By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
Over the past eight years, the Riordan administration has scored a handful of triumphs, including Staples Center, the Alameda Corridor project and the successful commercial reuse of the abandoned General Motors plant in Van Nuys. In a larger sense, the city — and Riordan — has benefited from a rising economy, which has invigorated retail and residential development.
But the results could have been better. A 1999 study by the Los Angeles Alliance for a New Economy and the UCLA Center for Labor Research and Education found that development help was not especially targeted at poverty-laden neighborhoods that most needed it. Moreover, the city lacked a comprehensive, coordinated and efficient business strategy.
Although the Mayor’s Office challenged these conclusions, Genesis LA was taking aim at these shortcomings a full seven months before the report was published. Under the leadership of Delgadillo and others, Genesis cherry-picked barren, polluted or dilapidated sites across the city, with the goal of turning them into job producers. Genesis would push for retail outlets in parts of town that lack them, but its primary focus would be manufacturing jobs — because once people have well-paying jobs, stores and restaurants are likely to follow on their own.
Delgadillo was part of the Riordan economic brain-trust almost from the beginning, finally rising to his position as deputy mayor.
Genesis LA grew out of the mayor’s Los Angeles Business Team, which received mixed reviews from the academic researchers, but did get credit for making the city bureaucracy easier and faster for developers to navigate. The Genesis initiative was announced in March 1999 and incorporated later that year as a nonprofit organization. The nonprofit, in turn, spun off a for-profit entity called the Genesis LA Real Estate Investment Fund. The for-profit controls $85 million in private investment capital for projects in low- and moderate-income areas. The nonprofit’s 12-member board includes Delgadillo (listed as an advisory member), former Assistant Deputy Mayor Marci Wiseman, Far East National Bank president Robert Oehler, several business people, and four attorneys, Ă˘ including two from Riordan & McKinzie — the mayor’s eponymous law firm.
“Genesis LA sites were not selected because they’re easy,” said Deborah La Franchi, a former Riordan assistant deputy mayor who is now president and CEO of the Genesis nonprofit. “Many of these sites were being worked on during Mayor Bradley’s administration. Our mission is to attack the high investment barriers to these abandoned and blighted properties located in Los Angeles’ most underserved communities.”
The nonprofit intends to develop three parcels of donated land. But in the main, Genesis attempts to assemble development deals funded by private capital, grants, subsidies, loans and the for-profit Genesis investment fund. The for-profit, however, is under no obligation to finance anything.
“The fund is operated totally autonomously from the nonprofit,” said George J. Buchler, president and chief executive of the Shamrock Real Estate Division, which manages the for-profit Genesis fund. “We are not required to take any of the sites or any of the projects. They are all at our discretion. They have to be a viable investment, in an area where there is sufficient market data to suggest a return. We haven’t taken every project we’ve been shown.”
That’s putting it mildly. The Genesis fund has offered to participate in exactly one of 22 Genesis sites, a proposed industrial park at a landfill and mining site in Arleta. But the fund has been busy elsewhere. According to published reports, it’s contributed $3 million to a $50 million office-renovation project on Vine Street in Hollywood. And it’s loaned $2.5 million to a $16.5 million Venice project that involves converting the old Roger Corman movie studios to artist lofts priced from $300,000 to $500,000 apiece.
“We’ve told our investors we will get them mid- to high-teens returns,” said Buchler. “That’s on an annual basis. An annual return in the 15 to 19 percent range.”
In short, the Genesis for-profit fund is nothing more or less than a moderate-risk, high-yield real estate fund that seeks investment opportunities outside of tony areas. Its public-service commitment is simply a willingness to consider all development pitches brought in by the nonprofit Genesis.
This noncommittal approach has its upside. An earlier economic incubator, the federally funded Community Development Bank, weighted itself down with loans to projects that never became viable, draining the bank of capital that it had intended to reinvest over and over again.
Thus far, however, several prospective Genesis projects have fallen apart or been delayed due to thorny economics or public opposition. Others are in the earliest stages. The projects that have gotten the furthest are seemingly the ones that have least to do with Genesis, though several benefited from support by the mayor’s Business Team.
One Delgadillo project, however, has penciled out nicely, namely the fund-raising for his aspiring political career. The 40-year-old Delgadillo is a native of Los Angeles who played football with distinction at Harvard and later became an intellectual-property attorney at O’Melveny & Myers. After the 1992 riots, he joined the management team at Rebuild L.A, an earlier nonprofit that sought to rebuild the urban core. “I wasn’t going to watch my city burn,” Delgadillo told the Weekly. “I wanted to give back.”