Office/22 inches/LK1ST/mike2nd By SHELLY GARCIA Staff Reporter San Fernando Valley office rents, which have held steady for the past year, have begun to rise dramatically, and could continue to increase at a double-digit annualized rate over the next 12 months in some segments, real estate brokers say. Although demand for office space has generally cooled over the past six months, a shortage of class-A buildings in such prime Valley areas as Warner Center and Sherman Oaks is expected to drive rents 9 percent higher Valleywide, and as much as 15 percent higher in the area’s most desirable markets. “With no new product, and no tenants moving out, we’re able to push rents higher,” said Donald W. Hudson, Jr., senior vice president and director of leasing for Warner Center Properties. Brokers point out there has been virtually no new office development in the Valley in about seven years. In the meantime, businesses have continued to move in and expand in the area. The class-A office vacancy rate in the Valley market was 13.4 percent as of the end of the third quarter, according to Cushman & Wakefield Inc., and that rate is expected to inch downward in the next 12 months. Continued strength is being displayed by the Tri-Cities area of Burbank, Glendale and Pasadena, where the office vacancy rate dropped to 8.6 percent in the third quarter, lower than any other submarket in Los Angeles County. That market will likely soften in the months ahead, however, as entertainment-industry growth slackens and some major new projects come on line. Farther west, the dramatic rise in occupancy at Warner Center’s Plaza III tower, from about 20 percent last year to over 90 percent currently, has played a pivotal role in the changing rental landscape. As long as the tower was vacant, competitors wishing to raise rents in the area ran a substantial risk of losing tenants. But with Plaza III and the Trillium (the other premier Valley property) virtually full, and many of the tenants locked in for the next three to six years, tenants looking for space don’t have many options. “Anyone who needs 25,000 square feet or more is going to have a hard time,” said John Battle, a broker with Lee & Associates. “People are going to have to pay these rents or go to areas where they think they’re going to get a better deal.” Monthly rental rates at Plaza III were running $1.75 per square foot last July and are currently at $2.40. Lease rates at the Trillium have risen from $2.05 to $2.50 per square foot in the past quarter. And in Calabasas, where average monthly office rents are hovering around $1.90 a foot, the Kilroy Calabasas Associates project under development is asking $2.05, nearly 8 percent more than the average. Over the next 12 months, brokers say, expect even more increases. Marcus & Millichap projects an average 9 percent increase in rents on class-A Valley office properties, despite the slowdown in employment growth and recent signs that leasing activity may be slowing. “Demand is still increasing,” said Jonathan A. Weiss, regional manager of Marcus & Millichap. “Is it increasing at the same rate as it did? No, but as it increases, it’s going to increase rents.” Although last year’s employment boom in the entertainment industry has slowed, other areas of the economy, such as technology, are still experiencing strong growth, and there is no downsizing on the horizon for any industry. Marcus & Millichap projects that Valley employment overall will increase by 2.7 percent in the next year. There are some problems on the horizon. Glendale Plaza, a high-rise under development by PacTen Partners, has failed to attract any tenants and that has led to speculation that other developers may put their projects on hold. But that would only further fuel rent increases, brokers said, because it would restrict the supply of new space as demand increases. “The fundamentals of the market are still solid,” said Doug Marlow, senior vice president with CB Richard Ellis Inc. “Single-digit vacancies (in Burbank) and more tenants continuing to seek space in the area will create an inflationary environment for rent increases.” Strength in Burbank and Glendale can also have a positive impact on Warner Center, the Ventura (101) Freeway corridor, and points farther west, brokers said. Average rental rates in the East Valley, which has largely attracted entertainment clients until now, range from $2.16 to $3 a square foot per month, according to Cushman Realty. That means owners of buildings in the Ventura Freeway corridor can raise rents and still remain below the cost of comparable space in such areas as Burbank and Warner Center. “With Warner Center increasing and with the East Valley already increased, there will be pressure to raise rents in other areas even though there may not be the same demand,” said Jim Lindvall, a broker with Grubb & Ellis Co. But most important, brokers said, is the sheer dearth of available class-A space, the type of space that typically attracts the companies requiring the largest blocks of space. As things now stand, some of the area’s most exclusive class-A buildings cannot accommodate tenants looking for 20,000 square feet of space or more. The largest contiguous block of space available in the Warner Center towers, for example, is 13,000 square feet. At McNeill Plaza, a 375,000-square-foot high-rise in Sherman Oaks, there are two floors of 18,000 square feet each available. The rest of the vacant space ranges from 8,400 square feet to 1,200 square feet. “They’re all little holes,” said Bill Inglis, the Grubb & Ellis broker who represents the property.

Chocolate/21″/dt1st/mike2nd By WADE DANIELS Staff Reporter At the October opening of the $1.6 billion Bellagio hotel in Las Vegas, there was cuisine from New York’s Le Cirque restaurant, the art on the walls was by European masters, the marble had been imported from Italy, and the chocolate came from Sylmar. Guests received hefty chocolate plaques with the hotel’s name emblazoned in gold-colored chocolate, and sporting a full-color rendering of an abstract painting in “chocolate ink,” all fashioned by Sylmar-based Chocolates & #341; la Carte. Customized items made of chocolate, like nautilus shells for a Nancy Reagan luncheon and sunglasses for a party for Jack Nicholson, have been the company’s main business since Rick and Rena Pocrass founded it in 1986. Its other mainstays have been cones, cups and other petite containers made of chocolate, which hotel chefs and caterers use for their dessert creations. However, three years ago the owners decided to diversify their sales, and began distributing their chocolates in supermarkets, restaurants and via catalog. This year, sales through those new channels are beginning to take off. “We decided that if the market for the custom chocolates we make was hit hard, we’d be in trouble,” said Rick Pocrass, the company’s chief executive. “We’re building new pillars for the business.” Some of the goods Chocolates & #341; la Carte began selling this year to supermarkets and restaurants are the same products the company has long sold to hotels and for special-event banquets. For example, some supermarket bakeries use its chocolate cups to hold desserts like mousse that are sold from glass display cases. However, the company’s current top seller is a new product, a chocolate-covered graham cracker developed last year. It was ordered for one Costco store in May and has subsequently been shipped to 30 other Costco outlets. “It’s been amazing how people react to a cracker covered in chocolate,” Pocrass said. He noted that while chocolate-covered graham crackers are nothing new, the crackers from Chocolates & #341; la Carte are covered in gourmet chocolate, imported from places like Belgium and France. The Sylmar company does not manufacture any of the chocolate it uses in its confections. While Costco’s demand for the product has expanded quickly and dramatically, Chocolates & #341; la Carte is progressing with such bulk accounts cautiously. Costco has a reputation for suddenly “pulling the plug” on supplier accounts, so it is wise not to devote major resources to something that may not pan out long term, Pocrass noted. “The steps we take away from our core business are done slowly, so we can easily go back to our safe harbor, or core business,” Pocrass said. That kind of caution is characteristic of the company, whose growth has been entirely financed with earnings and never with loans. The new distribution outlets now account for 15 percent of the company’s sales, which totaled $10 million last year and are projected to reach $12 million this year, Pocrass said. He added that the company aims to double its sales within two years, mainly through growth of its sales to new markets. To accommodate the anticipated growth, the 200-employee company plans to move into a 110,000-square-foot, build-to-suit facility in Valencia next August. Chocolates & #341; la Carte currently operates out of a 30,000-square-foot administration/production building in Sylmar and a 15,000-square-foot production facility in Cerritos. Over the years, the company has sculpted hundreds of chocolate replicas of things like cars, animals, sunglasses, soda bottles and footballs. Models are hand-sculpted at the Sylmar plant and then turned into plastic molds. In the past year or so, after discussions with food stylists and chocolatiers mainly in Europe, the company began offering items using “chocolate ink” multicolored chocolates that can be used for writing or even creating artistic images out of chocolate. The company has a store of about 1,000 molds, some of which are often reused, and an inventory of already-produced chocolate objects in the 40 or so most popular shapes. Chocolates & #341; la Carte was born in the kitchen at the Pocrass’ home, where Rena Pocrass began fashioning chocolate sculptures and dessert cups. She had co-owned a retail chocolate store called Sweet Fantasies in Encino in the early 1980s, but it closed in 1984 when its lease ran out and her partner decided to quit. Soon after, she landed a job as a food stylist for an ice cream commercial, and was struck by how much artistry was used in presenting the food. “I realized that food is very visual, and decided I wanted to make art with chocolate,” Rena Pocrass said. Food critics give high ratings to the company’s offerings. “Chocolates & #341; la Carte products are absolutely first-rate, as good as you can get,” said Michael Schneider, editor in chief of the New York-based trade magazines Chocolatier and Pastry Art & Design. “I also like that they are so active in the industry shows and with sponsorships.” Schneider also said he likes Chocolates a la Carte because its people have “recognized the artistry that can go into desserts.”

Re column/garcia/25″/dt1st/mike2nd By SHELLY GARCIA Staff Reporter Douglas, Emmett & Co. is expected to close escrow next month on the McNeill Plaza office tower at the southeast corner of Sepulveda and Ventura boulevards in Sherman Oaks, according to sources. If the deal goes through as expected, Douglas, Emmett would own three of the four properties that sit along Sherman Oaks’ major intersection. The company last year acquired the Sherman Oaks Galleria at the northwest corner of the intersection and, last summer, it bought the 171,000-square-foot Glendale Federal Bank building and adjoining properties on the northeast corner. Douglas, Emmett officials declined to comment, but others close to the deal said the company has agreed to pay close to $200 a square foot for McNeill Plaza, a 375,000-square-foot, class-A property. With those three properties, Douglas, Emmett is expected to spruce up the intersection, adding landscaping and other details that would give the thoroughfare a unified look similar to what the company created on San Vicente Boulevard in Brentwood after acquiring many office properties there. McNeill Plaza is part of a portfolio of properties owned by John Hancock Mutual Life Insurance Co. The company had put an entire package of about 25 Western region properties up for sale in July, but recently began breaking apart that portfolio and selling individual buildings. “In general, a portfolio of properties is not as attractive to buyers as it was six months ago because of the capital market situation,” said Kevin McGuire, vice president for John Hancock’s real estate investment group in Boston. Banks and other entities that once financed such portfolio acquisitions have pulled back as a result of losses they have sustained in international markets and the recent Wall Street volatility. McGuire said John Hancock is now considering individual sales of all its West Coast portfolio properties, including other Valley buildings in Woodland Hills, Encino and Westlake Village. He declined to comment on the status of sales negotiations on any of those buildings, saying company policy prohibits commenting on acquisitions in progress. Meanwhile, Douglas, Emmett is attempting to evict Robinson’s-May, an anchor tenant in the Sherman Oaks Galleria, in order to shift a portion of the center’s retail space to office use. A hearing on that issue has been set for Dec. 7. Big development plans Investment Development Services Inc. has completed two major property acquisitions and is proceeding with plans to develop projects on each of the sites. Its plans are for a business park in Newbury Park and an office complex in Westlake Village. The first deal involved IDS acquiring a 100-acre parcel that had been the site of a Northrop Grumman Corp. manufacturing complex in Newbury Park for an undisclosed sum. That property, which has been vacant since the late 1980s, includes four buildings with a combined 577,000 square feet of space. IDS plans to refurbish three of the existing buildings for R & D;, industrial and office uses. The fourth structure will be torn down and the land, along with additional acreage on the site, will be subdivided into parcels and put up for sale. The envisioned $50 million business campus, called Conejo Spectrum, is being developed on the site near the Rancho Conejo Boulevard exit on the Ventura (101) Freeway. IDS also acquired an 18-acre parcel in Westlake Village for $16 million, according to Hayden C. Eaves III and David G. Mgrublian, IDS managing directors. The company plans to develop a $50 million, 326,400-square-foot business campus at Lindero Canyon Road site. Plans call for three separate two-story, class-A office buildings with a combined 326,400 square feet of space. The buildings will range in size from 62,000 square feet to 134,000 square feet. The development is to be called Westlake North Business Park. IDS expects to begin construction on that project in March, with occupancy slated for December 1999. Frequent flyer Aviation Sales Co. signed a five-year lease for 7,729 square feet of space in the Valley Corporate Business Park on Roscoe Boulevard in Van Nuys, according to Duane Cody, a broker with Cushman & Wakefield Inc. who represented the tenant and landlord in the deal. Aviation Sales, which distributes aircraft parts, had been subleasing space in the business park until now. The company is moving into space formerly occupied by Alfred Publishing which, in turn, moved into larger quarters in the business park. The five-year lease is valued in excess of $765,000. Warner Atrium gets new tenant Automatic Data Processing has signed a five-year lease for 13,000 square feet in the Warner Atrium building in Warner Center, according to John Battle, a broker with Lee & Associates who represented the landlord, Archon Group. ADP plans to relocate its regional offices in Van Nuys to the new space, which has been vacant. The lease is valued at $1.2 million. Painting the town Dunn Edwards Corp. has inked a deal for a build-to-suit retail center at Sepulveda and Victory boulevards. A 10,000-square-foot facility is being constructed for the paint retailer, on 33,000 square feet of land. The multi-year lease is valued at $1.8 million, according to J. Richard Leyner, Cal Menzer and Diana Parker at Capital Commercial/NAI, who represented the lessor, Victory Sepulveda Associates. Dunn Edwards was represented by Bruce Heathcote of Lee & Associates. News and notes The 180-unit Glade Apartment complex has been acquired by Abra Management for $11.3 million, according to Jonathan Weiss, regional manager at Marcus & Millichap. The apartment, located at 6644 and 6670 Glade Ave. in Woodland Hills, was sold by W.H. Glade L.P. Marcus & Millichap also brokered the sale of The Palms, a 149-unit apartment building in Canoga Park. LDD Corp. paid $6 million for the property, which was sold by the John Hancock Mutual Life Insurance Co. The owners of LA Gym Equipment have acquired a 16,000-square-foot industrial building at 12301 Sherman Way for $1.2 million, according to Liz Evans and Mark Ranftle of Capital Commercial/NAI, who represented the buyer. LA Gym Equipment plans to relocate its offices, distribution and retail facilities to the new building. The seller, Boal Family Trust, was represented by Dick Eckles of Westcord.

toledano/DOC//LK1st/mark2nd By JESSICA TOLEDANO Staff Reporter With Democrats in control of both the state legislature and the governor’s office, it looks as if regulation of the managed care industry will be taken away from the Department of Corporations and handed over to a new agency. “I think the number one issue for us is going to be restructuring the governmental oversight of HMOs,” said Assemblyman Martin Gallegos, D-Baldwin Park, and chair of the Assembly Health Committee. “Clearly, the consensus is that the Department of Corporations needs to be removed as the oversight body.” Rosenthal proposed such legislation last session, but the bill died on the desk of outgoing Gov. Pete Wilson. Now, with a newly energized Democratic majority, it is only a matter of time before an overhaul takes place. Health care advocates say the agency has been ineffective in its efforts to hold health plans accountable for violations of state regulations. Part of the problem, advocates say, is that the department was set up to regulate the banking and finance industries not health care. “It is an example of the worst place you could possibly put the oversight of HMOs,” said Robert Fellmeth, director of the Center for Public Interest Law at the University of San Diego Law School, who co-sponsored and helped write the Rosenthal Bill. The legislation, which Gallegos plans to reintroduce next session, would establish a five-member board appointed by the governor and Legislature under the State and Consumer Services Agency. Called the Board of Managed Health Care, it would oversee regulation of the state’s 52 licensed HMOs, which serve about 21 million residents in California enrolled in managed health plans. Walter Zelman, president and chief executive of the California Association of Health Plans, which represents all the state’s major HMOs, said the industry has no problem with oversight being taken away from the Department of Corporations. But it prefers one top regulator as opposed to a board of officials. “What we objected to and what we still disagree with is having a commission rather than a single regulator. If you split up the authority you get less effective regulation,” said Zelman. Not true, counters Gallegos. “They want one person who is easier to talk to and deal with,” he said. “But it is difficult to find one individual who understands the intricacies of the health care industry. They want to keep the status quo. The more people we put as regulators, the more oversight.” A Department of Corporations spokeswoman declined comment.

SFV Newsmakers/11-16/mark2nd Entertainment Bahman Naraghi has been appointed chief financial officer for Universal Pictures. He will be responsible for all finance activities, strategic planning, performance monitoring and centralized accounting and reporting for the filmed entertainment group. Most recently, Naraghi served as senior vice president, planning and operations at Universal. Also, Allison Brecker has been promoted to executive vice president of production for Universal Pictures. She will be responsible for developing and supervising the production of feature film projects. Prior to joining, Brecker was vice president of development and production at Walt Disney Pictures. And Romy Kaufman has been promoted to vice president of Universal’s story department. She will work closely with the creative group in reading and evaluating feature film material. Previously, Kaufman was story editor at TriStar Pictures. George H. Garfield has been appointed senior vice president of global real estate and facilities at Universal Studios. He will be responsible for strategic development, expansion, lease negotiations, acquisitions and cost-effective use of Universal’s real estate. Most recently, Garfield was vice president of real estate for Walt Disney Imagineering. Ken Goldstein has been named senior vice president and general manager of Disney Online. He will oversee Disney Online’s operations including content development, production, technology and marketing. Prior to joining, Goldstein was vice president and general manager of Broderbund Software’s Red Orb Entertainment division. Lawrence Kieves has been appointed president of Calabasas-based K-Tel International Inc. He will be heavily involved in marketing the company through multiple channels, including K-Tel’s Internet operation. Kieves has held positions as CEO and COO with several public companies in the entertainment industry. Lanny Raimondo has been appointed divisional director of the wholly owned Technicolor group of companies. He will be chief executive for all of Technicolor’s businesses including videocassette and optical disc manufacturing, theatrical film production and distribution. Raimondo joined the company in 1994 as president of the video services division. Robbie Robertson has joined DreamWorks Records as creative plenipotentiary. He will be involved in both artistic and executive activities in the company, and will participate in projects set in motion by parent company DreamWorks SKG. Robertson is a singer, songwriter, guitarist, producer and film composer, and is best known as a member of the rock group The Band. Health Care Ivan Jeffrey Kamil (picnewsmakers11-16)has been promoted to vice president of quality management at the Woodland Hills office of Blue Cross of California. He will be responsible for leading the company’s quality initiatives, as well as developing and improving quality management programs. Prior to joining, Kamil held various positions with Prudential HealthCare and Maxicare Health Plan. Also, Brian Sassi (pic newsmakers 11-16) has been named general manager for the company’s large-group key accounts. His primary responsibility will be for all California employers with 51-250 employees. Previously, Sassi has held management positions with Provident Life Insurance Co. Landscape Design Richard A. Sperber has been named executive vice president at Environmental Industries Inc., the parent company of Valley Crest, where Sperber is president and chief operating officer. He will be taking on an expanded role in the corporation’s overall strategic planning. Sperber is also president and chief operating officer of Environmental Golf. Eric Bescoby has been appointed director of golf maintenance for Environmental Golf. He will manage the business unit dedicated to golf course maintenance at the firm’s contracted courses. Prior to joining, Bescoby was director of the golf course division of Rain Bird Sprinkler Manufacturing Corp. Also, Steve Chase has been appointed director of sales and marketing. Previously, Chase was vice president of sales at California Sports. In addition, John McNair has been named director of golf management. He will oversee golf course operations in addition to developing new management services. Previously, McNair was general manager of Cherokee Run Golf Club. Media Ron L. Wood has been appointed publisher of the San Gabriel Valley Newspaper Group. The group’s publications include the San Gabriel Valley Tribune, the Pasadena Star News and the Whittier Daily News. Wood was most recently vice president of circulation for the Los Angeles Newspaper Group. Real Estate Matthew L. Herrill has joined PacTen Partners as project director in charge of construction. His specific responsibilities will be for Valencia Corporate Point, a 700,000-square-foot office development that breaks ground Nov. 17. Most recently, Herrill was project manager in charge of design and development for Universal Studios. Restaurants Marc Carter has been named controller of Dick Clark Restaurants Inc. His responsibilities will include overseeing all aspects of the financial operations and reporting of the restaurant division. Most recently, Carter was controller/director of strategic planning at California Pizza Kitchen Inc.

Letter/cw1st City Easier on Developers The city of Los Angeles has been making life less complicated for developers. For the most part, it’s done so by improving and streamlining its notoriously complicated entitlement process. Unfortunately, unless they understand the ins and outs of these improvements, developers and their representatives won’t be able to take advantage of their benefits. Perhaps the most “developer-friendly” change involves the establishment of what are known as case management units. This involves shepherding developers through the lengthy process of permit application and environmental review. Previously, the city offered developers no official assistance when an application was filed; the only way you could be confident that your application would progress smoothly was if you happened to enjoy an informal “relationship” with city staff. Now, the Planning Department and the Building and Safety Department assign case managers to proposed projects. These managers will sit down with a developer before he prepares his application and identify for him all the specific entitlements and permits he will need to make his project a reality. Once the developer has filed his application, his case manager will then coordinate contact with all the departments involved, helping to schedule the various hearings the project will need and serving as the developer’s single source for information. As soon as a developer has a definitive site plan, he should contact the case management unit to request a “kick-off” meeting, where the case manager will assemble all the necessary staff to comment on the project, discuss the requisite entitlements, and determine the scope of environmental review. From then on, a developer can chart his application’s progress as it moves through the system and respond quickly as issues arise. PETER WEIL Chairman Los Angeles Planning Commission

Planner/dt1st/mark2nd November 18 Leadership Lectures Woodbury University holds a leadership seminar at the Universal Hilton in Universal City. Speakers include Herbert D. Kelleher, chief executive of Southwest Airlines. The conference programs run from 7:45 a.m. to 2:30 p.m. For information: 1-800-689-9771. November 19 Political Bedfellows The Southland Regional Association of Realtors hosts the 9th Annual Political Reception at the association auditorium, 7232 Balboa Blvd. in Van Nuys. The event begins at 6 p.m. For information: (818) 947-2296. Food for Thought The Calabasas Chamber of Commerce hosts a luncheon featuring Assemblywoman Sheila Kuehl, D-Santa Monica, at the Calabasas Inn, 23500 Park Sorrento. The event begins at 11:30 a.m. For information: (818) 222-5680 Immigration Professionals in Human Resources Association will host a luncheon meeting to discuss immigration law featuring attorney Josie Gonzalez. The event takes place at the Warner Center Marriott Hotel, 21850 Oxnard St. in Woodland Hills, beginning at 11:30 a.m. For information: Laura Wilson (818) 410-7472 November 24 Student Pass The Encino Chamber of Commerce holds a “Day With Business” to give high school students the opportunity to interact with employers. The chamber is looking for companies to participate in the event, which includes a three-hour visit to the employment site. For information: (818) 789-4711.

Marlboro/17″/mike1st/mark2nd By DAN TURNER Staff Reporter One of L.A.’s most recognizable icons is riding off into the Sunset Strip, that is. The Marlboro Man, who has graced the 60-foot-high billboard that has served as the unofficial gateway to the Sunset Strip for as long as most Angelenos can remember, is being buried with his boots on. The billboard will become a victim of the settlement reached last month between the nation’s major tobacco companies and state attorneys general. The deal bans tobacco advertising on billboards, transit signs and sports stadiums, and even forbids cigarette logos on merchandise. The ban goes into effect 150 days from the date it was ratified by the states. Which means that by April 23, 1999, the smoking cowpoke will be bucked off the Strip forever. Don’t expect too many angry protests from historic preservationists. “We’re not weeping over the loss of the Marlboro Man,” said Ken Bernstein, director of preservation issues with the Los Angeles Conservancy. “The Sunset Strip billboards are more important collectively than any one particular image.” Yet it’s arguably L.A.’s most famous billboard, unless you count the Hollywood sign. Its Wild West images, many times bigger than life, tower over the other brightly lit eye magnets lining the West Hollywood section of Sunset. Over time, it has come to symbolize one of the most glamorous streets in the world and added an invaluable degree of panache to the Marlboro brand. “A single billboard is not going to affect sales. But it probably hurts Marlboro to let this one go, as far as the overall erosion of the brand,” said Brian Morris, president of West Hollywood-based ad agency Dailey & Associates. Even without the recent settlement, the Marlboro Man’s days may have been numbered. On Monday (Dec. 7), the West Hollywood City Council is expected to give final approval to an ordinance that would ban all tobacco billboards in the city although that ban would exempt the Sunset Strip. The city opted to exempt those boards because it feared a First Amendment lawsuit from the tobacco companies. Nonetheless, Councilman Paul Koretz, who wrote the ordinance, has been waging a behind-the-scenes campaign to convince billboard companies to take down their tobacco ads on billboards along the Strip. Those efforts and the West Hollywood ordinance are now likely moot, unless something happens to prevent the settlement from going into effect. “It’s a difficult issue for me in a way because, while I oppose tobacco advertising, I’m also a historic preservationist, and that billboard is a historic part of the city,” Koretz said. “I’d like him (the Marlboro Man) to be in a museum, like the dinosaurs.” The Marlboro Man is actually the Marlboro Men; the image on the Sunset Strip board is changed every two years. It isn’t the most expensive billboard in Los Angeles there are larger boards on Sunset that cost more but it is probably in the top 10. Chris Massey, spokesman for Outdoor Systems Inc., which owns the board, declined to reveal how much Philip Morris Cos., the manufacturer of Marlboro cigarettes, pays for the sign. Most outdoor media companies have been taking steps to reduce their exposure to cigarette ad bans. Cities around the country have recently been passing ordinances restricting cigarette advertising, and state or federal restrictions have long been expected. Two years ago, about 20 percent of Outdoor Systems’ boards around the country were used for tobacco ads; today it’s closer to 4 percent, Massey said. “It’s unfortunate that L.A. is going to lose a landmark,” Massey said. But we may well be seeing him again or something very much like him. West Hollywood Mayor Steve Martin expects other advertisers to trade on the Marlboro Man’s fame by posting satirical boards once the famous one disappears for example, a board picturing a cowboy with a milk mustache, or a cowboy wearing Polo undershorts. “My suspicion is, we haven’t seen the last of the Marlboro Man yet,” Martin said. “He may not be smoking, but he’ll be back in another incarnation.”

Entnote/24″/dt1st/mark2nd By DAVID ZASLOW and BARRY GLASER With lending rates at a 12-year low, many homeowners have been refinancing their mortgages. As an owner of commercial real estate, you have the same option available to you although you would be well advised to take a good look before you plunge in. Why consider refinancing a piece of commercial property? As with many homeowners, you simply might want to avail yourself of a better interest rate than you got when you purchased the property. Or you might have a substantial amount of equity in the property and need cash right away. A note might be coming due, for example, or you might require cash because you’re in the process of dissolving a partnership or acquiring additional property. Family dynamics are another reason you might refinance commercial real estate especially if you want to transfer the property to, say, your children. Some would rather have cold, hard cash, while others would rather have the real estate. By refinancing the property, you can make everyone happy. Refinancing commercial real estate may sound like a terrific idea, and in many cases it can be, but there are potential pitfalls as well, so it’s vital to carefully weigh the costs and risks against the benefits. When it comes to refinancing commercial properties, there can be some heavy-duty expenses involved, such as fees for document preparation, appraisals, title policy, recording, and tax services, along with the points associated with the loan itself. These costs must be factored into the equation. Perhaps the greatest downside to refinancing is that it can put you and your financial assets at increased risk. In California, lenders can come after your personal assets if you don’t keep up with payments on the refinanced loan. That’s because most lenders will make you sign a personal loan guarantee. One important piece of advice: Whenever possible, avoid “cross-collateralizing.” Simply put, if you have two pieces of commercial real estate, one bad and one good, don’t use the good piece as all or part of the collateral for refinancing the other. If you do and later default on the loan, your creditors will be able to take the good property from you. It’s also extremely important to consider the tax ramifications of any commercial refinancing. Many people refinance a piece of commercial real estate to avoid having to sell it and pay tax now. In many cases, you can refinance the property and have more cash proceeds available than if you sold the property and paid tax. It’s called having your cake and eating it, too. However, refinancing might not guarantee the best tax benefits. If you have excess money after the refinancing, be careful. The interest you pay on the excess proceeds will only be deductible if you can trace these funds to new investment property. Unless you can specifically “track” the excess money to an investment type of asset, the government will consider the interest on that portion of the refinance loan to be consumer debt and you will not be able to deduct the interest. Alternatively, if you decide to sell the property instead of refinancing it, examine your personal situation carefully. Some property owners have assumed they’ll benefit from the new low capital gains rate of 20 percent. However, depending on the circumstances, the Alternative Minimum Tax could kick in and you could wind up paying 28 percent the former maximum capital gains rate. In this situation, you might want to consider a tax-free exchange in order to defer paying taxes. In addition to tax ramifications, there are a number of important issues involved in the loan itself, such as choosing the right lending institution. You could obtain the loan from a bank, a mortgage broker or a savings and loan, to name just three possibilities. The best option depends on the size of the loan. It’s important to be aware of and explore your options. Another issue is deciding what kind of loan you should get. There are different types available, including fixed loans and variable-rate loans. If you’re leaning toward a variable-rate loan, make sure you know what the “cap” is the highest interest rate the loan can reach. Find out the maximum allowable payment increase, and over what timeframe it can occur. Also, ask what type of index the interest rate is tied to. Some indices move slowly; others such as those based on Treasury Bills, CDs or LIBOR (London Interbank Offering Rate) are more volatile. With a slow index, even when interest rates do go up, they’ll rise more slowly than they otherwise would. You need to consider if the loan’s terms are advantageous to you. For instance, are there penalties for paying off the loan early? Or is there a “due on sale” clause, which means a new buyer cannot purchase the property from you and take over the loan without the refinancing lender’s approval? This can be very important later on. Say that eventually, you have 10 years remaining on your loan and want to sell the property. If interest rates have risen and your loan rate is lower than the current rate, it will make selling the property easier but only if you don’t have a “due on sale” clause. It’s something to consider when purchasing or refinancing commercial property. You also need to decide who will take title to the refinanced property. There are a number of possibilities: you, your spouse, your family, a partnership you arrange, etc. Which legal strategy you pursue can have a significant impact on liability issues. Bottom line? To answer the above questions and get a handle on the tax ramifications, speak with your financial advisor before refinancing or selling any piece of commercial real estate. David Zaslow, CPA, is the partner in charge of real estate at the accounting and business consulting firm of Roth Bookstein & Zaslow LLP. Barry Glaser is a partner in the law firm of Resch, Polster, Alpert & Berger LLP. He specializes in real estate, bankruptcy and title litigation. Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.

valleytalkadd/cw1st/LK2nd Excuses, Excuses No one ever said managing people was easy, but it probably doesn’t get any harder than in the temporary staffing business, especially now that unemployment levels have dropped precipitously. With more jobs to fill than there are employees to fill them, temporary help agencies like Royal Staffing Services in Sherman Oaks often find themselves dealing with a workforce sorely lacking in motivation. As a result, they’ve been hearing some pretty outlandish excuses for why temps can’t show up for work. Here are a few: “The hours are too early. My thyroid does not kick in until about 9 a.m.” “I’m in jail right now for not paying my parking tickets.” “My hot water heater exploded, my house is flooded and my cat ran away.” “Does temporary mean that I don’t have to go if I don’t feel like it?” “I’m really sick and I can’t go to work, but can I come in to pick up my check?”