LA Business Journal Write Up

Why moneymanager JamieFarnham is flee-ing the junkiestof bonds.PAGE 8

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T H E C O M M U N I T Y O F B U S I N E S S TM

UpFront

By HOWARD FINE Staff Reporter

Investors in Breitburn Energy Partners havebeen riding a gusher of rising oil prices that havepushed shares of the L.A. oil and gas partnership tothree-year highs. But challenges now dot the horizon.

After several boom years, signs are emergingof a tougher operating environment for Breitburnand its peer oil field companies. The number ofolder fields that could be bought and revitalizedhas been winnowed down so the fields are nowmore expensive. And with so many older wellsnow in production, it’s tough to find enoughskilled workers to keep them in shape. Also, envi-ronmental regulations hinder the company in theonce-promising California market.

News &Analysis

Hana’s fight tokeep its name isgoing to theSupreme Court.PAGE 11

Banking

RealEstate

Please see ENERGY page 37

Oil CompanyMay Face Hole

A school thatteaches kidshow to code ismultiplying.PAGE 3

By JONATHAN POLAKOFF Staff Reporter

THE 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 fromlaunching unmanned aircraft for filming. Andbusiness has taken off.

Two other L.A. aerial production companies,which are hired to get shots for commercialsand action movies from the sky, are choosing tostay 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 justdon’t care and they’re going for it.”

No film companies have received the FAA’sblessing to operate drones in U.S. airspace.But enforcement is lax or nonexistent, andDrone Dudes executives said they have not hadany problems.

Drone Dudes builds custom drones that holdcameras. Each rig could be worth a few thousanddollars 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 contractsworth $545,000 to Managed Career Solutionsfor workforce development services. Backing thecompany was then-Councilman Eric Garcetti, alongtime supporter.

“There is a great need to support the efforts ofManaged Career Solutions Inc.,” Garcetti wrote ina motion to approve one of the contracts, whichprovided veterans’ services.

It turns out that the company has also been alongtime supporter of Garcetti and other officials.The company’s principals, employees and theirfamilies have contributed at least $44,000 toGarcetti’s campaigns, including his successful bidfor mayor last year, campaign finance records

ENERGY: Lost bids, regulationcould hurt Breitburn production.

By DAVID NUSBAUM Staff Reporter

When Lynne Weaver decided to open a craftbrewery on the Westside, she looked for months butcouldn’t find the right spot. Not in Santa Monica. NorCulver City. Nor Playa Vista.

Then she found what she needed in Inglewood,which might seem like a surprising choice. But not forthose 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 asWeaver. The Forum has reopened after a majorremodel. A mini-city is planned on the site ofHollywood Park. There is even the potential for aNational 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 withprices like Commerce, I don’t think a business couldreally fail,” said Joe Clarke, senior broker at Maxam

Inglewood Gets Down to Business DEVELOPMENT: Retooled citypolicies help pull in projects.

Misgivings onMayor Money?CONTRACTING: Ex-exec saysMCS violated campaign laws.

PH

OTO

BY

TH

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AS

WA

SP

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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 tobuild the PalazzoWestwood, sellsit. PAGE 33

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38 LOS ANGELES BUSINESS JOURNAL JULY 7, 2014

Properties in Culver City. “With the HollywoodPark development, land that got bought for apotential football stadium and the Forum, peopleare going to go there in large groups.”

The turnaround started only a few yearsago. James Butts Jr. said when he assumedoffice as mayor in February 2011, the city wasfacing 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 $55million in general fund reserves over the priorthree years.”

The City Council took drastic steps. Citycontractors were asked to take 10 percent offtheir contracts, employees were furloughedand dozens were laid off. Other steps includedraising water rates, which hadn’t beenincreased since 2003.

The biggest challenge, however, wasaddressing unfunded liabilities, which werenearly four times greater than the annual gen-eral fund budget, which typically rangesbetween $79 million and $85 million.Employees who had worked for the city for asfew as five years were entitled to health carefor life, not only for themselves but a depend-ent. Inglewood was facing insolvency by 2017if it couldn’t address those unfunded liabilities.Butts renegotiated with unions, telling themthat a deal with the city was better than anydeal they might get out of bankruptcy courtlater. For example, health care coverage forretirees was capped at 15 years, with diminish-ing benefits over that span.

Butts, who holds an M.B.A. degree, spent19 years in the Inglewood Police Department,rising to rank of deputy chief of police. In1991, he was hired as police chief for the cityof Santa Monica, which at that point had ahigher crime rate than Inglewood. While hewas in Santa Monica, the crime rate dropped64 percent. After that, he worked in security atLos Angeles International Airport. He creditsthose experiences for learning what it takes tomake economies flourish.

“One big lesson I’ve learned in my career iscities that depend on indigenous property andsales taxes just get by in the best of times (and)struggle during recessions,” Butts said.

With city finances stabilized, businessesdid not have to fear that they would be taxedheavily. Also, Butts and the City Council havestarted making major infrastructure repairs.For example, the city spent only $140,000 onsewer projects in 2010-11 but this year willspend $1.18 million.

The city, population 111,000, sits at theintersection of four major freeways and is lessthan four miles from LAX. It also boasts L.A.’scoastal climate.

Major investmentsInglewood struggled mightily in recent

years, especially since its heyday as the homeof the Los Angeles Lakers and Los AngelesKings, both of which left the Forum for StaplesCenter in 1999.

The city remains economically challenged.But the renovated Forum, which reopenedearly this year under its relatively new owner,Madison Square Garden Co., was a turningpoint, Butts believes.

“I saw this in my time in Santa Monica:You focus on a major entertainment anchorbecause high-end restaurants and retail fol-low,” he said. “Then the business campusesrelocate in your city. That’s the next phase forwhat we need to attract.”

The Forum was only the beginning. InFebruary, construction started at the $1.6 bil-lion Hollywood Park Tomorrow project. Plansfor 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 remainopen during construction.

“As the mayor and City Council make theinvestment and as Madison Square Garden makestheir investment and we bring this urban village tolife, you’ll see a huge transformation locally andhow the area is perceived regionally,” said ChrisMeany, chief executive of San Francisco develop-er Wilson Meany, which manages the HollywoodPark project for the owner, Stockbridge CapitalPartners, also in San Francisco.

The racetrack closed in December and is inthe demolition process. During the past two

weeks, bids have been awarded for the firstphase of construction for infrastructure workalong Prairie Boulevard.

That’s not all. Another major site, the for-mer Daniel Freeman hospital, was purchasedby 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 ownerStan Kroenke in January purchased a 60-acrevacant property from Wal-Mart Stores Inc.that sits between the Forum and HollywoodPark. Kroenke is a real estate developer withvast holdings across the country, but has notstated his intentions for the property. The acqui-sition led to speculation that he would considerbuilding an NFL stadium at the site and movehis team from St. Louis after the upcoming sea-son, when he can opt out of the lease there.

More developments might soon be underway if the city can settle litigation over redevel-opment agency funds. The state disbandedcommunity redevelopment agencies statewideseveral years ago. Litigation with the successoragency prevents the city from selling any of itsmore than 30 parcels that were owned by theredevelopment agency; those parcels have satin limbo for more than two years. Butts expectsto 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 forinvestment is in downtown Inglewood alongMarket Street. Despite many vacancies, thecity and various developers see potential forthe area to develop into a retail strip similar toOld Town Pasadena or Third Street Promenadein Santa Monica. Butts said he has receivedoffers from developers who are looking toinvest $100 million to $150 million to build ananchor property on a city parcel in the area thatwould help begin a revitalization there.

In addition, the city has started to draw insmall businesses with its low costs for licensesand 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 ofMalibu resident Lynne Weaver’s homebrewhobby. She is launching the craft brewery inInglewood, although she looked there onlyafter eliminating all other Westside locations.

“Rents were too high in Santa Monica,Culver City was not brewery friendly, andwarehouse owners would not lease me space inPlaya Vista and Playa Del Rey,” she said.“Inglewood wasn’t on the radar, but my realestate agent encouraged me to look there.”

She found a city that already had zoningrequirements for a brewery. The city has amoratorium on new alcohol licenses butwaived that for her business. Fees are lower,too. The cost of a conditional use permit fromthe city of Los Angeles was $12,000 comparedwith $1,500 in Inglewood.

“During special use process, it was shownthat 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 405freeway, is in an area filled with air cargo stor-age. Those buildings do not generate a lot ofproperty tax, but if businesses can find newuses for the structures, they can generate prop-erty and sales taxes for the city much like rede-velopment that has taken place in the ArtsDistrict in downtown Los Angeles.

Butts asserted that crime is down.Nevertheless, a perception remains that it’s notthe safest of cities.

“Inglewood has a bad reputation, but so didCulver City and Venice at one time. There isnothing to stop the city from being revitalizedand bringing in businesses that are incomegenerating for the city,” said Weaver.

Her business will employ between 15 to 20people full time and provide a communitygathering place with an on-site tasting room.

Business openingsIn addition to the brewery, the mayor points

to 15 businesses that have opened this year inthe city. They include L.A.-based Orleans &York Deli, which opened a location inInglewood and has plans to open in Carson anddowntown Los Angeles within the next sixmonths. Sprinkles Cupcakes is moving awarehouse from Culver City to Inglewood.Yogurtland, Dunkin Donuts and Starbucks alsohave plans to open retail locations this year.

Maxam’s Clarke, who helped Weaver findthe Inglewood location, has said that industrialprices have tripled in Culver City, where space isbeing converted to creative offices and postpro-duction studios. He’s pushing clients such as artstudios to Inglewood because rents remain low.

The city passed a live-work ordinance thisyear to further increase investment from artistsand other small businesses that can use spacessuch as air cargo warehouses that are onlyoccupied 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 leavingCulver City when leases are up and going toInglewood because it has the space and therents 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 learnedin my career is cities that

depend on indigenousproperty and sales taxesjust get by in the best of

times (and) struggleduring recessions.’

JAMES BUTTS JR.,Inglewood mayor

said Hirschman, who’s partnered withChewse for about a year. “We wouldn’t do itotherwise.”

The company, which has relationshipswith about 90 restaurants, said it is addingabout five more each week.

Among the participating restaurants areBergamot Café in Santa Monica as well asWest L.A.’s Nong La Cafe andFundamental LA.

Lawrence said Chewse evaluates neweateries 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 saidthe number has doubled over the last six months.

Tech firms make up a big chunk of theclientele – Shopzilla Inc., ActivisionPublishing Inc., Factual Inc. and JustFabare some of the many big names, but majorprivate equity firms such as Gores Group

and Leonard Green & Partners are alsocustomers, Lawrence said.

Escartin said the service has allowed himto spend more time on important tasks suchas coordinating events that help develop officeculture, including a meetup with local indus-try group Innovate Pasadena.

“They do seem to kind of veer toward thetech and startup industry for the most part,”said Colony Café’s Hirschman of his Chewsecustomers.

Lawrence said workers in the tech, finan-cial and legal sectors typically put in long

shifts, which puts an added responsibility ontheir employers to ensure that they are well-nourished.

“People are spending so long at work,” shesaid. “It’s a great thing for an office to saylet’s take that burden off of you.”

Lawrence spends half her time atChewse’s San Francisco office in preparationfor the company’s planned expansion to theBay Area in about three months – and shedoesn’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

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