquartered. Berman’s intent was to make it easier for consumers who have a stake in a corporation’s Chapter 11 filing to protect their interests, said a staffer. But Roth managed to kill the effort. “Twenty-five percent of the downtown Wilmington offices are rented by bankruptcy lawyers,” said Kenneth N. Klee, a UCLA law professor and principal with Klee, Tuchin, Bogdanoff & Stern LLP. “Bankruptcy is a major attraction of business to Wilmington. The Hotel du Pont is sold out on a regular basis.” Klee said most law firms with large bankruptcy practices follow the cases to Delaware, where they often hire local attorneys as co-counsels. But most of the money for support services is spent in Delaware, not in the law firm’s city of origin. “It’s terrible for the legal business and support staff businesses (in L.A.),” Klee said. “When a case is filed here, a creditors’ committee is formed. You have meetings here, food orders come in. There’s work for messenger services.” Ironically, Klee was a staffer on the House Judiciary Committee when Congress revamped the nation’s bankruptcy laws in 1978. No one realized at the time that the provision allowing companies to file bankruptcy in their state of incorporation would cause such a stir so many years later, Klee said. Seigel conceded it may be tough for the average Angeleno to feel sorry for bankruptcy attorneys, unless they harbor a fear that more attorneys will go into personal-injury work, he joked. But things may be looking up for the legal beagles. With junk bond debt mounting and many dot-com and health care companies facing a difficult road ahead, the smell of carrion is already wafting in the air. “A lot of people who don’t have a lot of work are optimistic we’re going to see a lot of bankruptcies,” Seigel said.

It’s put up or shut up time for Jarco/SLG & G; LLC, developer of a proposed 500,000-square-foot retail and entertainment complex on a 42-acre site in North Hollywood’s Television, Arts and Entertainment district. Jarco was awarded the right to negotiate for the acquisition of the site last year by the L.A. Community Redevelopment Agency, but the developer has to convince the agency that it can sign up tenants if the project is to proceed. Jarco recently hired a brokerage to find tenants for the site. “I’m not going to move forward if I don’t see leases,” said Lillian Burkenheim, North Hollywood project area manager for the CRA. “(Jarco Chief Executive J. Allen Radford) needs to show this is a viable project. If the market isn’t there, it shouldn’t be something we are doing.” Radford hopes to devote about two city blocks at the corner of Lankershim and Chandler boulevards to a complex that would include a multiplex movie theater, health club, themed restaurants, supermarket and specialty retail shops. The balance of the development would include a hotel and conference center, and an office park with six mid-rise buildings. Radford has hired Armando Aguirre, Bert Abel, Ian Brown and Walter Pagel of Grubb & Ellis Co. to handle leasing for the proposed retail complex, which has been named NoHo Commons. Radford is also working on an environmental impact report, which is slated for completion by the end of the year. His deal with the CRA is contingent on the EIR being approved, as well as his ability to close lease deals on the space. Radford has acquired from private parties about one-third of the land he would need for the development. The CRA owns another third of the project site. And the final third is still owned by other private parties. If the development deal with the CRA goes through, the agency could use its powers of eminent domain to acquire that remaining land. The project was delayed earlier this spring when Radford revised his original development plan, which called for a number of sound stages. Senior Development Senior Resource Group has broken ground on a 249-unit senior housing complex in Sherman Oaks. The company, which is developing the property in partnership with Greenwich, Conn.-based Starwood Capital Group, will spend about $35 million on the complex, located on a 4.5-acre parcel at 5450 Vesper St. About 80 percent of the complex will be devoted to active senior housing. Another 20 percent will be geared to assisted living facilities. Starwood, which has mostly invested in hotel developments until now, decided to diversify into the senior housing sector with Senior Resource Group because of what it believes is a growing market for such facilities, and because of the location of this particular development. Sherman Oaks, with its barriers to entry for new development, presents an attractive investment market for this type of housing, said Dan Peoples, a spokesman for Senior Resource Group. The complex is expected to be completed in 2001. Valencia Sale A joint venture between Hanover Financial Co. in Los Angeles and Kensington Management Group in Tustin has acquired a 50,265-square-foot retail/office project in Valencia for $7.3 million. The complex, at 27600-27674 Newhall Ranch Road, was purchased from Newhall Land & Farming Co. LeAnne Seichel of Told Partners represented the buyers, who are operating the venture as Kensington Del Rancho LLC. Tom Lagos of Grubb & Ellis represented Newhall Land. Glendale Acquisition CB Richard Ellis Strategic partners LP acquired a 315,000-square-foot office building in Glendale for $55 million. The building, at 505 N. Brand Blvd., is about 40 percent vacant, including sublease space, which represents an opportunity for the new owner to increase cash flow. “The best news about the project is, there’s available space for lease,” said Bill Boyd, senior vice president at Grubb & Ellis. “505 Brand is the only opportunity for large tenants to consider.” Boyd predicted the 13-year-old building, which had been owned by Shuwa Corp., will lease at rates in excess of $30 per square foot a year, far higher than previous levels, he said. Shuwa placed its 8.5-million-square-foot portfolio, including the Glendale building, on the market following the onset of the Asian financial crisis about two years ago. But instead of proceeding with the portfolio sale, Shuwa has been selling certain properties individually. Mary Ricks of Kennedy-Wilson Inc. represented Shuwa in the deal. Northridge Adds Tenants Northridge Fashion Center has signed leases for about 50,000 square feet of space in the new outdoor extension to the enclosed mall, called The North End. Sushi Factory, an all-you-can-eat buffet-style restaurant, will be joining the lineup in The North End at the end of the year, along with Wood Ranch BBQ & Grill, a family-style restaurant. The two newcomers will join Macaroni Grill, Claim Jumper and On the Border Mexican Cafe, which are also located in The North End. Cost Plus World Market a giftware, housewares and gourmet chain will also open an outlet in The North End in December. Meanwhile, two retailers are setting up shop inside the mall this month. Beyond The Beach, a casual apparel shop for young men and women, and Gloria Jean’s Coffee will join Banana Republic and A Bear Is Born, which opened earlier this year. Agoura Deal Holualoa of Arizona Inc. has acquired a 62,207-square-foot office building in Agoura Hills for $7.75 million. The building, at 30851 W. Agoura Road, was sold by GE Capital. Mark Leonard of Cushman & Wakefield represented both buyer and seller. Staff reporter Shelly Garcia can be reached at (818) 710-2731 or by e-mail at [email protected].

Five years ago, when the Internet was still in its infancy, Robert V. Johnson had a hunch. He figured that more and more folks would be traveling through cyberspace and they would need a way to get there. So Johnson opened Internet Specialties West Inc., a service provider based in Westlake Village. “We figured if we built it, they would come,” he says. To Johnson’s chagrin, they didn’t. Johnson, who is president and chief executive of the firm, was ready to close the doors when he met up with his current partner, Drew J. Kaplan. Together, the two repositioned the company to focus on the business market instead of residential consumers, and the company began to take off. That was 1997, when e-commerce was just starting to boom and business-to-business service was nowhere near as popular as it is today. “I saw that the company had the wrong focus, and I saw where the money was,” said Kaplan, who joined IS West as director of sales and marketing. “There was more profit on focusing on business-to-business.” A year later, annual revenue had shot up to $580,000, and in 1999 that figure nearly doubled to $1.1 million. This year, the company expects to record sales in excess of $2.5 million while looking for a new building to accommodate its rapid growth. As it turned out, IS West ended up in a segment of the market that is now growing at breakneck speed. “They were right on time,” said Greg Tally, managing editor of ISPworld.com, the Web site and business-to-business portal for Boardwatch magazine, a Golden, Colo.-based publication for the Internet service provider marketplace. “The research firm Data Monitor predicts that $89 billion will be spent worldwide on Internet access and (related) services for business over the next two years. Even if they’re capturing a sliver of that marketplace, they have an opportunity to do very well.” The old days Back when Johnson started, providers like America Online Inc. were signing up thousands of new residential accounts each day with an aggressive advertising campaign, while Johnson’s tiny company was running ads in local newspapers and waiting for the phone to ring. His service, designed by a consultant that Johnson describes as a “computer nerd,” was not nearly as user-friendly as AOL’s, and it was costing a fortune to offer technical support to the few customers the company had. Johnson, a veteran of the telecommunications and computer industries who had worked at Pacific Bell and AT & T; Corp., had met up with Kaplan through a supplier the two were acquainted with. Kaplan, an entrepreneur who began making spin-art T-shirts at the age of 16, had no experience with Internet technology. His most recent venture had been a pre-paid calling card company geared to the Latino market. He decided to close that operation because he didn’t have the capital necessary to expand. Despite his inexperience, Kaplan quickly realized that the cost of supplying Internet services to consumers was as high, if not higher, than the cost of supplying such services to businesses. But the revenues generated by business-to-business services could be higher. For one thing, businesses typically need a broader range of services, including Web-hosting and data retrieval capabilities to track e-commerce transactions, as well as e-mail. And they usually require faster connections provided through T-1 lines, which can be sold at higher prices and are more reliable than the dial-up service that most residential consumers use. That meant that by switching to business customers, IS West would be able to generate more revenue at a lower cost. “I may spend the exact same time on the phone with a (business) customer that’s going to spend $1,000 than with a (residential) guy who’s going to spend $30,” said Kaplan. “Since we figured that out in 1997, that’s all she wrote.” At the time, businesses had begun to exploit the Internet, adding e-mail for internal communications and Web sites to sell goods and services. “Why is it that ISPs continue to proliferate at 1,500 (providers) a year?” posited Tally. “It’s because this is such an incredibly lucrative market right now that plenty of people are willing to throw their hat into the ring.” There are 849 Internet service providers headquartered in California alone, according to Boardwatch, and small providers account for about 80 percent of that total. Though many smaller companies go out of business, many more are able to survive largely because the demand is growing at such a rapid clip. Accumulating accounts Rather than build its customer base from scratch, IS West went on a shopping spree to acquire other small providers. In 1998, the company acquired Channel Islands Internet, followed by the purchase of NC Plus and InfoSpec in 1999, doubling its customer base. IS West now boasts more than 3,000 accounts, typically small to mid-sized companies with anywhere from five to 50 employees. “We were lucky enough to find three ISPs at a level that were just eking out an existence (and therefore interested in being bought out),” said Johnson. “We had the staff and all the stuff in-house where we could move their stuff to our infrastructure and it added little cost.” The next step for the company is expanding its services to companies that want to host their own Web sites. Instead of using a host service, these companies locate their own servers at the Internet service provider, where they can plug into the connectivity infrastructure more cheaply than buying the equipment outright.

Despite the slate of industry heavy-hitters at the helm, the music division of DreamWorks SKG has not translated considerable critical acclaim into blowout record sales. After a handful of moderate successes, the DreamWorks Records label finally has one artist edging into the top 10 albums on the Billboard charts. Other than that, the label has very little to show after four years in existence somewhat of a surprise considering the group is overseen by record-industry legend David Geffen, not to mention such well-known executives as Mo Ostin and Lenny Waronker. “The music business (at DreamWorks) has been off to a slower start than anticipated,” said Christopher Dixon, a senior media analyst at PaineWebber. “After the George Michael contract (which was signed early in the company’s existence), they haven’t seemed able to expand.” In an effort to pump some life into the music division, DreamWorks Records is turning to the Internet. The label plans to use its Web site to attract new artists, while continuing to focus on acts with long-term potential. “We’re trying to position ourselves as a progressive record label, and this is another step toward doing that,” said Jed Simon, head of new media for DreamWorks Records. Slow, steady development According to Simon, the label’s principals Michael Ostin, Mo Ostin, Lenny Waronker and Michael Goldstone believe that developing promising artists is more important than capitalizing on the latest music trend. “If you look at their track records, they always have and still do believe in artist development,” Simon explained. “The rest of the industry is more of a singles-driven business. We still believe in artist development and feel that ultimately will be the winning strategy.” The company is not ignoring sales, however. “We believe all the records we put out should be commercial successes, that they have an audience,” said Luke Wood, an A & R; executive at DreamWorks Records. “We’re not collecting art.” But some industry observers noted that the label is running out of time to make a commercial impression. “I would think the next two years are going to be very crucial,” said Jay Cooper, an entertainment attorney at Manatt Phelps & Phillips. “At some point, the financial entities will come in and have a review.” The two Ostins, Waronker and Goldstone serve as the four main principals at DreamWorks Records, which eschews titles. The men share the workload and decision-making responsibility, actively participate in artist development and have personally signed artists to the label. Mo Ostin joined DreamWorks after spending 25 years at Warner Bros. Records, where he ultimately served as chief executive. The man who was instrumental in launching the careers of Jimi Hendrix and The Kinks has taken on a chief executive role at the label. Lenny Waronker is a former president of Warner Bros. Records and was previously a top producer. Waronker still signs talent to the DreamWorks label and serves in a co-CEO capacity with Ostin. Michael Ostin, Mo’s son, served as senior vice president of A & R; for Warner Bros. and has recently taken on handling some of the label’s day-to-day operations, similar to a company’s president. Goldstone was previously vice president of A & R; at Epic Records, a label under Sony, and serves as the equivalent of an executive vice president. Geffen provides ultimate strategy, influence, and is best known for his ability to close deals for the company. In its four years, DreamWorks Records has signed a number of critically acclaimed musicians Rufus Wainwright, Elliott Smith and Randy Newman among them. Last year, the label had just three albums that earned industry distinctions for sales. Powerman 5000’s rock album “Tonight the Stars Revolt” went platinum, selling more than 1 million copies, while albums by rockers Buckcherry and urban artist Dave Hollister earned gold-record designations, selling more than 500,000 copies each. Observers are carefully watching newcomer Papa Roach, which is currently heating up on the Billboard charts and is considered the label’s biggest hit to date. “The industry is always very skeptical. (DreamWorks Records) has been around four years, they’ve put out a lot of records but have had limited success,” said David Katznelson, a former vice president of A & R; for Warner Bros., who worked with the Ostins and Waronker during their tenures there. “But if you look at it on a growth chart, they had two hits last year, and they currently have their biggest hit yet.” The other DreamWorks albums on the list of Billboard’s top 200 selling albums as of last week were both under the company’s Nashville label: a comedy release by Jeff Foxworthy and a country release from Toby Keith. But the record label’s performance is lackluster when compared with DreamWorks’ success with recent films. “American Beauty” swept the Academy Awards earlier this year, “Saving Private Ryan” earned critical acclaim as well as big box-office sales, and “Chicken Run” and “Gladiator” are currently hot offerings. Analyst’s assessment “Clearly, DreamWorks’ success is in the motion picture business,” Dixon said. “Perhaps this new Web site launch and refocusing will act as a catalyst to get the music business moving again.” The newest online venture at DreamWorks Records is the A & R; development site at www.DreamWorksDigital.com, which will focus on signing promising artists to the DreamWorks Records label. Launching the digital effort became increasingly important to DreamWorks executives over the past year or two. “We realized a lot of our musicians and artists were sending us MP3 or digital files or putting up their work on (a Web site) so we could hear demos,” Wood said. “It seemed asinine that we couldn’t communicate with unsigned artists in the same way. We thought, ‘We should already be there because the artists are already there.'” DreamWorks will begin selling MP3 downloads of singles this summer, and by the end of the year will likely offer full-length albums online.

L.A.’s second-biggest advertising agency has only one client: itself. The NBC Agency, a division of the NBC Inc., handles more than $1 billion in promotional airtime for the company’s diverse broadcasting, Internet and cable assets. (That makes it second only to TBWA Chiat/Day Inc., in terms of local billings.) It is being closely watched by NBC’s competitors, because the other networks still farm-out their promotional campaigns to independent ad agencies. If NBC’s in-house agency is successful in saving money, observers expect the other networks to copy NBC’s strategy. “It will give NBC a more consistent look,” said one media buyer, who asked for anonymity. “They want everything to look the same, but they can make individual adjustments in each of the different platforms.” The division got underway last November and is headed by two NBC veterans: John Miller, who serves as president, and Vince Manze, the creative director and executive vice president. The two marketing executives are responsible for NBC’s highly successful campaigns, “Must See TV” and “Appointment Television” both of which began in 1994. In-house advertising The agency creates unified campaigns for NBC’s TV network and its owned-and-operated stations, as well as such cable assets as CNBC and MSNBC and Internet companies like CNBC.com, MSNBC.com and NBCi. The NBC Agency is now one of the largest advertising agencies in the country in terms of the value of its airtime though that’s somewhat misleading, since the time is provided by the NBC stations and networks. Though right now it only creates campaigns for NBC companies, it is considering expanding to outside clients. In fact, Manze said, the agency has been approached by such potential clients as the Salt Lake City Olympic Committee for its 2002 games, a syndication company, and the Hollywood Stock Exchange. “The real savings are not in money, but in efficiency and time use,” Manze said. “We can work quickly, and that is an advantage for our clients (NBC operating units).” Another advantage of having an in-house ad agency for a media company like NBC is that it facilitates a consistent look to its promos across multiple media platforms, and allows for cross-promotion of those platforms. For example, NBC is heavily promoting is upcoming coverage of the Summer Olympics in Sydney, Australia. The Games will be aired not only on NBC, but on CNBC and MSNBC as well. Because not all cable operators carry the latter two networks, NBC is running promotional spots, letting viewers know that if their cable operator doesn’t carry CNBC or MSNBC, they’ll be missing some Olympics coverage. NBC officials hope that will prompt viewers to put pressure on the cable operator to sign up for the missing networks. “It might goose them,” Manze said. The coming Olympics spots will feature such athletic stars as shot putter C.J. Hunter and his wife, track star Marion Jones. They will run on NBC, MSNBC, CNBC and the company’s owned-and-operated stations. The NBC Agency customized each of the ads for each platform. Prior to the creation of the in-house agency, each unit of the broadcasting company would oversee the creation of its own campaign and then ask for airtime. The entire process was pell-mell. “Someone from CNBC might come to us and say, ‘Here is a campaign; please put it on the network,'” Manze said. “Everything was piecemeal.” Of course, it’s not enough to promote a network or channel just within the NBC family. For billboards, radio and print advertising, NBC turns New York-based ad agency D’Arcy, which books media time and placement. Focus on the network Plans for the creation of the in-house NBC arm got underway two years ago at the encouragement of NBC President Robert Wright, who met with Miller and Manze in New York. While the agency’s goal is to assist all the NBC operations, the brunt of its efforts are aimed at promoting the NBC TV network and its prime-time slate, which generated $2.3 billion in up-front advertising this spring. So far, Miller and Manze said, NBC’s competitors have not unified their promotional efforts. ABC had been discussing such a plan, but that appears to have been set aside in the wake of the departure of ABC President Pat Fili-Krushel. CBS, however, is a different case, especially following its merger with Viacom Inc. CBS officials are working relentlessly to streamline operations, and may be interested in creating a similar division. That might pose a competitive challenge for NBC, because Viacom has a much bigger media empire. It owns the TNN cable network, MTV, VH-1 and UPN. NBC, with the exception of a minority interest in Pax Net, principally has financial cable channels that are not as synergistic for entertainment programming as Viacom’s. CBS also has a giant outdoor advertising operation and a hugely successful radio division.

Historical Announcement There’s an old saying in advertising: “50 percent of my advertising expense is wasted. I just don’t know which 50 percent.” The old adage proved less than accurate recently, when sponsors of the Summer Food, Wine & Micro-Brew Fest were able to point to precisely which portion of their advertising had been wasted. It was an ad that ran in the June 27 issue of the Los Angeles Times. The problem? The festival took place on June 22. The errant ad sent phones ringing at the Valley Cultural Center, according to Deborah Kimbrough, the office manager, who added that she did not know what caused the mixup. Another festival insider, however, pointed the blame at a communications breakdown. “The art people weren’t talking to the ad people,” said the insider, who asked not to be identified. The festival, sponsored by Westfield Shoppingtown Topanga along with the Los Angeles Times and Warner Center Properties, included 21 restaurants, wineries and microbreweries along with live entertainment. Proceeds went to benefit the Valley Cultural Center. Happily, three other, more timely ads had run before the event, sending more than 300 visitors to the festival, according to Janine Baker, marketing director for Westfield Shoppingtown, which held the event in its Canoga Park shopping center. Oh Say Can You Grill Forget apple pie. Most folks think of hot dogs and hamburgers when they think about all-American fare. That’s the conclusion of Macerich Co., which recently surveyed 4,500 shoppers nationwide to take the pulse on patriotism as the Independence Day holiday approached. Santa Monica-based Macerich, which owns the Panorama Mall among other shopping centers, reported that 45 percent of the shoppers surveyed thought there’s nothing more American than dogs and burgers, while only 42 percent of those surveyed gave their vote to apple pie. A Maze-ing Attraction This summer, Six Flags Magic Mountain unveiled its newest roller coaster, Goliath, an 85-mph ride that shoots up to heights of 255 feet during its three-minute run. But if that’s too much of an adrenaline rush, there’s a new attraction in the San Fernando Valley. The Lost Adventures Corn Maze opened this month in Van Nuys. The maze provides tourists and residents with miles of corn stalks to roam through on eight acres near Woodley Park. “We saw one in Central California and thought, ‘Gosh dang, it seems like a good idea,'” said Greg Cole, one of the owners of Lost Adventures. “We leased the land from Parks and Rec and planted the corn and now we’re up and running.” In case anyone gets lost, the maze includes a 15-foot-tall guard tower and workers stationed throughout the maze with walkie talkies. Of course, the Valley already has its share of attractions there’s Universal Studios to the east, Magic Mountain to the north, arboretums and studio tours. But maze promoters say Lost Adventures offers something the others don’t. Lost Adventures awards weekly prizes to the person who makes it through the maze the fastest. So far, the time to beat is 35 minutes, but Cole said as the corn grows, the maze will become more difficult and the time to maneuver through will get longer. Losing to Dallas When it comes to business travel destinations, L.A. is running in the middle of the pack, according to a recent survey by Runzheimer International. With 46 percent of business travelers surveyed citing L.A. as one of their top 10 travel destinations, the city comes in ahead of New York City (41 percent) and San Francisco (34 percent), but trails Chicago (66 percent), Dallas (41 percent) and Atlanta (47 percent). Chicago and Atlanta both have bigger convention centers than L.A., so it makes sense they would attract more business travelers, according to L.A. Convention & Visitors Bureau spokeswoman Carol Martinez. But how does Dallas outrank L.A.? The Texas town has a smaller convention center. “Maybe they did a real good job marketing themselves,” Martinez said. Hail to the Vice Chief They may not be hosting any state delegations during the upcoming Democratic National Convention, but the two L.A.-area Ritz Carlton hotels still plan to grab a piece of the action. The establishments in Pasadena and Marina del Rey are preparing a host of amenities designed around a “You Can Call Me Al” theme, as in Vice President and presumptive Democratic presidential nominee Al Gore. Each day of the convention, guests will find in their rooms an “Al” amenity: alphabet cookies, Altoids (no Clinton jokes please), Tennessee ale, and almonds. At the bar, guests can sip red, white or blue martinis. And in the lobby of the Marina del Rey Ritz Carlton will be a 5-foot-tall, white-chocolate replica of the White House. “We wanted to do something fun and creative for the convention,” said Ritz Carlton spokeswoman Sheena Stephens.

Wednesday, July 12 Speaking Seminar The Encino Chamber of Commerce holds a seminar titled, “Public Speaking: The Art of Being Remembered.” The event runs from 5 p.m. to 6:30 p.m. at the Encino Chamber of Commerce headquarters, 4933 Balboa Blvd., Encino. Information: (818) 789-4711. Sunday, July 23 Park Promos The Woodland Hills Chamber of Commerce and area businesses host “Country Festival in the Park,” a daylong event meant to give members a way to advertise their services. The festival will be held in conjunction with the Valley Cultural Center’s weekly Concerts in the Park series. The festival runs from noon to 8 p.m. in Warner Park, at the corner of Califa Avenue and Topanga Canyon Boulevard. Information: (818) 347-4737. Tuesday, July 25 Legal Affairs The Professionals in Human Resources Association holds an update on employment laws. The meeting runs from 11:30 a.m. to 1:30 p.m. at Castaways Restaurant, 1250 E. Harvard Road, Burbank. Information: (626) 683-1630. Benefits Forum The United Chambers of Commerce of the San Fernando Valley hosts a forum on “Maximizing Your Return on Health Benefits Investment” for businesses. Event runs from 7:30 a.m. to 10:30 a.m. at the Warner Center Marriott, 21850 Oxnard St., Woodland Hills. Information: (818) 981-4256.