Insights

Redeveloping Retail Potential of Inner-City Neighborhoods

How Primestor capitalized on the need for retail and transformed underserved neighborhoods.

Back in the 1980s and into the 1990s, the community of Bell Gardens near South-Central Los Angeles was not top-of-mind as a place to visit.

The intersection of Florence and Eastern Avenues was a textbook case of urban blight. Crime and poverty rates exceeded the average rates for Los Angeles County. About half of the buildings were in a state of serious disrepair or posed fire hazards due to over-occupation.

“The buildings were tired,” said Abel Avalos, director of community development for the City of Bell Gardens. “There just wasn’t any kind of cohesive or comprehensive approach on how to maintain them.”

For someone familiar with how Bell Gardens’ primary commercial district looked back then, it would be hard to recognize the area now.

Retailers like Toys ‘R’ Us, Marshalls, and Ross sit in newly redeveloped buildings next to Starbucks, Jamba Juice and Applebee’s restaurants. Meticulously maintained landscaping – think palm trees dotting sidewalks that meander through newly cut sod grass – allow patrons to easily walk from their cars to the various tenants.

Redeveloping blight

The Bell Gardens city government took the lead in remaking its commercial core with a program of purchasing neglected properties. Los Angeles-based real estate development company Primestor has restored the area into its current incarnation – a vibrant shopping district.

Dotted throughout the Los Angeles area, as well as a growing number of other U.S. cities, are stories that closely resemble what happened in Bell Gardens. Primestor has become a specialist in the redevelopment of abandoned properties in primarily Latino neighborhoods. The company converts struggling neighborhoods with diminishing market retail space into well-stocked shopping centers with national, brand-name retailers.

“Don’t think this was an easy journey that anyone could have pulled off,” said Leandro Tyberg, president and co-founder of Primestor. When Tyberg and his partner, Arturo Sneider, first launched Primestor, it was an understatement to say they had a hard time persuading retailers and investors to come along.

“It was tremendously hard to get the right capital partners, the right lenders and the right retailers,” Tyberg said. “It basically occupied all of our time. We felt like we were trying to break down barriers of perception, to educate partners about the real power of our inner cities. Not many listened.”

Local elected officials were also very skeptical at first, he recalled.

“It felt like they had been promised so many things in the past that when we said we’d walk into one of their offices, they looked at us incredulously and didn’t know what to make of us,” he said.

Rapid Latino population growth

On paper, at least, it should have been an easy sell, as the Latino population in the U.S. is growing rapidly. This population segment grew an average of 2.8 percent a year from 2007 to 2015, and, between 2000 and 2014, Latinos accounted for more than half of the total population growth in the U.S., according to the Pew Research Center. California has the nation’s largest Latino population, with more than 6 million living in the Los Angeles metropolitan area.

East West Bank was one of the very first financial backers to grasp the potential in Primestor’s idea, Tyberg said.

“They understood the value of our dense urban population centers, and they understood that ethnic markets offer stability and opportunity,” Tyberg said.

Primestor was able to get law enforcement onboard with their plans fairly easily, as they saw the huge benefit in ridding a community of blight and replacing it with nice properties where commerce can take place, Tyberg said. The partnership between Primestor and law enforcement continues today.

“We sit down with the Los Angeles Police Department (LAPD) and its crime prevention unit and go over designs, and they educate us on how to create centers that look more open, with less visible obstacles,” Tyberg said.

When Primestor plans to demolish a blighted property, the company always lets local fire departments and police departments use the building for training exercises before it’s bulldozed.

The company is gaining popularity due to its success. Frequently, Primestor receives unsolicited calls from various mayors and city council members asking them to visit and examine potential redevelopment uses for troubled neighborhoods.

“We love getting those calls,” Sneider said.

Stumbling blocks

Primestor’s projects do, of course, hit stumbling blocks. The state of California recently eliminated the legal concept of Redevelopment Agencies, a financing method that had been used in many of Primestor’s developments.

“We think that was very misguided,” Tyberg said. “The truth is that our inner-city neighborhoods do need focused leadership and assistance at an every level.”

Online retailing has raised questions about the overall future of brick-and-mortar retail stores. Primestor already avoids one element of brick-and-mortar retailing that has been severely wounded by online commerce—malls.

“We don’t believe in that model is a viable way of going forward,” said Sneider, who serves as Primestor’s CEO. “Our demographics and our communities, there’s a very strong awareness of the social and entertainment aspects of shopping and going out. You don’t get that in a mall.”

Otherwise, Primestor must change with the changing times when it comes to building shopping districts in the age of Amazon, Sneider said. That includes constant tinkering with how Primestor tackles its projects.

“To say that we have an answer to online retailing would be like saying we have an answer for the electric car,” Sneider said. “The reality is, retailing has never stopped evolving.”

Regional appeal

Even with the challenges of changing state laws and the emergence of online commerce, Primestor also gets unexpected boosts every so often. Consider that Los Angeles is in the midst of building from scratch one of the nation’s most extensive mass-transit networks, with lines of light-rail trains springing out all over Southern California. Combined with the city’s already-expansive bus network, it’s a boon for many of the consumers who visit Primestor’s shopping districts, as many of them do not own cars.

“The more mass transit and the more transit-oriented development, the better,” Tyberg said. “It improves the quality of peoples’ lives, and, certainly, there’s nothing as depressing as getting on the freeway for an hour, trying to get home.”

The improved accessibility from an expanding mass-transit network and the popularity of Primestor’s approach to building shopping districts has turned Bell Gardens into a desirable retail destination. Now, Bell Gardens has become a shopping destination not just for residents, but also for those from nearby communities such as Cudahy and South Gage.

“Primestor has really blazed the trail where retailers can succeed in a community like ours,” Avalos said. “A-level retailers look at Bell Gardens as a vibrant community now, where people want better stores.”