Ibj glick partners on $30 m downtown apartment development 2-14-11
LA Business Journal Write Up
1. Why money
manager Jamie
Farnham is flee-
ing the junkiest
of bonds.
PAGE 8
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LOSANGELES BUSINESS JOURNAL
Volume 36, Number 27 July 7 - 13, 2014 • $5.00
labusinessjournal.com
T H E C O M M U N I T Y O F B U S I N E S STM
Up
Front
By HOWARD FINE Staff Reporter
Investors in Breitburn Energy Partners have
been riding a gusher of rising oil prices that have
pushed shares of the L.A. oil and gas partnership to
three-year highs. But challenges now dot the horizon.
After several boom years, signs are emerging
of a tougher operating environment for Breitburn
and its peer oil field companies. The number of
older fields that could be bought and revitalized
has been winnowed down so the fields are now
more expensive. And with so many older wells
now in production, it’s tough to find enough
skilled workers to keep them in shape. Also, envi-
ronmental regulations hinder the company in the
once-promising California market.
News &
Analysis
Hana’s fight to
keep its name is
going to the
Supreme Court.
PAGE 11
Banking
Real
Estate
Please see ENERGY page 37
Oil Company
May Face Hole
A school that
teaches kids
how to code is
multiplying.
PAGE 3
By JONATHAN POLAKOFF Staff Reporter
T
HE Federal Aviation Administration does-
n’t allow commercial drones to fly in U.S.
airspace. But that isn’t stopping L.A. aeri-
al production company Drone Dudes from
launching unmanned aircraft for filming. And
business has taken off.
Two other L.A. aerial production companies,
which are hired to get shots for commercials
and action movies from the sky, are choosing to
stay on the ground, for now, awaiting govern-
ment regulations.
“A lot of people want to use drones, but
they’re apprehensive because of the current situa-
tion with the FAA,” said Andrew Petersen, co-
founder of Drone Dudes. “Other people just
don’t care and they’re going for it.”
No film companies have received the FAA’s
blessing to operate drones in U.S. airspace.
But enforcement is lax or nonexistent, and
Drone Dudes executives said they have not had
any problems.
Drone Dudes builds custom drones that hold
cameras. Each rig could be worth a few thousand
dollars all the way up to $100,000, Petersen said.
Please see ENTERTAINMENT page 36
Some drone-using filmmakers aren’t waiting for OK
By ALFRED LEE Staff Reporter
Last year, L.A. officials awarded four contracts
worth $545,000 to Managed Career Solutions
for workforce development services. Backing the
company was then-Councilman Eric Garcetti, a
longtime supporter.
“There is a great need to support the efforts of
Managed Career Solutions Inc.,” Garcetti wrote in
a motion to approve one of the contracts, which
provided veterans’ services.
It turns out that the company has also been a
longtime supporter of Garcetti and other officials.
The company’s principals, employees and their
families have contributed at least $44,000 to
Garcetti’s campaigns, including his successful bid
for mayor last year, campaign finance records
ENERGY: Lost bids, regulation
could hurt Breitburn production.
By DAVID NUSBAUM Staff Reporter
When Lynne Weaver decided to open a craft
brewery on the Westside, she looked for months but
couldn’t find the right spot. Not in Santa Monica. Nor
Culver City. Nor Playa Vista.
Then she found what she needed in Inglewood,
which might seem like a surprising choice. But not for
those familiar with the city’s budding transformation.
Inglewood is back from the brink of bankruptcy.
Political leaders have adopted a business-friendly atti-
tude that is attracting a range of entrepreneurs such as
Weaver. The Forum has reopened after a major
remodel. A mini-city is planned on the site of
Hollywood Park. There is even the potential for a
National Football League stadium.
Combine all that and Inglewood, despite its con-
tinued problems, is gaining a much improved reputa-
tion for business.
“Being a stone’s throw from Culver City, but with
prices like Commerce, I don’t think a business could
really fail,” said Joe Clarke, senior broker at Maxam
Inglewood Gets Down to Business
DEVELOPMENT: Retooled city
policies help pull in projects.
Misgivings on
Mayor Money?
CONTRACTING: Ex-exec says
MCS violated campaign laws.
PHOTOBYTHOMASWASPER
Buzzed About: Drone Dudes’ Andrew Petersen with flying camera in the Hollywood Hills.
Please see CONTRACTING page 36
Please see DEVELOPMENT page 38
Sky’s Limit
RINGO H.W. CHIU/LABJ
Moving In: Lynne Weaver at Three Weavers.
Alan Casden,
who fought to
build the Palazzo
Westwood, sells
it. PAGE 33
2. 38 LOS ANGELES BUSINESS JOURNAL JULY 7, 2014
Properties in Culver City. “With the Hollywood
Park development, land that got bought for a
potential football stadium and the Forum, people
are going to go there in large groups.”
The turnaround started only a few years
ago. James Butts Jr. said when he assumed
office as mayor in February 2011, the city was
facing an $18.6 million annual deficit and
$316 million in unfunded liabilities.
“We were going to miss payroll that June,”
said Butts. “The city had burned through $55
million in general fund reserves over the prior
three years.”
The City Council took drastic steps. City
contractors were asked to take 10 percent off
their contracts, employees were furloughed
and dozens were laid off. Other steps included
raising water rates, which hadn’t been
increased since 2003.
The biggest challenge, however, was
addressing unfunded liabilities, which were
nearly four times greater than the annual gen-
eral fund budget, which typically ranges
between $79 million and $85 million.
Employees who had worked for the city for as
few as five years were entitled to health care
for life, not only for themselves but a depend-
ent. Inglewood was facing insolvency by 2017
if it couldn’t address those unfunded liabilities.
Butts renegotiated with unions, telling them
that a deal with the city was better than any
deal they might get out of bankruptcy court
later. For example, health care coverage for
retirees was capped at 15 years, with diminish-
ing benefits over that span.
Butts, who holds an M.B.A. degree, spent
19 years in the Inglewood Police Department,
rising to rank of deputy chief of police. In
1991, he was hired as police chief for the city
of Santa Monica, which at that point had a
higher crime rate than Inglewood. While he
was in Santa Monica, the crime rate dropped
64 percent. After that, he worked in security at
Los Angeles International Airport. He credits
those experiences for learning what it takes to
make economies flourish.
“One big lesson I’ve learned in my career is
cities that depend on indigenous property and
sales taxes just get by in the best of times (and)
struggle during recessions,” Butts said.
With city finances stabilized, businesses
did not have to fear that they would be taxed
heavily. Also, Butts and the City Council have
started making major infrastructure repairs.
For example, the city spent only $140,000 on
sewer projects in 2010-11 but this year will
spend $1.18 million.
The city, population 111,000, sits at the
intersection of four major freeways and is less
than four miles from LAX. It also boasts L.A.’s
coastal climate.
Major investments
Inglewood struggled mightily in recent
years, especially since its heyday as the home
of the Los Angeles Lakers and Los Angeles
Kings, both of which left the Forum for Staples
Center in 1999.
The city remains economically challenged.
But the renovated Forum, which reopened
early this year under its relatively new owner,
Madison Square Garden Co., was a turning
point, Butts believes.
“I saw this in my time in Santa Monica:
You focus on a major entertainment anchor
because high-end restaurants and retail fol-
low,” he said. “Then the business campuses
relocate in your city. That’s the next phase for
what we need to attract.”
The Forum was only the beginning. In
February, construction started at the $1.6 bil-
lion Hollywood Park Tomorrow project. Plans
for the 238-acre site include a retail develop-
ment with a 300-room hotel and 2,995 market-
rate homes. They also include a complete ren-
ovation of the city’s largest taxpayer –
Hollywood Park Casino, which will remain
open during construction.
“As the mayor and City Council make the
investment and as Madison Square Garden makes
their investment and we bring this urban village to
life, you’ll see a huge transformation locally and
how the area is perceived regionally,” said Chris
Meany, chief executive of San Francisco develop-
erWilsonMeany,whichmanagestheHollywood
Park project for the owner, Stockbridge Capital
Partners, also in San Francisco.
The racetrack closed in December and is in
the demolition process. During the past two
weeks, bids have been awarded for the first
phase of construction for infrastructure work
along Prairie Boulevard.
That’s not all. Another major site, the for-
mer Daniel Freeman hospital, was purchased
by a developer with plans to build 272 town-
homes on the 57-acre site with units in the
$400,000-$500,000 range.
Most intriguingly, St. Louis Rams owner
Stan Kroenke in January purchased a 60-acre
vacant property from Wal-Mart Stores Inc.
that sits between the Forum and Hollywood
Park. Kroenke is a real estate developer with
vast holdings across the country, but has not
stated his intentions for the property. The acqui-
sition led to speculation that he would consider
building an NFL stadium at the site and move
his team from St. Louis after the upcoming sea-
son, when he can opt out of the lease there.
More developments might soon be under
way if the city can settle litigation over redevel-
opment agency funds. The state disbanded
community redevelopment agencies statewide
several years ago. Litigation with the successor
agency prevents the city from selling any of its
more than 30 parcels that were owned by the
redevelopment agency; those parcels have sat
in limbo for more than two years. Butts expects
to enter into a settlement in about two months,
which will allow the city to sell former redevel-
opment agency parcels for development.
One area that developers are looking at for
investment is in downtown Inglewood along
Market Street. Despite many vacancies, the
city and various developers see potential for
the area to develop into a retail strip similar to
Old Town Pasadena or Third Street Promenade
in Santa Monica. Butts said he has received
offers from developers who are looking to
invest $100 million to $150 million to build an
anchor property on a city parcel in the area that
would help begin a revitalization there.
In addition, the city has started to draw in
small businesses with its low costs for licenses
and lower rents than surrounding areas.
One company that did not plan to open in
Inglewood was Three Weavers, a Kickstarter-
funded craft brewery that is the outgrowth of
Malibu resident Lynne Weaver’s homebrew
hobby. She is launching the craft brewery in
Inglewood, although she looked there only
after eliminating all other Westside locations.
“Rents were too high in Santa Monica,
Culver City was not brewery friendly, and
warehouse owners would not lease me space in
Playa Vista and Playa Del Rey,” she said.
“Inglewood wasn’t on the radar, but my real
estate agent encouraged me to look there.”
She found a city that already had zoning
requirements for a brewery. The city has a
moratorium on new alcohol licenses but
waived that for her business. Fees are lower,
too. The cost of a conditional use permit from
the city of LosAngeles was $12,000 compared
with $1,500 in Inglewood.
“During special use process, it was shown
that they were welcoming and supportive of us,”
Weaver said. “I have not had a negative interac-
tion with anyone in the city of Inglewood.”
The warehouse she found, west of the 405
freeway, is in an area filled with air cargo stor-
age. Those buildings do not generate a lot of
property tax, but if businesses can find new
uses for the structures, they can generate prop-
erty and sales taxes for the city much like rede-
velopment that has taken place in the Arts
District in downtown Los Angeles.
Butts asserted that crime is down.
Nevertheless, a perception remains that it’s not
the safest of cities.
“Inglewood has a bad reputation, but so did
Culver City and Venice at one time. There is
nothing to stop the city from being revitalized
and bringing in businesses that are income
generating for the city,” said Weaver.
Her business will employ between 15 to 20
people full time and provide a community
gathering place with an on-site tasting room.
Business openings
In addition to the brewery, the mayor points
to 15 businesses that have opened this year in
the city. They include L.A.-based Orleans &
York Deli, which opened a location in
Inglewood and has plans to open in Carson and
downtown Los Angeles within the next six
months. Sprinkles Cupcakes is moving a
warehouse from Culver City to Inglewood.
Yogurtland, Dunkin Donuts and Starbucks also
have plans to open retail locations this year.
Maxam’s Clarke, who helped Weaver find
the Inglewood location, has said that industrial
prices have tripled in Culver City, where space is
being converted to creative offices and postpro-
duction studios. He’s pushing clients such as art
studios to Inglewood because rents remain low.
The city passed a live-work ordinance this
year to further increase investment from artists
and other small businesses that can use spaces
such as air cargo warehouses that are only
occupied seasonally. Businesses provide ware-
house owners year-round tenants that also gen-
erate a solid tax base for the city.
“There are high-end artists who are leaving
Culver City when leases are up and going to
Inglewood because it has the space and the
rents they desire,” said Clarke.
Development: Inglewood Works to Pull in Business
Internet: Food Delivery Service Looks to Feast on Firms
Continued from page 1
‘One big lesson I’ve learned
in my career is cities that
depend on indigenous
property and sales taxes
just get by in the best of
times (and) struggle
during recessions.’
JAMES BUTTS JR.,
Inglewood mayor
said Hirschman, who’s partnered with
Chewse for about a year. “We wouldn’t do it
otherwise.”
The company, which has relationships
with about 90 restaurants, said it is adding
about five more each week.
Among the participating restaurants are
Bergamot Café in Santa Monica as well as
West L.A.’s Nong La Cafe and
Fundamental LA.
Lawrence said Chewse evaluates new
eateries through its “taste tester” program,
where businesses can opt to try out restau-
rants and offer feedback.
“Customers get the final say,” she said.
Lawrence declined to say how many busi-
nesses order through Chewse, though she said
the number has doubled over the last six months.
Tech firms make up a big chunk of the
clientele – Shopzilla Inc., Activision
Publishing Inc., Factual Inc. and JustFab
are some of the many big names, but major
private equity firms such as Gores Group
and Leonard Green & Partners are also
customers, Lawrence said.
Escartin said the service has allowed him
to spend more time on important tasks such
as coordinating events that help develop office
culture, including a meetup with local indus-
try group Innovate Pasadena.
“They do seem to kind of veer toward the
tech and startup industry for the most part,”
said Colony Café’s Hirschman of his Chewse
customers.
Lawrence said workers in the tech, finan-
cial and legal sectors typically put in long
shifts, which puts an added responsibility on
their employers to ensure that they are well-
nourished.
“People are spending so long at work,” she
said. “It’s a great thing for an office to say
let’s take that burden off of you.”
Lawrence spends half her time at
Chewse’s San Francisco office in preparation
for the company’s planned expansion to the
Bay Area in about three months – and she
doesn’t want to stop there.
“I want to nourish the nation’s workforce,”
she said.
Continued from page 5
Different Perspective: Mayor James Butts Jr. atop City Hall in Inglewood.
RINGO H.W. CHIU/LABJ