The Business Press: Ontario seeks options to run convention center

By Chris H. Sieroty

Contributing Writer

With SMG’s contract to operate the Ontario Convention Center set to expire in June, city officials have begun to explore their options. Among the possibilities are having city staff oversee the facility, approving a new contract with its current operator or contracting with a new company to operate the space.

Based in Philadelphia, SMG has operated the 225,000-square-foot, city-owned convention center for the past 10 years. Instead of the city council automatically approving another two-year contract, Ontario City Manager Gregory Devereaux told The Business Press that his staff was directed to prepare a report that would outline the best options for running the exhibit and meeting facility.

He said the report was scheduled to be completed in the first quarter and then presented to Mayor Pro-Tem Jim Bowman and Councilman Alan Wapner, who were chosen to lead a subcommittee to explore the city’s options for operating the convention center. The committee will then make recommendations to the city council, the city manager said.

“In these times, it’s prudent to explore what your options are in running the convention center in the most cost effective way,” Devereaux said. “In the end, we want to make a recommendation that would be the most economical. We do this constantly with all our departments and programs … this one just happens to be more public.”

The Ontario Convention Center, which was first opened in 1997 and operated as a non-profit for two years, operates at about a $1.5 million annual deficit. While city officials would like the convention center to break even or even show a profit, Devereaux said it acts “as a loss leader” in an effort to increase local TOT taxes (Transient Occupancy Tax) and business for local hotels and restaurants.

Wapner agreed, saying the review would give the city the opportunity to gage if the current contract was doing what it was supposed to do, increase the amount of TOT collected by the city.

“I’m concerned that the convention center is not generating enough TOT taxes,” Wapner said. “I don’t know if it’s because of the economy or the way it’s being managed or a combination of both. But this process will give us time to review how the facility is being run.”

In fiscal year 2007-2008, Ontario collected $11 million in gross TOT, according to a city official. In fiscal year 2008-2009 that declined to $8.7 million.

Grant Yee, the city’s finance director, said TOT were expected to decline to around $8 million in the current (2009-2010) fiscal year that ends June 30.

Wapner said he and other council members were also concerned if SMG was fulfilling commitments it made two years ago when their contract was renewed. Those commitments included using the company’s buying power to reduce costs, and a national marketing team to book larger conventions and trade shows at the facility and bringing down the convention center’s operating deficit.

“I’m not sure we’ve met our goal of building tourism and supporting local businesses while bringing down the operating deficit,” the councilman said. “Or even if it’s being operated in the best interests of the Ontario Convention Center or SMG.”

Bob Brown, an SMG employee and general manager of the convention center, said “We are following the direction of the city manager and city council and providing all the information they need to do their diligence of exploring the contract extension.”

In a report prepared by its staff, the Ontario Convention Center expected to generate $4.1 million in economic impact from 25 events in the third quarter that ended Sept. 30. Fourth-quarter economic impact figures were not available.

“No event is too big or too small, especially in this economy,” Director of Sales Amita Patel said in a statement. “We continue booking events and stirring business with visitors who will book rooms at local hotels and spend at local eateries and shops.”

In the statement, Brown added: “A convention center’s purpose is to generate economic impact. We support and help local businesses thrive with every event we book.”

Wapner, whose term ends in December 2010, expressed concern that SMG was not attracting large enough events that would increase occupancy rates at local hotels. In a report prepared by Bruce Baltin, senior vice president with PKF Consulting in Los Angeles, the economic downturn and modest increase in the hotel supply this year was expected to lead to “immense pressure and increased competition among local hotels.”

In 2010, the hotel market was expected to remain tough, but Baltin wrote the “long term outlook for the Inland Empire and Ontario is favorable.”

Overall, PKF Consulting predicted that 2009 year-end hotel occupancy rate in Ontario would be 60 percent, then showing a slight decline in 2010 to 59 percent before rising to 62 percent in 2011 and 2012.

“My job is to make sure (local) hotels survive through this economy,” Wapner said. “SMG’s job is to look at convention center’s bottom line, while my job is also to look at the bottom line for the city as a whole.”

Among the options is running the facility in house, but Devereaux said initial indications were that it would be unlikely “you would go purely in house” to operate the convention center because of the increased employee and pension costs.

He said the city had also been contacted by consultants seeking to represent the city in its negotiations with SMG and had received an inquiry from Global Spectrum about the possibility of replacing SMG. Messages left with Global Spectrum executive Todd Glickman were not returned.

Based in Philadelphia, Global Spectrum is a division of Comcast Spectacor, a sports and entertainment company which owns the Wachovia Center, Philadelphia Flyers, Philadelphia 76ers, and Comcast SportsNet. Global Spectrum was one of the companies that originally bid for the operating contract in 1999.

“I got a letter from another firm expressing interest,” said Wapner, who declined to identify the company. “There is interest out there.”

Wapner expressed the hope that a decision could be forthcoming by January but wanted to give city staff the time they needed to complete their report.

“We need to give SMG an answer by the end of January, but I don’t think it will make a difference if we take a couple of extra weeks,” he said. “Maybe in the end we’ll be able to strike a better deal with SMG.”

Press-Enterprise: Home Depot warehouse to be built in Ontario

By Chris H. Sieroty
Special to The Press-Enterprise
A new warehouse planned in Ontario appears to be another distribution center for Atlanta-based Home Depot Inc.
ProLogis announced late Tuesday that it would begin construction in December on a warehouse at the southwest corner of Etiwanda Avenue and Fourth Street in Ontario within its Crossroads Business Park, a 281.7-acre master-planned project near the interstates 10 and 15 intersection.
ProLogis declined to identify who would occupy the 667,000-square-foot facility, but documents filed by the developer with the city’s planning department show the occupant will be Home Depot. Messages left with Paula Drake, senior manager of corporate communications with Home Depot, were not returned.
Earlier this year, Home Depot moved into a 650,000-square-foot building at ProLogis Park Redlands. Home Depot also operates a distribution center in Mira Loma.
“The retailer is a longstanding customer, and we are pleased to once again meet the company’s needs for distribution space,” said Richard Strader, ProLogis Global Corporate Services’ senior vice president, in a statement. “Upon completion of this facility, the company will occupy approximately seven million square feet of ProLogis distribution space in 13 markets across the country.”
ProLogis said the project would be built on a 55-acre parcel within the development. Terms of the deal were not released, but with an average construction price in the region of between $70 to $90 per square foot, the new facility at the low end of the scale would cost approximately $46 million to construct. It is scheduled to be completed next fall.
With an industrial vacancy rate of 9 percent at the end of the third quarter and construction of new industrial facilities all but halted since the recession took hold in late 2008, a new project has been welcomed by Ontario officials.
“Any construction jobs or permanent jobs in an (economic) cycle like this are welcome,” said Ontario City Manager Gregory Devereaux. “It will be occupied by a nationally known tenant and a builder that has developed other projects in the area.”
Devereaux said it also demonstrated ProLogis’ “faith in our market.”
Based in Denver, ProLogis has about 45 million square feet of industrial space in Southern California. At Crossroads Business Park, Home Depot would be located next to buildings occupied by Gillette and Oakley Inc.

The Business Press: WinCo quietly builds market share

By Chris H. Sieroty
Contributing Writer
Winco Foods LLC, a privately held Boise, Idaho, discount grocer that has expanded its footprint in the two-county region, says its plans to open additional outlets remain on track despite the area’s economic instability.
WinCo plans to open two to three more stores in Southern California by the end of 2010, said Michael Read, WinCo’s vice president of public and legal affairs. They will join three stores the company recently opened in the Western United States, including an outlet in Hemet.
“We describe our company as discount supermarket chain,” Read said in an interview. “We are usually double the size of a traditional supermarket and feature national brands. We focus on pricing and work to be the low price leaders in the (markets) we serve.”
Read, who declined to comment on the future Inland Southern California locations, said Riverside and San Bernardino counties were an attractive market because of demographics. The chain’s business model continues to be centered around individual consumers or families on a budget. Analysts described WinCo’s core consumer as “middle income.”
“We’ve been in the Inland Empire for a several years,” he said. “Our new store in Hemet was a natural process of our overall plans for growth in California.”
Currently, WinCo Foods operates eight Inland Southern California locations, including Hemet, Temecula, Moreno Valley, Fontana, Indio, Apple Valley, Victorville and Pomona.
“We look at the overall market before we decided where to open a new location,” he said. “We look at traffic patterns, demographics, how shoppers spend their food dollars and make sure the store has good visability from the street. Right now our real estate development team is looking for properties throughout the Western United States.”
With sales expected to top $4.5 billion this fiscal year, the company was in a strong financial position to support its expansion goals. Read said WinCo Foods had a strong cash position and a good credit facility to borrow from as needed to finance its expansion.
“Our employees own 84 percent of WinCo Foods, and the rest is owned by a venture capital group, that helped us with our restructuring a few years ago,” he said. The company’s employee ownership structure is known as an Employees Stock Ownership Plan, or ESOP.
In 2004, Endeavour Capital Funds invested $40 million in a recapitalization of WinCo Foods, according information posted on Stoel Rives LLP’s Web site, the Portland, Ore., -based business law firm represented Endeavour Capital in its acquisition of a percentage of the supermarket chain.
Messages left with Stephen Babson, Endeavour’s managing director in Portland, were not returned.
“Endeavour was introduced to WinCo management as a potential equity partner to assist in the buyout of a strategic investor and finance continuing growth in the store network,” the venture capital firm said in a profile posted on its Web site. “In 2004, Endeavour acquired a minority interest in the company alongside the ESOP, which is the majority owner of WinCo. During Endeavour’s involvement, the company has continued its rapid growth, with the addition of two 1 million square foot distribution centers and several new store openings each year.”
While the two-county region has an abundance of supermarket chains, WinCo Foods operates in a different way and is increasing its sales in a recession.
The discount warehouse grocery chain expects to boost its sales by $500 million for the fiscal year ending in late March, Read said. WinCo projects sales of $4.5 billion, up from $4 billion for the last fiscal year and $3.5 billion for fiscal year 2007.
Analysts say overall it’s a difficult economic environment for some chains and the challenge is to be able to attract consumers who are looking to stretch their food dollars.
Bruce Cohen, a retail strategist with San Francisco-based Kurt Solman Associates, said in a telephone interview that the supermarket business has changed dramatically due to the recession, which has forced consumers to change their shopping habits. For instance, from 2006 through late 2008 purchases were driven by convenience as consumers bought more prepared meals, branded items and premium goods, but the recession has caused consumers to look for values and price oriented purchases in an attempt to stretch their shopping dollars.
“Overall, store revenues locally and nationally are being challenged as consumers are making fewer trips to the grocery store,” Cohen said. “It’s expected that consumers will spend 20 percent less on groceries this year.”
Many moderate-income consumers that traded up to purchase goods at Whole Foods, Ralphs or Vons when the region’s economy was booming now shop at Wal-Mart, Costco or WinCo Foods, he said. Cohen said the challenge for WinCo Foods to continue its sales growth was to keep consumers coming back to its stores when the economy turns positive.
“We expect the economy to be very tough in 2010,” he said. “WinCo’s bottom line should continue to benefit from the weak economy and changes in shopping habits. It’s trial and repeat in the supermarket business. Consumers will try WinCo Foods, but business is made in repeat visits.”
On Oct. 19, WinCo opened its eighth Inland location in Hemet. The warehouse-style store is 94,000 square feet and employs approximately 225 individuals, the company said.
As customers enter the store they’ll see a large “Wall of Values” featuring special low pricing on a wide variety of popular items that are placed on heavy metal racks. Read said its bulk-food section is filled with more than 600 items, such as pet food, coffee, flour, and candy.
The store also features “hot price” items in the first two rows. He said the Hemet store is different from other local supermarket chains because of its size and selection.
He said inside store aisles are stocked in traditional patterns, and each store features a bakery, produce department, deli, seafood and meat counter. The warehouse-style chain doesn’t offer loyalty cards and unlike other supermarket chains, the store’s telephone number can’t be found in local telephone books, but is printed on store receipts.
Employees will answer customer questions over the telephone, but will not offer price quotes, he said. The Hemet store is managed by Raul Garcia, a 13-year employee who has worked in several stores before transferring to Hemet from Temecula where he served as store manager, the company said.
Steve Harding, Hemet’s assistant city manager, said local officials didn’t offer WinCo Foods any tax incentives or lobby the company to open its store, but did assist the grocery chain through the building and planning phase, including assistance with the city’s permitting process.
“The store has been packed since it opened,” Harding said. “The store just really took off. The city really had nothing to do with attracting WinCo Foods … supermarkets usually locate in an area that they feel is not being served. However, we are (pleased) about the local jobs the new store has created.”
Located at 4602 W. Florida Ave, WinCo Foods faces local competition from a half dozen other big-box retailers and grocery chains, including Vons, Target, Wal-Mart, Grocery Outlet, Albertsons and State Bros.
Headquartered: Boise, Idaho
Locations: The employee-owned discount supermarket chain operates 29 stores in California, including eight in Riverside and San Bernardino counties.
Rankings: Forbes magazine ranks WinCo Foods as the 114th largest privately held company in the nation.
Web site: http:/// www.wincofoods.com
Company Overview: WinCo Foods LLC operates a chain of supermarkets. It offers groceries, meat and produce, bakery, bulk foods, and deli. The company was formerly known as Waremart Food Centers and Cub Foods. WinCo Foods was founded in 1967 and has stores in Washington, California, Idaho, Nevada, Oregon, and Utah. The company has more than 13,000 workers at 70 stores and four distribution centers.

The Business Press: Credit Unions see mortgages as part of return to profitability

By Chris H. Sieroty 

Contributing Writer

California credit unions originated more than 12,500 primary mortgages, including purchases and refinances, in the second quarter of 2009, the highest level since the second quarter of 2004 and almost 2,000 more than the first quarter, according to a report by the California Credit Union League.

Based in Ontario, the CCUL said California credit unions originated more than $7.3 billion in loans in the second quarter, up from $7.1 billion in the first quarter of the year.

In Inland Southern California loan volumes were mixed as credit unions in San Bernardino County originated 92 primary mortgages in the second quarter for more than $16.2 million, compared to 108 loans for more than $12 million in the first quarter. In Riverside County both primary loan numbers and capital outlay were down in the second quarter. The CCUL reports 542 loans were made in the second quarter for more than $9.3 million, compared to 708 loans for more than $12 million in the first quarter.

“We are still seeing credit unions approving primary loans in the region,” said Daniel Penrod, senior industry analyst with the CCUL. “I expect the number of home sales will increase but home prices will continue to decline because there are still a lot of foreclosures and short-sales available. Things will level off near the end of the year.”

Despite, the region’s high unemployment rate and stagnant real estate market, Penrod told The Business Press that credit unions are seeing an increase in deposits as customers view credit unions as conservative and a safe lending institution compared to major financial institutions.

But Inland credit unions have not been immune to the financial problems brought about by sour real estate loans that have forced the Federal Deposit Insurance Corporation to seize local banks and sell their assets to more stable financial institutions.

In the High Desert, the National Credit Union Administration has seized two credit unions and sold their assets and liabilities to Alaska USA Federal Credit Union.

In June, Alaska USA purchased certain assets and liabilities of High Desert Federal Credit Union in Apple Valley in a deal valued at about $100 million, according to a company executive. The sale came after the NCUA had been overseeing the operations of High Desert since Oct, 16, 2008, when the federal agency placed the struggling credit union into conservatorship.

Three months after it acquired High Desert, Alaska USA took over The Members’ Own Federal Credit Union in Victorville in a deal valued at approximately $80 million, according to the NCUA. The Anchorage-based credit union now owns five local branches, servicing a combined 22,000 members.

“The acquisitions are part of our strategy of expanding our business into areas where we feel like there is an opportunity to grow our business model,” said Dan McCue, Alaska USA’s senior vice president, corporate administration. “San Bernardino County is a good sized area with lots of opportunities.”

McCue said the credit union’s business model was based on attracting deposits along with offering other business lines, including mortgages, trust services, business services and insurance.

In terms of originating primary mortgages, McCue said even in a recession Alaska USA would continue to do business in the Inland Empire.

“We are looking for loans,” he said. “We are making decisions on a case-by-case basis, but we are trying to offer mortgages and other loans to our members. I’ve been told that customers are happy we are in the region, because some credit unions had stopped lending money.”

While Alaska USA is relatively new to the two-county region, Altura Credit Union and Arrowhead Credit Union are well known brands locally.

Mark Hawkins, president and chief executive of Altura Credit Union, said the loan totals seemed low and attributed the CCUL’s figures to loans made by local credit unions and placed on their books and not packaged and sold on the secondary market. Based in Riverside, Altura is a state-chartered credit union with 14 branches, 110,000 members and $908 million in assets.

“So far this year, we’ve made about $100 million in loans,” Hawkins said. “In most cases we are not putting the loans on our books. We are packaging them and selling them on the secondary market. We can do a lot more business by packaging our loans.”

Altura Credit Union is expected to issue $11 million in primary mortgages in October. Hawkins said most of the mortgages approved have been for “purchase activity” and not refinances.

“It’s a tough time when it comes to refinancing,” he said. “Most people can’t qualify for refinancing, because they’ve lost the equity in their homes.”

It’s also been a difficult time for Altura in terms of loan losses, which has forced the credit union to use staff to modify mortgages to keep people in their homes. Hawkins said the credit union lost money for the first five months of the year but in each of the past five months has reported a profit.

For the six months that ended June 30, Altura reported a loss of $3.5 million, but for the third quarter it reported a $1.8 million profit.

“We will be profitable for the fourth quarter, but we expect to report a loss for the fiscal year,” Hawkins said. “But any positive trend is extremely welcome.”

Larry Sharp, president and CEO of Arrowhead Credit Union, said his company would not be profitable this year because of heavy loan losses.

“Last month we reported a $94,000 profit, though it won’t be enough to make up for earlier losses,” Sharp said. “We will be profitable in 2010 and 2011 on a year-to-year basis. We have turned the corner, and things are beginning to stabilize.”

Despite reporting loan losses, Sharp said Arrowhead was actively lending and putting those loans on the firm’s balance sheet.

“We are not going to the secondary market,” he said. “We feel like it’s a good time to be making home loans, especially with yields down in other lending. Since December, delinquencies have been going down, but consumers are still skeptical about how slow things are turning around.”

Gene Shabinaw, Arrowhead’s senior vice president of lending, said the company had set aside $68 million for loans, with a portion designated for real estate transactions. In terms of returning to making a profit from home loans, he acknowledged the company had “dipped into the red and is starting to come out the other end.”

Sharp agreed, saying Arrowhead will benefit from working with some of the region’s largest employers, from local school districts and county governments to Stater Bros.

“Our members are mostly employed by some of the largest employers in the area,” he said. “Many of these agencies and companies have begun to settle down in terms of layoffs, while the general community hasn’t settled yet. We will benefit from (that stability).”

Based in San Bernardino, Arrowhead Credit Union, a state-chartered institution, operates 24 branches, with more than 162,000 members and $979 million in assets.

CREDIT UNION INDUSTRY BRIEFING

During a recent hearing held by the U.S. Senate Banking, Housing and Urban Affairs Subcommittee on Financial Institutions, Debbie Matz, chairwoman of the National Credit Union Administration, said it was a challenging time for credit unions, and predicted that the number of troubled credit unions would probably increase through at least early 2011.

“Credit unions have not been spared harsh effects of the economic downturn and have a difficult road to travel in 2010 and beyond,” Matz told lawmakers at the Oct. 14 hearing on the condition of the financial services industry. In response to the challenging environment, she said the “NCUA has enhanced our supervision, shortened the examination cycle, increased the number of examiners and upgraded risk-management systems.”

She said that as of Sept. 30 there were 66 credit unions with assets over $100 million with a CAMEL 4 or 5 rating, compared to 12 in 2007. Overall, there are 326 such credit unions, representing 4.9 percent of all credit union assets.

According to the NCUA, a CAMEL rating is an internal rating system used for evaluating the soundness of credit unions on a uniform basis, the degree of risk to the National Credit Union Share Insurance Fund (NCUSIF), and for identifying those institutions requiring special supervisory attention or concern.

Matz said one of the bright spots is the “savings flight to quality” caused a 16 percent annualized increase of member deposits during the first half of 2009.

The Business Press: Community banks seek gain in market share from fallen

By Chris H. Sieroty

Contributing Writer

A steady stream of financial institutions nationwide have collapsed over the past year as a result of the country’s economic crisis and millions of dollars in soured real estate loans. As of Oct. 2, the Federal Deposit Insurance Corp. had taken over 98 banks both large and small across the country.

That figure compares with 26 banks seized last year and just three in 2007, according to statistics compiled by the FDIC. In Inland Southern California, four community and business banks — 1st Centennial, PFF Bank & Trust, Temecula Valley Bank and Vineyard Bank — have been shuttered since November 2008, and analysts expect additional small and midsized financial institutions to be taken over by the federal agency before the two-county region’s economy begins to recover late next year.

“California banks have probably been hit harder than banks in most other states due to the decline in the real estate market,” said Beth Mills, vice president of communications with the Sacramento-based California Bankers Association. “Additional banks being seized by the Federal Deposit Insurance Corporation is inevitable. It’s going to be a tough environment over the next year to year and a half.”

Mills said despite the adverse economic conditions, the majority of community and business banks in the Inland Empire “are well-capitalized and have enough capital to withstand the downturn.”

In total, the four Inland Southern California community banks seized by the FDIC cost the federal agency $1.897 billion. But those financial institutions that remain have been looking to take advantage of the fallout to increase their market share and total assets, according to several bank presidents interviewed by The Business Press.

“The recession wiped out a lot of the competition,” said Gary Votapka, president and chief executive officer of Temecula-based Mission Oaks National Bank. “I’m not happy about that. It’s not the way you’d like to increase your market share.”

Votapka said Mission Oaks has seen a fair amount of new business since Temecula Valley Bank was seized by regulators on July 17 and was taken over by First Citizens Bank of Raleigh, N.C. He explained that many of their new clients wanted to continue doing business with a smaller, independent business bank.

Ralph Wiita, president and chief executive officer of Golden State Bank in Upland, agreed, saying they’ve had a good opportunity to increase market share, particularly following the collapse of PFF Bank & Trust and Vineyard Bank.

“Our opportunity to increase our market share lies with attracting customers who want to work with a community bank and not a large financial institution like the banks that have taken over several local banks,” Wiita said. “We also have a one-on-one marketing effort. We have been calling offices and soliciting business, while following up on referrals and participating in networking opportunities with social organizations, chambers of commerce and rotary clubs.”

For the second quarter, Mission Oaks National Bank reported a net loss of $3.84 million, or 85 cents per share, compared with net earnings of $158,000, or 4 cents per share, for the same period a year earlier. In the first six months of 2009, Mission Oaks lost $6.39 million, or $1.42 per share, compared with net income after taxes of $461,000, or 10 cents a share, in the corresponding 2008 period.

Results from the second quarter and year-to-date of 2009 are exclusive of any credit for income taxes while the results from the second quarter and year-to-date of 2008 included tax provisions of $80,000 and $261,000, respectively, the company said in a regulatory filing with the U.S. Securities and Exchange Commission.

The earnings decline was primarily attributed to increased contributions to loan loss reserves, which totaled $3.61 million in the second quarter and $5.97 million year-to-date. That compares with provisions for loan losses of $534,000 in the same quarter and $786,000 in the year-to-date results a year ago, the company said.

Votapka said second-quarter results were impacted by a $3 million write-down on a secured real estate loan that became “impaired” during the quarter.

As of June 30, the company had total assets of $218 million, up $6.8 million, or 3.2 percent, over what was reported a year ago. Total deposits in the second quarter were $182.3 million, a 13.8 percent growth from the same period a year earlier.

He said the bank remains well-capitalized under regulatory guidelines. Mission Oaks National Banks has $25.5 million in equity capital, according to the FDIC.

“The biggest issue for our bank and banks in the Inland Empire is the devaluation of real estate holdings and the effect it’s having on our balance sheets and earnings,” Wiita said.

Golden State Bank has $160 million in assets and operates two branches in Upland and Brea. The collapse in real estate values has caused the company to swing from a profit of $600,000 in 2007 to a loss of $9.2 million from January 2008 through June, he said.

“The bank is padding its capital fund internally,” he said. “Our losses are all related to our real estate portfolio. We don’t see any more losses and our (third quarter) earnings are much improved.” Golden State Bank was scheduled to release its third-quarter earnings on Oct. 19.

Wiita stressed that the company’s “core operating earnings are profitable and have been profitable all along.”

The bank, which was founded in 2003, has a diverse loan portfolio with about one-third small-business loans; one-third commercial, office, industrial and real estate construction loans; and one-third real estate business loans. He said real estate business loans were dominated by specialty loans to fast-food restaurants, convenience stores and gas stations, all businesses that tend to do well in recessions.

Wiita said Golden State Bank has been more selective in making loans because the risk exposure is “bigger” in a recession.

“One of the challenges in this economy is to maintain higher reserves and capital level,” said Kevin Farrenkopf, president and chief executive of the Bank of Hemet. “Our goal has been to increase our capital reserve level, which we did through earnings. As of June 30, we had earnings of $3 million for the first six months of the fiscal year.”

The bank has $37.8 million in total capital, according to the FDIC. Based in Hemet, the bank has six branches and focuses on lending to small businesses and income-producing real estate.

Farrenkopf said the bank opened a permanent branch in Beaumont in September but will likely not expand this year or in 2010.

“We’ve been there for over a year, but we just recently opened a new, permanent branch,” he said. “Our company was originally attracted to Beaumont because there were no other community banks in the area. We also thought in was an underbanked area.”

Both Wiita and Votapka said that Golden State Bank and Mission Oaks, respectively, have no plans to expand their companies through opening of new branches.

The Press-Enterprise: Businesses advised to prepare for emergencies

By CHRIS H. SIEROTY

Special to The Press-Enterprise

Inland businesses are being encouraged to prepare ahead for potential disasters, as part of a national campaign in tune with National Preparedness Month.

The program, Ready Business, was launched nationally five years ago by the U.S. Department of Homeland Security and the Advertising Council as an extension of the Ready Campaign, which was implemented as a response to the Sept. 11 terrorist attacks and was designed to educate Americans on how prepare for and respond to emergencies.

A disaster plan can save lives, company assets and get a business back up and running after a disaster, according to an executive with the Ready Campaign.

“You need to remember at least one in four businesses never reopen after a disaster,” said Becky Marquis, acting director of the Ready Campaign in Washington D.C., a division of the Federal Emergency Management Agency, which is overseen by DHS.

Marquis said more often than not these disasters are everyday events and not necessarily a major event like the wildfires in Southern California that have been dominating the local headlines.

Robert Bahler, a spokesman with the American Red Cross in San Bernardino, said local businesses seeking assistance in preparing an emergency plan can schedule an appointment to have one of his employees come to a local business and speak about emergency preparedness.

“We work with a number of business partners every year to establish emergency preparedness plans,” Bahler said. “Our chapter serves people from Yucaipa to Chino Hills, which is home to more than 2 million people. We probably work with 30,000 people a year in preparing for a disaster.”

Marquis said preparing for a disaster can be daunting but urged business owners to visit www.ready.gov/business for information on how to prepare for emergencies.

“Once they print out what they need to get started, they’ll find it’s rather simple to put a plan in place that will protect their business and employees,” she said. “We recently conducted a survey that found only 38 percent of businesses nationwide had an emergency plan.”

One business that is prepared is Best Best & Krieger in Riverside. Debbie Prior, the company’s director of human resources, said for a modest investment other companies can follow the law firm’s lead in preparing their employees for any emergency.

“One of the things we do is provide every employee with an emergency backpack that includes water, a flashlight, whistle, first aid kit and granola bars,” she said. “We also encourage employees to bring in other items, including tennis shoes. It may sound funny, but many female employees wear high heels and would need to change into tennis shoes if a disaster happened and they needed to get out of the building.”

Prior said the firm also holds occasional staff meetings to update employees on emergency procedures, and has CPR trained employees in every office.

With fire season in full swing and the experts predicting an increase in cases of swine flu virus this fall, U.S. Small Business Administration Administrator Karen G. Mills said now is the time to revisit preparedness plans.

“We should all realize that storms, floods, earthquakes, fires and man-made disasters can strike at anytime and anywhere,” she said in a statement.

One local business that is no stranger to rebuilding after a disaster is the Redlands-based KOLA-FM and KCAL-FM radio stations. Steve Hoffman, KCAL’s program director, said the station’s transmitter was destroyed in the Old Canyon Fire that burned thousands of acres in Waterman Canyon in San Bernardino County six years ago.

“We were lucky because we were able to get back on the air using backup equipment,” he said. “We do have a disaster plan that would allow the stations to keep operating following an emergency of any kind.”

Hoffman explained that if the building were to collapse after an earthquake, everything from music to commercials is backed up on computers.

“Our technical people would grab two computers and they would be taken to the transmitter,” he said. “In the old days, stations had booths at their transmitters that would allow them to broadcast live. If something happened, we would still be able to broadcast and inform the community.”

But unlike other businesses, Hoffman said on-air and technical employees would automatically come to work in the event of an emergency.

“We would broadcast information to the community in the event of an earthquake,” he said. “That’s what we do. We are also part of the Emergency Alert System, which is operated by the Federal Communications Commission and gives the president the capability to address the nation during a national emergency.”

As part of National Preparedness Month, Fontana is hosting an emergency preparedness and safety fair Saturday at the city’s police station. Laura Wolbert, Fontana’s emergency manager, said residents and local businesses who attend will learn how to make an emergency supply kit, create an emergency plan, and receive valuable local emergency preparedness information so they know how to stay informed during an emergency situation.

(For more news about Riverside and San Bernardino counties, visit www.pe.com)

Donald Paysinger takes over as head coach of Beverly Hills

By Chris H. Sieroty

The Beverly Hills High School football team began fall practice on Monday with a new head coach for the first time in 19 years. Donald Paysinger, a longtime assistant coach with the Normans, replaces his older brother Carter Paysinger.

Carter Paysinger, who coached Beverly Hills since 1990, resigned following an 8-4 season to concentrate on being an assistant principal at the school. He has said he will continue to help call plays during gams and develop game plans on the weekends. 

Donald Paysinger, a 1977 Beverly High graduate, was Santa Monica High School’s football coach from 1998 to 1999, leading the Vikings to a 2-8 record each season.

Paysinger was also a graduate assistant coach at San Jose State University and coached with the San Francisco 49ers during training camp in 2004 in connection with the National Football League’s Minority Fellowship Program.

“The reason I applied for the job was simple, we needed a head coach,” Paysinger said. “If I’m going to be involved with the team, I thought I could do a good job as head coach. I’ve been coaching for 29 years.”

The Normans aren’t the only Ocean League team adjusting to a new coach. Jahmal Wright takes over for Tom Salter at Culver City and Travis Clark succeeds Zach Cuda at Santa Monica. Wright was an assistant for Salter, who declared him his designated successor before he step down at the end of the last season. 

Culver City was 7-3 last season and captured the 2008 league championship with a 57-27 win on Nov. 14 over Beverly Hills. The Centaurs lost to Alemany of Mission Hills, 31-15, in the second round of the CIF Southern Section playoffs.

Clark prepared by being an assistant to Norm Lacy on CIF championship teams at both Santa Monica and St. Monica. Lacy is now Santa Monica High’s athletic director and hired Clark over the summer. Cuda, who coached Santa Monica for three years, resigned following an 8-3 season and remains as a teacher at the high school.

Santa Monica’s only losses last season were to Culver City and Beverly Hills in league games and Warren High School in Downey in the first round of the CIF Southern Section playoffs. Santa Monica has lost four straight games to Beverly Hills. Last year, the Normans defeated the Vikings, 26-10.

The 2009 schedule is almost the same as last year’s. The only difference is that Beverly Hills plays Hamilton High School this year instead of Marshfield High School from Massachusetts. In non-league play the Normans will also face Long Beach Jordan, Santa Barbara, West Ranch and Desert Hot Springs.

Last year, Beverly Hills defeated Santa Barbara, West Ranch and Desert Hot Springs but lost to Marshfield and Jordan. 

In Ocean League play, the Normans main competition for the league title will probably come from Culver City and Santa Monica. After a 5-5 season last year, Inglewood was expected to challenge for a CIF playoff position despite the loss of several key players, Morningside was expected to be in the middle-of-the-pack and Hawthorne is in the middle of a 32-game losing streak and hasn’t won since 2005.

“It’s going to be a tough league again this season,” Paysinger said. “Santa Monica and Culver City are going to be tough, while Inglewood always plays us hard. Morningside gave us a tough game last season. It’s going to be a coin toss again to see who wins the league. There are four or five teams shooting for three playoff positions.”

According to preseason rankings compiled by Calpreps.com, Culver City was expected to repeat as Ocean League champions, followed by Santa Monica, Beverly Hills, Inglewood, Morningside and Hawthorne. The high school sports website ranked Beverly Hills 13th overall in the CIF Southern Section’s Western Division.

On the field, Paysinger said the Normans will be led by four key players. Junior Josh Newman replaces Dex Lucci, who graduated last year, at quarterback. Last season Newman was 13 for 25 for 166 yards and three interceptions in two games.  

Kenny Bassett, who rushed for 1,414 yards as a junior, and senior wide receiver Daniel Bradbury were expected contribute heavily to the Normans offense, he said.

On Defense, junior defensive end Greg Townsend Jr. was expected to improve on last season’s 38 tackles.

“Both Josh Newman and Kenny Bassett started for us last year and played very well,” Paysinger said. “We are a young team, but the good thing is a host of kids played for us at some point last season. I think with Newman, Bassett, Bradbury and Townsend we’ll be alright this season.”

Beverly Hills will play its opener Sept. 11 at Nickoll Field against Long Beach Jordan. The Panthers, who tied for second place with Compton and Lakewood in the Moore League, defeated Beverly Hills, 28-13, in the opening week of the 2008 season.

The Business Press: Hospitality Lane still drawing crowd

By Chris H. Sieroty 

Contributing Writer

The center of San Bernardino’s retail and office market once was located within a vibrant downtown, but over the past two decades many retailers and companies have moved their operations to Hospitality Lane.

The pattern has transformed what was once an underdeveloped area next to Interstate 10 into the city’s hub of shopping and employment.

Within the past year, several restaurants and retailers have closed because of the recession, but interest in leasing retail space remains strong, according to several real estate brokers. The 1.2-mile stretch of Hospitality Lane between D Street and Tippecannoe Avenue has experienced an increase in hotel development, led by the $10 million upgrade to the Hilton and a new Hilton Garden Inn, which is expected to be completely built by the end of September.

Jim Morris, chief of staff to Mayor Patrick Morris, said the “strong demand” for modestly priced hotel rooms targeted to the business traveler has driven the increase in new hotels on Hospitality Lane over the past four years.

“Over the last four years three new hotels have opened,” Morris said. “A fourth is about to be completed and two other hotel projects are in the planning stages.”

The Hilton Garden Inn and Hilton Hampton Inn will be situated within a 7.3-acre development called Hospitality Courtyard that is being built by Los Angeles-based ICO Development. Messages left with ICO Development were not returned.

“A niche (hotel) market has been developed along Hospitality Lane, which is a nice complement to the retail and office that has already exists,” he said.

Once completed, the new hotels will join Fairfield Inn & Suites, La Quinta Inn, Quality Inn & Suites, Residence Inn, Best Western and Days Inn.

Along with hotels, Hospitality Lane has developed into a regional dining destination. Over the past few years, regional and national chains such as Pat & Oscar’s, BJ’s Restaurant and Brewhouse, Elephant Bar, and Ruby Tuesday have opened successful outlets.

Pat and Oscar’s, which opened in March 2005 at 690 E. Hospitality Lane, was recently sold to a franchisee. The restaurant seats more than 250 customers and is approximately 5,200 square feet. It’s located in the Tri-City Corporate Centre.

“We are excited about our acquisition of the Pat & Oscar’s in San Bernardino,” said Ron Mehrens, who owns the franchise with his two sons, Kevin and Ron Mehrens Jr. “It was the second Pat & Oscar’s franchise we purchased after acquiring an outlet in November in Palm Desert.”

Mehrens said the acquisition of the Hospitality Lane location closed on March 2 when “the economy was probably as bad as it was going to get,” but in the past five months he hasn’t seen a decline in sales. He declined to release revenue figures or the purchase price for either location.

“We are very fortunate to be located next to so many offices,” he said. “Even in tough times local offices still demand catering services. Our long-range goal is to open four more Pat & Oscar’s, but will probably have to wait a couple of years to see what happens.”

Despite the ongoing success of Pat & Oscar’s, Hospitality Lane has seen the closing of two well-known chain restaurants: Guadalaharry’s at 280 E. Hospitality Lane and Crabby Bob’s seafood restaurant at 215 E. Hospitality Lane. Both restaurants have been vacant for more than a year.

On the retail side, the former Circuit City store at 555 E. Hospitality Lane remains empty after the electronics retailer filed for bankruptcy in January and closed its 567 stores nationwide.

Both restaurant properties are listed for lease by Lee & Associates. Jeff Stanley, senior vice president with Lee & Associates Commercial Real Estate Services in Riverside, said Guadalaharry’s 9,000-square-foot, two-level building with its upstairs patio is listed for $1.75 per square foot, while the former Crabby Bob’s 6,200 square feet of space is listed at $2.20 a square foot.

“We’ve had a few offers for the former Guadalaharry’s and Crabby Bob’s locations from nightclub operators and other restaurants, but nothing has been signed,” Stanley said. “The rental rates for both properties are soft. We’ve had to talk about being flexible about rental rate reductions with the landlords to attract new tenants. The problem is rental rates are off 20 percent to 30 percent below what they were at the peak of the market at the same time last year.”

Stanley admitted that while interest in retail properties remains strong it has taken longer to close a deal because of the recession. The last restaurant deal he was involved with was Ruby Tuesday’s leasing of 5,300 square feet of ground floor space at 996 E. Hospitality Lane in August 2008.

Stanley said the Maryville, Tenn.-based chain of midpriced restaurants that features burgers, salads and sandwiches signed a 15-year lease.

“The area’s strong office market has helped increase the interest (in) retail and restaurant chains considering a move to Hospitality Lane,” he said. “We use it as a selling point. Even though the office vacancy rate is around 22 percent in San Bernardino, it’s better than other submarkets within Inland Empire.”

The area’s demographics are key to its success. Within a one-mile radius there is a total daytime work population of 11,021, according to 2008 statistics provided by CB Richard Ellis. That figure increases to 60,437 within three miles and 121,706 in the surrounding five miles.

In terms of restaurant expenditures in 2008, the real estate firm reported that $4.1 million was spent within a mile radius of Hospitality Lane, increasing to $74.2 million by consumers within three miles before dramatically rising to $223.9 million within five miles.

Attracting tenants to Hospitality Lane hasn’t been difficult, said Michael Ray, vice president with CB Richard Ellis in Ontario.

“San Bernardino is on fire,” Ray said. “For one of the smallest submarkets it’s … one of the largest amount of space in the eastern Inland Empire. Hospitality Lane is the nicest of all the options, with attractive prices, a large population of employable residents and attractive on-site amenities.”

He said the vacancy rate figure quoted by Stanley included downtown San Bernardino and that the vacancy rate for office space along Hospitality Lane was lower.

The real estate firm is in negotiations to lease 20,812 square feet of space at the Northpointe building at 1003 E. Brier Drive. The 284,000-square-foot building is anchored by Wells Fargo Bank, which signed a 10-year lease in 2006.

Ray declined to identify the company negotiating to occupy the space at Northpointe. The company has approximately 239,579 square feet of office space listed for lease in Northpointe, Tri-City Corporate Centre and other buildings adjacent to Hospitality Lane.

“Certainly Hospitality Lane is doing much better than downtown,” Stanley said. “There has been ongoing interest from possible tenants in newer retail and office properties east of Waterman Avenue.”

But after a decade of building shopping centers and office buildings, the area is built out. City officials have shifted their focus from new developments to working with existing property owners located from Waterman Avenue west to D Street in an effort to revitalize aging office buildings and retail space.

Morris said the mayor’s office was trying to pull together property owners to reinvest in their properties and reinvent the western area to take advantage of an expansion of rapid bus service that stretches north to downtown and then to the University Park area of San Bernardino. He said by repositioning the western end of Hospitality Lane it would create a new market for retailers looking to attract rapid-transit commuters and consumers from other areas of the city.

“Hospitality Lane is a critical area of the city,” Morris said. “It’s critical in terms of retail sales taxes, critical as an employment center and functions as a regional hospitality destination.”

Market News International: California Watch

13:28 EDT 07/21

{California Watch: $26 Billion Budget Deal Reached>}

–Lawmakers to vote on Calif. budget deal Thursday

–Two-third vote needed to approve California budget deal

 

By Chris H. Sieroty

 

   LOS ANGELES (MNI) – California is expected to stop printing IOUs

after Gov. Arnold Schwarzenegger and lawmakers reached an agreement on a

plan to close the state’s $26.3 billion budget shortfall.

 

   The governor and lawmakers announced the compromise late Monday,

almost three weeks after the state began issuing IOUs to thousands of

state contractors and vendors. So far California has issued more than

$661 million in IOUs, according to the state controller’s office.

 

   A vote on the agreement, which is composed of cuts, borrowing and

fund shifts without raising taxes, was expected Thursday. The deal will

need to receive a two-thirds vote in both the state Assembly and Senate

before it’s send to the governor’s office for his signature.

 

   Assembly Speaker Karen Bass, D-Los Angeles, and other legislative

leaders urged lawmakers to approve the compromise plan, describing it as

the best way to close the state’s budget deficit and prevent further

decline of the state’s credit rating, which is already the worst in the

nation.

 

   “These are painful solutions for all Californians and many of the

cuts we have to make would be unthinkable if we weren’t in the midst of

an unprecedented and ongoing recession that is plaguing our nation and

our state,” Bass said. “But despite a two-thirds vote requirement that

hamstrings our ability to pass responsible revenue solutions, we’ve

prevented irreparable harm to our schools and prevented the proposed

elimination of California’s safety net.”

 

   The compromise includes billions in cuts to education, health care,

prisons, welfare and other programs. The rest of the deficit will be

made up by a combination of borrowing from local governments, shifting

money from other government accounts and accelerating the collection of

certain taxes.

 

   Schools will take a $6 billion cut, but won a commitment to be paid

back $9.3 billion in cuts from previous years. The agreement also cuts

$2.8 billion from the University of California and California State

University systems, $1.2 billion from the corrections department, and

$1.3 billion from MediCal funding.

 

   Schwarzenegger and Republican lawmakers were able to uphold their

vow of no new taxes with a series of accounting shifts, borrowing and

fund shifts. The state will extract $4.4 billion from local governments’

revenues — about $2.1 billion in borrowing by suspending Proposition

1A, $1.3 billion in redevelopment dollars, and $1 billion in transfers

from local gas taxes.

 

   Schwarzenegger also succeeded in having a proposal to expand oil

drilling off the Southern California coast for the first time in 40

years included in the budget agreement. Under that plan, drilling would

be allowed from an existing rig off the Santa Barbara coast, generating

about $1.8 billion in revenue.

 

   Some 200,000 state government employees already have been ordered

to take three days off a month without pay, the equivalent of a 14

percent pay cut. Those furloughs will continue through next June,

shutting many government offices for three Fridays a month.

 

   “This is a budget that has no tax increases and a budget that is

cutting spending,” Schwarzenegger said Monday. “We’re protecting

education and making government more efficient and cutting waste and

abuse. All around this is a really great achievement.”

 

   California’s latest budget crisis came less than five months after

negotiations resulted in tax increases and spending cuts to eradicate a

$42 billion budget shortfall. Since then, California’s deficit has

spiraled as soaring unemployment and one of the worst home foreclosure

crises in the United States have sent state revenues declining to levels

not seen since the 1990s.

 

   Personal income fell this year in California for the first time in

70 years, leading to a 34% plunge in income tax revenue during the first

half of the year. The $26.3 billion shortfall amounts to nearly 30% of

the state’s general fund, the account that pays for day-to-day state

services.

 

                  ** Market News International **

 

[TOPICS: M$$CR$,M$U$$$]

The Business Press: Homebuilder begins ‘infill’ effort in Upland

By Chris H. Sieroty 

Contributing Writer

Trumark Cos. has established a new company called Trumark Homes to take advantage of the downturn in the real estate market by acquiring infill properties in distressed communities statewide, according to a company executive.

Michael Maples, principal at Trumark Homes and co-founder of its parent company Trumark Cos., said current economic conditions have created an opportunity for his company to acquire distressed properties because they are “unencumbered by the financial challenges faced by existing builders.”

The privately held firm’s first acquisition was 4.38 acres of land at 15th Street and Benson Avenue in Upland, where it will develop a project of 39 courtyard-style homes called Wyeth Cove. Maples declined to release the purchase price or seller but said the property was “a short sell with Comerica Bank.”

Since Trumark Homes is able to build on land that was purchased on good terms — often at below replacement cost — it can afford to sell homes at prices as much as 50 percent below what the market would have priced them at in 2005, the company said in a statement.

The single-family homes will range in size from 1,717 square feet to 2,401 square feet, with construction scheduled to begin in August. Maples said the homes, which will be priced between mid-$300,000 and low $400,000, were expected to open early next year.

“In this case we bought finish lots that already had been permitted by the city,” he said. “At the top of the market, these homes would have been priced in the mid-$600,000. It’s also a price point that will allow buyers to meet federal loan limits at least for 2010, which are about $425,000 in Upland.”

Maples described Trumark as a builder that was initially targeting distressed markets. Its projects will include town homes and small-lot detached and traditional single-family housing.

“We are looking to build in constrained markets that are close to job centers and have an older housing stock,” he said. “In Upland, about 90 percent of the homes were built before 1989. There is demand for new home projects.”

In April, the median home price in Upland was $379,000, down 15.8 percent from $450,000 from the same month a year ago, the California Association of Realtors reported. As of mid-June there were 838 properties in various stages of foreclosure — defaults, auction, bank-owned and houses for sale — in Upland, according to figures compiled by RealtyTrac Inc.

The single-family homes in Upland will range in size from 1,717 square feet to 2,401 square feet, with construction scheduled to begin in August.

Maples said the reduction in home prices, distressed property assets and the credit crisis have created opportunities in the land market, which provided Irvine-based Trumark with the ability to acquire lots at a cost that could lead to a profitable return when sold. Besides the firm’s Upland property, Maples told The Business Press the company has bought or contracted to purchase 200 properties in California over the past 90 days.

He said the company looks for properties in older communities where re-sales are more of an issue than foreclosures.

Since Trumark Homes is able to build on land that was purchased on good terms — often at below replacement cost — it can afford to sell homes at prices as much as 50 percent below what the market would have priced them at in 2005 before the real estate market crashed, the company said in a statement.

“A down real estate market is the perfect time to launch a homebuilding company since relationships have changed from old builders to new builders,” said Gregg Nelson, a principal with Trumark Homes. “We are at a competitive advantage, where investors are seeking to work with us.”

Currently, Trumark Homes is underwriting its deals using private equity and does not expect to acquire debt until next year. Maples said once banks become more confident and start lending again, the company will seek low-leverage construction loans for current and future projects.

“We believe that banks will be interested in lending to us because our devalued assets will offer significant loan security and upside potential. In addition, most of our projects will be located in niche markets where there is no competition,” Maples said.