An anti-displacement group in L.A.'s tiny Tokyo is helping small businesses own their real estate
An anti-displacement group in L.A.’s tiny Tokyo is helping small businesses own their real estate

One of only three remaining historic Japantowns in the country, Los Angeles’ Little Tokyo is facing a wave of gentrification. In response, a consortium of local CDFIs joined forces to help local small businesses put down roots.

Displacement runs through the tapestry of American history like a bright red thread. The reasons vary, from political to racial to economic. Today, gentrification, essentially moving by any other name, is sweeping through communities and neighborhoods from coast to coast with the inexorable force of a hurricane.

Little Tokyo in downtown LA, one of America’s most historic communities that was once home to more than 30,000 Japanese residents, is all too familiar with the move – its former residents banished to concentration camps during World War II.

“Little Tokyo has undergone many displacements; this is probably the most common theme in its history,” says Takao Suzuki, Community Development Manager for Little Tokyo Service Centera CDFI based in East Los Angeles.

Suzuki has been the manager of Little Tokyo for over 10 years and has seen the many changes, good and bad, that have rocked this historic area. But he and other community activists are taking a stand against the current tidal wave of change: gentrification. In 2019, Little Tokyo Services Center partnered with two other local CDFIs, Inclusive Action for the City and East LA Community Corp. to form CORE: Community-Owned Real Estate.

Its mission is to purchase commercial real estate on the open market in communities most facing gentrification and rent or lease those spaces to local entrepreneurs and nonprofits at rates typically below those of the market. Supported by loans from Genesis LA, CORE secured $5.5 million in loans to purchase five buildings, totaling 26,000 square feet. Other community activists and CDFIs are also fighting gentrification by buying buildings, but CORE focuses on commercial buildings with a bit of a twist: the long-term goal is to turn tenants into owners of the spaces they rent or are currently renting.

Rudy Espinoza, executive director of Inclusive Action, a CDFI that focuses on providing loans to small entrepreneurs, noted that two years ago there was “a lot of activism around gentrification in Los Angeles. “. Espinoza, who holds a master’s degree in urban planning, also realized that small businesses are particularly susceptible to being displaced by gentrification because they mostly have short-term leases.

On its website, CORE admits that “ownership doesn’t solve everything, but ownership gives stability a foothold.” Indeed, trying to push back against gentrification may seem like a “finger in the dike” campaign, but CORE hopes its empowerment strategy will spur similar efforts across the country.

“All three of us really believe in community empowerment and true community engagement,” says Suzuki. “One of the values ​​we hold dear is community control. CORE is an illustrative example of this value.

But in touting the promise of their efforts, community activists also recognize the challenges — and there are many. First, CORE is scrambling to find funds to repay the $5.5 million loan. Second, to bid on properties in a very competitive LA market. Third, trying to find tenants for some of their buildings has been daunting. With so many people working from home in the pandemic era, physical retail can be a tough sell. While CORE’s buildings are 70% leased, landlords are struggling to find tenants for its latest building, a three-story building.

Additionally, activists admit that some of the buildings they are buying need repairs, and the rehabilitation of its latest acquisition sent CORE over budget by $150,000. But they are convinced that the rehabilitation will be completed in a few months.

“The cost of construction has increased dramatically due to supply chain (problems) and inflation,” says Suzuki. “We will find a way to complete the project, but the pandemic was an unforeseen challenge.”

In addition, the Covid-19 delayed the authorization of the building and even cost the group a restaurant tenant which closed due to lack of activity.

Tom De Simone, president and CEO of Genesis, notes that lending for these projects is more risky, in part because many tenants were “no-credit tenants,” suggesting they don’t don’t have the traditional credit scores and references.

Genesis had to get creative with funding, admits De Simone, cobbling together money from foundations, loans and the tax credit program for the new market. This federal program generates $8 of private investment for every $1 of federal funding. The $5.5 million loan from Genesis to CORE bears a fixed rate of 5%.

Despite the challenges, De Simone says he is pleased with the progress and that he and others expect to continue the program, guided by new lessons in commercial property management. From now on, De Simone says they will likely hire a dedicated project manager. CDFIs, after all, are generally not in the business of managing commercial real estate.

Espinoza admitted that CORE wouldn’t exist without the hands-on assistance of Genesis. The project wouldn’t exist without tenants like Andi Xoch either.

The 34-year-old Mexican built her plant store, latinx with plantsfrom pop-up shops to renting two spaces in buildings owned by CORE.

“If it wasn’t for them, I couldn’t have gotten these spaces,” she says, noting that she’s particularly excited about eventually owning the spaces.

“It’s like a dream,” says Xoch. “It creates generational wealth.”

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lens of equity, public policy and inclusive community development. The series is generously supported by Partners for the Common Good. Sign up for PCG’s CapNexus newsletter at capnexus.org.

Christopher C. Williams is a New Jersey-based freelance financial writer. He worked for many years with Dow Jones Newswires and Barron’s Financial Weekly and contributed to publications such as The Wall Street Journal, New York Times and Essence magazine. It focuses on the intersection of business, economic equity, and racial justice.

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