Inner-city rebuilding dominated by supermarkets; two years after riot, smaller businesses not restored.

Almost two years to the day since hundreds of commercial buildings were damaged or destroyed in the Los Angeles riot, supermarkets are the main rebuilders of commercial properties in the areas most affected by the riot.

But according to preliminary figures in a new study by RLA, the organization attempting to rebuild riot-damaged areas and other "neglected areas" of L.A., the smaller property owners have made little headway in rebuilding.

Linda Griego, the former Los Angeles deputy mayor who became president and chief executive officer of RLA in February, said approximately 350 of the commercial sites damaged in the April 1992 rioting remain vacant. Most of those properties were formerly occupied by smaller businesses that have been either unable or unwilling to rebuild.

Griego said most of those 350 sites are in the parts of South Central and South Los Angeles that were hit hardest by the riot, but the 350 also include sites in many other surrounding communities that RLA defines as "neglected." These include parts of Hollywood, Long Beach, East Los Angeles, Pacoima and portions of the San Fernando Valley.

In the two years since the riot, supermarket chains Vons Cos. Inc., Ralphs Grocery Co. and Smart & Final Iris Co. have opened 10 new stores in the neglected areas. Those three chains, plus Food-4-Less, have announced plans to open another 20 stores, including eight that are scheduled to open this year.

Most of the (supermarket) commitments are still very much on line," Griego said. It's the businesses on the other end of the scale - the ones that formerly inhabited small commercial sites - that have not reinvested. Most of those sites remain vacant and fenced in.

Griego said the 350 sites that remain vacant were among 1,100 commercial sites damaged in the riots. About half of the 1,100 structures sustained relatively little damage, she said, and most of the sites with minor damage have been restored. She said the biggest challenge is to restore the 350 properties that were the most heavily damaged because those are the sites where the least amount of rebuilding has occurred and where owners are least capable of rebuilding on their own.

RLA is currently updating its survey of the owners of the damaged properties to find out if they are doing anything to rebuild or if there is some way RLA can help them rebuild.

"When you consider how many grocery stores have been built in two years, that's not so bad considering how difficult development is in today's economy. Most of the commitments for additional stores from supermarkets are still on line. But not very much has occurred on the 350 vacant sites," Griego said. "I'm concerned that they're just sitting there with no one working with the properly owners. I don't want these empty lots to be forgotten.

According to the new RLA president, some of the property owners have not rebuilt because they had insufficient insurance. Others already had heavy debt before their properties were destroyed, so they are not good candidates for SBA-backed loans or other traditional sources of financing for small commercial developments.

"The biggest problem for these small property owners, which is the biggest problem for everyone in today's economy, is getting financing," Griego said.

Some property owners also received sizable insurance claims settlements and have decided not to rebuild because their buildings had high vacancies before the April 1992 riot. Many of those owners are waiting for the market to improve before rebuilding, Griego added.

Griego said a recent RLA study, which was conducted for the agency by Cal State Los Angeles, surveyed owners of riot-affected properties to find out the status of their properties and what their plans are - if any. Survey results are still being compiled and are expected to be completed in May.

"We want to look at the survey results and see if we can come up with a strategy" to help the property owners, Griego said. For example, if RLA finds that a property owner needs $2 million to rebuild, and the SBA will only guarantee a loan on part of that amount, RLA would try to find a "combination of resources" for the rest of the financing.

The damaged properties include a variety of retail and some light industrial uses that are still in demand, even though the properties haven't been rebuilt, RLA officials said they believe.

"We know these communities need a whole bunch of amenities," Griego said. RLA is looking for these new service "amentities" - such as dry cleaning, restaurants, auto repair, etc. - to be provided primarily through the expansion of existing businesses that are currently providing such services within the areas served by RLA.

Griego even sees a need for new office buildings, despite the glut of such space throughout the Los Angeles Basin.

"There aren't surplus office buildings in this part of town (South Los Angeles). If some government agencies wanted to be closer to where their customers are, there are very few spaces where thy can go," the RLA president said.

One such example of a government entity is the Military Entrance Processing Service, known as MEPS, which is currently in a building on La Brea Avenue near Rodeo Road. But is is looking for new space because its present building can not accommodate its space needs.

The federal government's General Services Administration, the agency which oversees MEPS, has agreed to keep the MEPS operations in the South Central L.A. area, after initially considering a move to Orange County or to a facility near the Los Angeles International Airport.

MEPS' decision to remain in South Central is significant because it means several hundred jobs will stay in the area, Griego said. MEPS is committed to signing a 10-year lease for 62,382 square feet when it finds the right building.

Said Griego the biggest obstacle facing any developer hoping to construct a build-to-suit home for MEPS will probably be securing adequate financing. "You would think you could (get financing) because there is a ready-made tenant here," Griego said. "So it's not |spec' construction."

Among those bidding to develop the space of the MEPS facility is Michael Anderson, an architect/developer who hopes to build a multi-tenant, 100,000-square-foot office building on a site behind the Baldwin Hills Crenshaw Plaza. Anderson said he is one of four or five developers who are competing fiercely to win the deal to develop and then lease space to MEPS.

According to a General Services Administration request for lease proposals, MEPS is looking to lease 62,382 square feet "for 10 years firm, with two five-year renewal options." The request states the space must be within the area bounded by the Santa Monica (10) Freeway on the north, Stocker Street on the south, La Cienega Boulevard on the west and La Brea Avenue on the east.

The GSA hasn't said when it will make a decision on the deal. Anderson said the government's requirement to lease within those boundaries limits its number of choices for office space. Despite the glut of available office space in downtown Los Angeles and other submarkets in the Los Angeles Basin, Anderson said the Crenshaw area has a shortage of quality office space.

His proposed project would be the first new office building in the Crenshaw district in about 30 years, he said. He believes that, despite today's difficult financing environment, he could get a loan to develop the new building if he could win the MEPS lease.

The other contenders include some landlords who are offering to remodel their buildings to win the MEPS lease, Anderson said. But, he asserted, a new building would do more for the area by acting as a catalyst for other development.

Dubbed the Santa Rosalia Office Building, Anderson's proposed project would be part of a development plan that Anderson calls the Crenshaw Economic Development Proposal. He said it would "nurture the local real estate market and increase the feasibility of building new housing because it would make the area more attractive."

Including the new office building that would house the MEPS facility, the plan includes proposals for 1.5 million square feet of new office space in nine buildings. The office space would be part of $1.2 billion in development that would transform a 10-square-mile area of Crenshaw district communities - including Leimart Park, Baldwin Hills and View Park.

Planned as a seven-year construction project, the proposal calls for 4,000 new homes, rehabilitation of 3,000 existing homes and complete rehabilitation of 10 commercial streets.

Anderson has been soliciting support far and wide for the economic development proposal, gathering letters of endorsement from city, county, state and national elected officials. Among these are L.A. Mayor Richard Riordan, L.A. County Supervisor Yvonne Brathwaithe Burke, U.S. Sens. Ted Kennedy, D-Mass., and Barbara Boxer, D-Calif., and numerous local citizen groups in the Crenshaw area.

According to Griego, there is a demand for a new office space in the Crenshaw area and other parts of Los Angeles that were bypassed by the 1980s building boom. She noted that RLA itself, which is based near Francisco Street and the Harbor (110) Free-way in downtown Los Angeles, has had trouble finding space for a satellite office in South Los Angeles, where it could meet with local businesses to plan expansions and rebuilding.

"We hope to meet with 15 or 20 businesses at a time and, as the businesses tell us what they need in order to grow, we will try to put them together with those resources - whether it be financing, management or other help," Griego explained.

Part of RLA's focus, she added, will be to help small retail and distribution businesses establish network to assist each other in bidding on contracts and solving mutual problems.

Griego's emphasis on small companies is a departure from the course taken by Rebuilt L.A., as RLA was originally known when it was headed by former Major League Baseball Commissioner and Olympic Organizing Committee Chairman Peter Ueberroth.

But considering the downsizing in corporate America today, Griego said she doubts she would have much luck approaching Fortune 500 companies about investing in the inner city.

"We consider every possibility and certainly would welcome something like that (a factory or other large corporate employer)," she said. "But we're focusing on smaller, local companies and businesses that are already here because we think those efforts have a much better chance of being fruitful."