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York&Fig

At the Intersection of Change

By THE WEALTH & POVERTY DESK

I. “Gentrifiers!”

The word was written as clear as day in sunny yellow paint. The message was a little murkier.

Gentrifiers-Tag

That word was painted on the door of Marketplace’s storefront in a historic Los Angeles neighborhood called Highland Park. Since August, the space has been occupied by four reporters and producers who work for the show’s Wealth & Poverty Desk. The little storefront is just a few miles from Marketplace’s studios in downtown Los Angeles, but the bureau was opened to take on a very special assignment: getting a street’s eye view of gentrification in progress. You see, Highland Park is changing, and fast.

York Boulevard – one of two major commercial corridors in this neighborhood – has been something like ground zero for gentrification in Highland Park. The empty storefronts and 99 cent stores are being replaced by vegan donut shops and yoga studios. And more of the same is happening on Figueroa Street, the other high-traffic zone of Highland Park. Fig is where our bureau is. Although, our block hasn’t really tipped yet; it’s not fancy. Our neighbors – a tattoo shop, a pet groomer, an appliance store, a hair salon – are all long-time residents. Whoever tagged us with the word “Gentrifiers!” breezed right by the windows and doors of those businesses before sidling up to ours and whipping out a paintbrush.

What’s going on in Highland Park is illustrative of the kinds of demographic and economic changes happening in cities nationwide.  People tend to have “this obsessive focus on who is moving in and who is moving out,” says Elvin Wyly, a geographer at the University of British Columbia.  “It becomes a question of who are the gentrifiers? Are they nice people? Do they have good intentions? And that’s not what matters.  Gentrifiers can be nice or not nice.  That’s less important than the process.”

As a process, gentrification is driven by deeper forces – structural changes in our economy, trends like the widening gap between people who have access to money and people who don’t.  When a place gentrifies, these markers of inequality are visible on the landscapes of older, poorer parts of a city that attract big pots of investment money.  The pursuit of profit also drives gentrification.  And, Wyly adds, cheap real estate with lots of potential attracts “something newer and more upscale at that location. Fortunes can be made.”

Let’s take a look at how some residents of Highland Park see their community being transformed.

The Reyna family has deep roots in Highland Park(Photo credit: Rafael Cardenas)

The Reyna family has deep roots in Highland Park
(Photo credit: Rafael Cardenas)

Vidal Reyna is a waiter at El Arco Iris, one of Highland Park’s oldest Mexican restaurants, owned by his wife’s family.  He grew up here.  He says the moment he understood that his neighborhood was becoming a different place happened on a drive with his father.  Reyna recalls, “He turns around and tells me in Spanish, ‘Hay muchos gueros mal vestidos por aqui.’”  Loosely translated, that means “around here, there are a lot of badly dressed white people.”  Reyna has also taken note of the crackdown on gang activity by local law enforcement and property values going up – something that benefits his family’s small real estate portfolio.

Marilyn Miller moved to Highland Park in the 1990s when it was “affordable.”  She says, “Now that we’re the hottest little neighborhood and all these developers and buyers and people are coming in, it’s changing,” she says.  “When we moved in, it was predominately Spanish-speaking.”  Miller describes the older businesses of Highland Park as being “very utilitarian,” the perfect complements to “a common sense, working people’s neighborhood.”  She adds, “ Now, like along York, we’re getting these businesses.  Now we have health clubs and now we have coffee shops and now we have outdoor dining and now we have vintage clothing.  That kind of stuff is coming.”

Jackie Martinez grew up in Highland Park and her parents still live here.  When she tried to buy the house across the street from theirs, she was quickly outbid by a real estate investor with cash in-hand.  “People around here, growing up, can’t do that,” she laments about the competition for housing in her neighborhood.

Miguel Olivares says, “It just looks different, even the dogs being walked down the street or the poop being left by the dogs being walked down the street.  Poodle poop is definitely different than Chihuahua poop.”

Marina Bellizzi grew up in Highland Park. She graduated from Franklin, one of the local high schools, then moved just a few miles away to attend Occidental College in neighboring Eagle Rock. In the few short years between high school and college, her perspective of the neighborhood changed. “When I was younger, going to Franklin High School was something to be embarrassed of.  We had ugly cheerleaders, we had pregnant teenagers, we had unsuccessful teachers.  So, there was a lot of shame that was thrown at going to my high school or even just living in this area.  Even young people from it would make fun of it.  There wasn’t a lot of pride, I guess I would say,” Bellizzi says.  “Now I see it differently, like the neighborhood’s changing and it’s being perceived as this positive place but for me to readjust what my preconceived notions were would be difficult.”

Restaurateur Erica Daking offers vegan-friendly meals on her menu at Kitchen Mouse in Highland Park (Photo Credit: Rafael Cardenas)

Restaurateur Erica Daking offers vegan-friendly meals on her menu at Kitchen Mouse in Highland Park (Photo Credit: Rafael Cardenas)

In addition to investors and new kinds of residents, dozens of new businesses have moved into Highland Park.  One, on Figueroa Street, is a vegan-friendly brunch and bakery spot called Kitchen Mouse.  The restaurant’s giant windows, glossy white subway tiles and exposed brick are a far cry from the décor of the previous tenant in this space: a quick cash loan place that specialized in car title loans. Erica Daking is the owner of Kitchen Mouse and she worries some about how she will be perceived in the neighborhood.  While noticing that another new business nearby had been tagged with the phrase “bad for the community,” she thought, “Are we going to get that kind of reaction? And you understand and at the same time it makes you feel so unwelcome.”

We did not come to Highland Park to gentrify it.  We came to document the changes taking place here as a result of more wealth moving into the neighborhood.  But, as outsiders embedding ourselves in a community – is it possible to do one without the other? The person who painted our door likely thinks not, but we don’t have the answer.  We are definitely now on record as a part of the change happening here, but neighborhoods are almost always changing.  People move in, people move out.  Areas get safer, houses deteriorate.  So if communities are always in some state of flux, why are some changes easier to see or more controversial than others?

When people talk to us about gentrification, we hear about coffee shops, flipped houses, paved streets, bike lanes, more dogs, new parks, higher prices, hipsters.  Those are very visible elements of change.  It’s the invisible elements – unseen economic forces that urge a community into transition – that also interest Marketplace.  We’re here to uncover those and place them under a microscope to better understand why it’s become unaffordable for so many of us to live where we do.

More than 62,000 people live in the four-square-mile zip code area that encompasses Highland Park.

The median household income is around $50,000, and 17 percent of its residents live below the poverty line.

From the Blog

One of the funnest parts of this project was interviewing Highland Park locals in our resident recording booth. We heard stories from a family that landed in the neighborhood after fleeing war-torn Guatemala; memories from a resident who grew up in the extraordinary old house his grandfather built to be an artist community in the early 1900s; tales from a homeowner…

Read More from the Blog

II. The House on York Boulevard

Peeling back the wallpaper

In 2013, the real estate listing website Redfin named Highland Park the hottest neighborhood in the country. Signs of a residential transformation are everywhere. Lawns are dotted with “For Sale” signs. Each weekend, energetic real estate agents host a slew of open houses. For homeowners who bought in the 1970s and ’80s, Highland Park’s bad years, this is an opportunity to sell at higher prices than they ever expected. Investors have purchased and flipped hundreds of homes, while other houses have been bought by families willing to invest sweat equity and tackle renovations themselves.

We wanted to tell the story of residential real estate in Highland Park by looking at specific houses and the different “generations” of owners that had passed through them. We knocked on dozens of doors with “For Sale” signs out front, asking families if they would be willing to talk about why they were selling. We also dropped in on just about every real estate agent in the neighborhood.

One afternoon, while paying a visit to real estate agent Elsa Kim at the Century 21 office in Highland Park, we met Irma Alvarado. Two months earlier, with Elsa’s help, Irma sold her two-bedroom, two-bath house on York Boulevard. The women have become friends, and Irma occasionally stops by Elsa’s office to say hello.

Irma Alvarado, former owner of 4784 York. Moved out several months ago. Now lives in a retirement community in Montebello.

Irma Alvarado is a former owner of a small house on York Boulevard who sold to a young couple and moved out to a retirement community nearby. (Photo credit: Rafael Cardenas)

The Alvarados were a young working-class family with two daughters when they moved to Highland Park in 1978. The couple met when she was 16 and he was 22, and married not long after. They bought the house, with its small porch and big backyard, for about $78,000. Irma’s mother-in-law lived with them, in a small basement unit, and at times, she says, the house felt too small for all of them.

They chose the neighborhood because nearby Glassell Park, where they were living, was plagued by gang violence. A couple of years later, though, the gangs followed them to Highland Park. She remembers hearing gunfire one night.

“My two girls, they threw themselves on the floor and they were doing a walk like this, a crawl walk,” Irma said. “And I was like, what the heck’s going on here? And my husband says, ‘I told them if they hear gunfire, they have to throw themselves on the floor and crawl to the back room.’ And I was like, oh my God, this is too much.”

Four years ago, Irma’s husband was diagnosed with cancer. The couple decided to sell so she wouldn’t have to keep up the house alone. They looked around at property values in their area and decided to list the house for $500,000.

Elsa Kim, a real estate agent who helped Irma Alvarado sell the house. (Photo credit: Rafael Cardenas)

Elsa Kim, a real estate agent who helped Irma Alvarado sell the house. (Photo credit: Rafael Cardenas)

As they were making their decision, Elsa Kim began getting calls from real estate investors who expressed interest in Highland Park properties. She sent a form letter to homeowners on York, asking if they wanted to sell. The Alvarados got her letter, and chose Elsa as their agent. When Elsa saw the house, they sensed that $500,000 was too low. It eventually sold for $521,000. After her husband passed away, Irma Alvarado moved to an apartment in a community for seniors in Montebello, California. She expects that the money she made on the sale of the house will support her for the rest of her life.

Irma didn’t know a lot about the couple who bought the house, but said she’d had a good feeling about them. She knew they were young and she remembered the name “Benoit.” The silent “T,” she said, tipped her off that they were French.

French Canadian, actually, and only one of them. We reached Benoit Guerin and Katie Dormeier through their real estate agent. Benoit, a technical director for educational theater at Kaiser Permanente, and Katie, a production coordinator for TV commercials, were drawn to the house on York because it stood out from the professionally rehabbed Highland Park homes. Many of those houses were out of their price range or seemed bland and lifeless. The couple decided they’d prefer to renovate themselves.

“We have spent a lot of time on these walls,” Katie said. “There was wallpaper, and then they painted over the wallpaper and then they painted over the paint, and then they wallpapered over the painted-on wallpaper and painted over that.”

Benoit and Katie are classic Highland Park newcomers: young, artistic professionals who couldn’t afford to buy in more gentrified Los Angeles neighborhoods like Silver Lake. They’re also aware of the anxiety that surrounds gentrification. Katie saw the process firsthand while living in Chicago, and Benoit saw it in Montreal. They see owning a home as an important step toward being part of the community.

“I think there’s a greater sense of social responsibility, being a homeowner as opposed to being a renter,” Katie said.

“I’ve never had to rent where I was like, I’m gonna be here for 25 years,” Benoit agreed.

While they handle the renovations, the couple is living downstairs in the basement unit, which is crowded with racks of clothes and a big bed. There’s also a sump pump down there, which they were told was a remnant from a year of severe flooding.

In the Los Angeles County assessor’s office, decades of homeownership records are kept in a dimly lighted basement room. The blue record books for Katie and Benoit’s home list a man named Marcel C. Hiller as the house’s first owner, in the 1920s. At the time, Highland Park’s wealthier white residents were leaving for areas west of the neighborhood, and working-class white families were moving in. Hiller’s name, in neat cursive writing, is listed alongside the house until 1976, when it was passed on to a new owner, Georgina Hiller. She owned the house for a short time before selling it in 1977, to the woman who would later sell to Irma Alvarado. Irma has only hazy memories of her and could recall only a first name: Olga. She also remembered that the bedrooms were painted pink, which made her think Olga’s children must have been girls.

Iris Lawrence Parelas (right) and her sister Nancy Lawrence lived in 4784 York in the 1970s.

Iris Lawrence Pereles, right, and her sister Nancy Lawrence lived in Highland Park in the 1970s. (Photo credit: Rafael Cardenas)

Olga Lawrence, a Cuban immigrant from Guantanamo, died in 2008, but her daughters, Iris Lawrence Pereles and Nancy Lawrence, have kept her memory alive. They live a few miles from Highland Park, in a house decorated with framed photos of their mother. They have stacks of photo albums with pictures of extended family in Cuba, pictures of the small, solid home their father built in Guantanamo after winning the lottery, and pictures of the family’s first house in Highland Park, which was also on York Boulevard. They don’t however, have any pictures of the house their mother sold to Irma Alvarado. Olga bought the house after she was divorced in 1977. That year, Los Angeles was hit by heavy rains, and the basement flooded. Frustrated by the mess, Olga sold the house to Irma  after only about a year.

Olga’s daughters say she was headstrong and decisive. After she sold the house on York, she immediately bought another one in a neighborhood outside Highland Park, which she left to her daughters. It’s where they live now. Over the years, the two women have kept an eye on the bungalow on York, and they were astonished when it sold for more than $500,000.

“I cannot get it in my mind,” Iris said. “For 520-something-thousand? I can’t, I can’t, I just cannot.”

Despite their disbelief, the same changes are coming to the neighborhood where they now live. Real estate agents have started approaching them, asking if they’re interested in selling the coral, stucco house their mom bought for about $63,000 in the late ’70s. The sisters say they’ve been told they, too, might be able to sell for close to $500,000. The gentrification happening in Highland Park, they say, is coming their way now.

III. The House on Meridian Street

Tracing the history of a house

As Lyn Mayer walks a half mile from the studio apartment she rents to her old house on Meridian Street in Highland Park, she’s filled with memories of what the neighborhood was like when she moved here in 1991. The road was so quiet that a neighbor’s chickens could nap in the middle of it. The family up the hill grew corn in their yard. The city didn’t maintain the sidewalks nearly as well as it does now.

And then, there’s the house, a white, stucco box set on a hillside that Lyn sold to an investor last summer after years of struggling to keep up with repairs. She has come to meet the new owner, to get his thoughts on the changes in Highland Park and, as a longtime resident, to share her own.

Paul Downer purchased the house from the investor who bought it from Lyn. He moved to Highland Park from San Francisco a few months ago. He is a pattern drafter and educator with an eye for artistic detail. Little details are part of what drew him to the house on Meridian Street: the small, colored panes of glass above the large picture window and the terra cotta tile in the bathroom.

lynmayer

“Not that anyone made me feel uncomfortable, but I stuck out like a sore thumb.” -Lyn Mayer

Paul is a newcomer, but he doesn’t consider himself a gentrifier. He witnessed the effects of gentrification up close in San Francisco and was saddened when high-end restaurants began to replace taquerias in the Mission District. He sees similar dynamics at play in Highland Park, and he’s put off by the sense of exclusivity that he feels many higher-end businesses exude.
“A lot of the cafes, I feel unworthy walking in,” Paul said. “Because the waiters seem much more hip and interesting than I am, and I’m like, intimidated. And some of the things on the menu, I’ve never heard of before.”

Paul, though, benefited from one of the biggest effects of gentrification: rising house prices. He sold his apartment in San Francisco and was able to pay $710,000 cash for the house on Meridian Street. He admits that for 1,100 square feet, it’s a lot of money.

The sale price astonishes perhaps no one more than Peter Alexander and Scott Craig, who bought the house in 1988 and sold it to Lyn Mayer in 1991. They were a young, artistic couple, and Highland Park was one of the few neighborhoods where house prices weren’t out of reach. They bought the house, at the time a one-bedroom, one-bath, for $95,000.

As a white, gay couple in a majority working-class Latino neighborhood, they stuck out a little, but their neighbors were friendly. Peter and Scott loved eating at the cheap tamale places, and waking up to the neighbors’ mariachi music in the morning. They laugh at the memory of repainting the white wall out front every weekend, after it was tagged by neighborhood kids on Friday nights.

Peter and Scott left Highland Park for the same reason that many Angelenos move. Most of their friends lived in Silver Lake, another artist-friendly neighborhood that is geographically close to Highland Park, until you take Los Angeles traffic into account. The drive to see friends had become a chore. They fixed the house up, added a bedroom and a bathroom, and sold it to Mayer for about $180,000.

Seventeen years ago, they opened Akbar, a nightclub that has become a Silver Lake institution. Laughing, they admit they helped gentrify Silver Lake. They don’t, however, think they were early gentrifiers of Highland Park. They lived there for three years, and in that time, not much changed. Businesses weren’t forced out by rising rents, and homes weren’t being flipped.

One of the early signs that a neighborhood will gentrify is an influx of artists. And in some ways, that sets Highland Park apart from a typical gentrifying neighborhood. Highland Park has been attracting artists for more than a century. It’s part of the reason Lyn Mayer doesn’t see herself as a gentrifier, but as an artist who, like other artists, was attracted by relatively cheap home prices, and lots of space.

In the lexicon of gentrification, Lyn “cashed out.” She sold her home at a far higher price than she bought it for. Still, her life post-sale is decidedly lo-fi. She still drives the same old truck with 230,00 miles on it, she still wears out her clothes, she still takes herself out to lunch because it’s cheaper than dinner. And, rather than buying another, smaller house, or a condo after she sold the house, Lyn is renting a small attic studio. At 60, she has retirement on her mind and she knows it won’t be easy.

“Do I feel the money I got, I’m set for life?” Lyn pondered. “No, not when they say that in order to retire comfortably you need at least a million dollars.  I feel right now I cannot have the thousand-pound gorilla that was on my back a little over a year ago. But now, I just have chimpanzees on my back.”

The real-life experiences, preferences and consciences of people like Lyn Mayer and Paul Downer often run smack into academic definitions of gentrification. “The class transformation of urban space,” is how geographer and gentrification theorist Elvin Wyly defines it. Simply put, that means money coming in to a neighborhood.

After they’d met, after Paul had taken Lyn on a tour of the house, and after he’d had an opportunity to look through samples of her artwork, they shared a slice of cake.  I presented them with the academic definition and asked, even if neither of them wants to be a gentrifier, is it possible that she was, and he is? They thought about that for a while, and admitted, yes, it’s possible.

Paul Downer in his home on Meridian Street. (Photo credit: Rafael Cardenas)

Paul Downer in his home on Meridian Street. (Photo credit: Rafael Cardenas)

“Because I’m white, there’s that element,” Paul said. “It’s not merely a class issue. I guess technically, I would be considered that. That’s not how I see myself. I see myself as just trying to be part of a community, but I am an outsider, and that’s a reality.”

Lynn added, “Not that anyone made me feel uncomfortable, but I stuck out like a sore thumb. Because I was a white girl, but I also was alone. When I moved in here, it was families with kids. And I guess I was an interloper too.”

This is the pattern in any neighborhood, gentrifying or not. She was an interloper. Now, she’s an insider. He is still new. Some of his neighbors may not have warmed to him yet. Sometimes his hellos aren’t returned. But Lyn has introduced him to her friends, and they go to dinner and to galleries together. And from his front porch, he can see even newer people traipsing through the house across the street – which has been flipped and is on the market for $680,000 – trying to decide whether to call Highland Park home.

IV. The Gentrification Machine

Profiting from change

There is a familiar storyline you hear in lots of gentrifying neighborhoods about how all the change got started. At some point it usually involves a cute little café. In Highland Park it’s a place called Café de Leche, which opened its doors in 2008.

The café has become a favorite meeting place for newcomers, often found sipping single-origin coffees or horchata lattes while hovering over laptops.

It’s also become a favorite target of disgruntled old-timers. They have tagged the café with words like “gentrifier,” posted symbolic “eviction notices” to its door, and infiltrated those laptops using an anonymous Wi-Fi network with a name that directed an expletive at hipsters.

“I don’t know,” Anya Schodorf said with a sigh, about the frustrations directed at the café. She owns it with her husband, Matt. “It’s just embarrassing and not good.”

Matt and Anya Schodorf own Café de Leche. (Photo caption: Rafael Cardenas)

Matt and Anya Schodorf own Café de Leche. (Photo caption: Rafael Cardenas)

Matt, originally from Ohio, and Anya, originally from Nicaragua, say they get why some Highland Parkers might feel uncomfortable with how fast the neighborhood is changing. But the idea that their little café started it all?

“We just opened a coffee shop,” Matt said. “There was no master plan.”

And despite all the storylines to the contrary, it would be improbable for the Schodorfs to have single-handedly constructed a master plan for gentrifying Highland Park, while simultaneously starting a small business in a recession and nearly losing their home to foreclosure in the process.

Which is why this story is not about Café de Leche, or any master plan of theirs. Instead, this story is about the much larger but much less visible network of professionals who surround Café de Leche, and who do make changing neighborhoods their business—a very lucrative one.

A Seed of Transformation

Let’s start with a professional house flipper named Steve Jones, known around here as the “Hipster Flipper” of Highland Park. He is open about the fact that Café de Leche was part of his master plan.

Steve Jones of Better Shelter outside one of the many Highland Park homes he's flipped. (Photo credit: Krissy Clark)

Steve Jones of Better Shelter outside one of the many Highland Park homes he’s flipped. (Photo credit: Krissy Clark)

“When I first started doing work here in this area – the only thing that was really around was Café de Leche,” Steve explained recently. “And I said to those guys, ‘Listen, you can not go out of business.  If you go out of business – I’m screwed.’”

To understand why, you need to know a little more about Steve Jones’ business, Better Shelter. Since the housing crash, Steve, who lives in a wealthier neighborhood across town, has worked with investors to buy more than 50 houses in Highland Park.  Most of them were foreclosures. In a working-class place like this one, foreclosed houses were not hard to find back then.

“Where somebody might see urban blight and decay, I was like ‘Oh my gosh – look at all these homes I could do!’” Steve said. “I saw opportunity.”

Opportunity, that is, to make a lot of money. Steve buys these houses, guts them, renovates them with Dwell Magazine touches, and then sells them at a nice profit.

Steve took me to one house he did — a “reimagined” Spanish-style, white stucco with a mint green door, red-tile roof and big arched windows.

I asked him how much he made on this one, and he couldn’t remember the details, so he looked them up on a real estate app on his phone. When he brought up the record, he shook his head, as if he still couldn’t quite believe it. He bought it for $280,000, he tells me, put another $140,000 or so into the rehab, and sold it for – now he’s laughing – “$530,000! Oh my gosh!”

But to sell houses for that much, Steve knew he needed people who could afford to pay that much. People already living in Highland Park, for the most part, could not. So Steve needed to draw wealthier people from other areas. And he worried that the “urban blight and decay” in Highland Park that he saw as an opportunity might scare off the kinds of buyers he was courting.

Highland Park “might be a little bit of a shock to some people,” Steve said. “And so one of the things for us was to show this home buyer: Look, you can live in this neighborhood.”

And that is where Café de Leche fit in.

“One of the first things that home buyers look for is like – ‘Where do I get my dry cleaning? Where do I go to get my groceries? Where do I get my coffee?’” Steve explained.  “And at least I could say, for the coffee, ‘You go there.’”

Steve calls a place like Café de Leche a “seed” of transformation — something he could point to and say, look, this neighborhood is changing. He needed to convince potential home buyers of this, yes. But just as important, he needed to convince the people who were giving him money to flip those homes.

‘Up and Coming’ Never Looks Like ‘Up and Coming’

Yet another gear in the machine that drives gentrification are real estate investors like Gregg Solomon. Gregg and Steve met when they both worked at Quiksilver, the surfwear and board-sports company. Steve was a VP on the design side. Gregg was a senior VP on the business side.

Gregg lives in a wealthy suburb of Los Angeles and, like a lot of investors who’ve been betting on low-income neighborhoods, had never been to Highland Park until recently. The first time he visited, to check out a property Steve wanted to show him, Gregg says he purposely drove his truck and not his “nicer” car.

“It was definitely a place I have to admit that I would not have gone to at night,” he told me. “I  wouldn’t have felt comfortable.”

This discomfort that Gregg felt, this perception that Highland Park was a place to avoid, is strangely at the exact heart of what makes buying property here such a potentially lucrative investment.

Or, as Matt Manner, another real estate guy who specializes in Highland Park, put it: “Up and coming never looks like up and coming. It looks like a bad neighborhood.”

Matt Manner used to buy and sell houses for Steve Jones in Highland Park, until he started his own home-flipping company, Extraordinary Real Estate.

He says it’s basic economics. The nicer a neighborhood is, the more expensive the properties. So if you invest in a nice neighborhood, the less return you get.

But in a rundown neighborhood, properties are cheaper. You can buy low and, if the gentrification machine is cranking, sell high. It’s a riskier model, but one with potential for bigger rewards. And that is the whole reason investors put their money into these homes.

“All these people out there that have so much money, it’s sitting in some stupid money-market account making 2 percent or 3 percent or whatever their horrible rates are right now,” Steve explained. “And so for me, I have to present to these people, like look, here’s an opportunity for you. I can make you X percent on your money.”

He paused. “And I have made these people a lot of money.”

Gregg Solomon said he’s invested about a million dollars over the last few years in Steve Jones’ homes in Highland Park. He estimates he’s gotten a 35 to 40 percent return on his investment. “You can’t complain about that,” he said.

At least, an investor like Gregg can’t complain. But the whole chain reaction of gentrification has investors like Gregg Solomon on one end, and on the other end, families like the Martinezes.

Not the Old Neighborhood

Andres Martinez and his wife Cecilia bought their house in Highland Park 20 years ago. Back then, it was one of the few areas they could afford on his income as a grounds-keeping supervisor and hers working at an insurance office. Now their daughter Jackie, an ESL instructor, has tried and failed to buy her own house in the neighborhood where she was raised.

Martinez-garden_resize

Andres Martinez in his Highland Park garden. (Photo credit: Krissy Clark)

Homes are either too expensive, or scooped up by cash offers from investors like Gregg Solomon and Steve Jones or by even bigger flipping companies — funded by private equity or foreign money.

The Martinez’ home is surrounded by ones that have been flipped. Some neighbors lost their homes to foreclosure. Others decided to sell and cash out on rising property values. Jackie Martinez said real estate agents and investors constantly approach them about their house, too.

“Calling or sending fliers – we’ve had countless people come say, ‘Oh, we’ll buy the property,’” she said. So far they have refused.  “It’s home,” she said.

Even if it is a home that Jackie Martinez sometimes barely recognizes.

“You don’t see as many of the things you used to see,” she said. “The carnicerias, the markets, the people out selling tamales — that more neighborhood feel.”

But in some ways that “neighborhood feel” needs to change if real estate investors are to keep profiting in Highland Park. Carnicerias, Mexican markets and tamale vendors won’t on their own draw enough people who can afford to buy a beautifully rehabbed home. Or so the reasoning goes.

For that matter, one little third-wave coffee shop won’t draw enough people either.

Which is why Steve Jones, the “hipster flipper,” and his real estate agent have started hosting mixers for some of Highland Park’s new shops – what Steve calls “like minded” businesses. Over wine and cheese, shop owners talk about how to get the city to deal with issues like all the gum on the sidewalks and too many overflowing garbage cans.

Steve started off one recent event by asking people to go around the room and introduce themselves.

“I’m Jen, and I literally signed a lease for a bookshop today,” said one woman, as the room cheered congratulations.

“Charles Wren, The Hive Los Angeles,” said the owner of a hair salon and boutique. “We just opened on York.”

There were no tamale vendors or auto-body shop owners in attendance. But there was a Reiki master, the owner of a home decor store, and the guy behind a new wine boutique/coffee-shop/farm-to-table restaurant/pizzeria that some critics have dubbed the “hipster mini mall.”

The point of this gathering was part cross-promotion, part support group, Steve Jones explained.

“I wanted to give people an opportunity to socialize and connect and really let other businesses know that we’re sort of in this together,” Steve said.

Because while it might take the tiny seed of just one cute café to flip a few dozen houses, it’s going to take a group effort to flip a whole neighborhood.

V. Flipping the Neighborhood

Flipping the Neighborhood

For 23 years, Frank Cordova owned a little shop on Figueroa Street in Highland Park. It’s one of those shops that sold a bit of everything: Shampoo, car speakers, picture frames, dictionaries, all at a deep discount. Frank had been behind the counter, selling this stuff every day since 1991, when he hired a mariachi band to play at his grand opening.

In all the years since, he’d taken no vacations, no sick days, no days off for anniversaries or birthdays. His motto: “If it’s raining you come to work. If it’s sunny you come to work. If it’s cold you come to work. If it’s windy you come to work. No matter how it is, you always come to work.”

That is, until the day you don’t.

In early November, Frank packed up his remaining merchandise, put it in storage and went out of business. There were many things that lead up to this day. Lots of his usual customers, mostly working-class Latinos, had moved away in recent years or just weren’t buying stuff like they used to. The last straw was when he got a call saying the building his store was in had just been sold and was going to be renovated – and that after two decades of never going up, his rent was about to increase “significantly.” Before he even heard how much, Frank decided it was time to go.

On one hand, closing the store feels like a relief, Frank said. On the other, “it feels like crying.” He thought for a moment. “But what can we do? Everything changes you know. Nothing stays the same.”

Everything changes. It is a phrase you hear a lot these days on Figueroa Street, where small businesses like Frank’s have been shutting down one after another. But the thing that becomes clear the more you speak to people at the center of the kind of change going on in a neighborhood like Highland Park right now is that it doesn’t just happen. It takes hard work by a network of people who hope to make a lot of money making this place change. People we’d like to introduce you to.

The ‘Retenanter’

“See this swap meet here?” asked Nicole Deflorian, pointing at an old brick building with a sign – HighlandSwapMall.Com  – neatly spray-painted over the door. It’s a few doors down from Frank’s now-shuttered store.

Nicole Deflorian is a commercial real estate agent. (Photo credit: Rafael Cardenas)

Nicole Deflorian is a commercial real estate agent. (Photo credit: Rafael Cardenas)

She looked through the Swap Mall’s windows at a hodgepodge of kiosks selling underwear, cell phones, cheap jewelry. “I don’t know how they are still around and staying in business,” she said.

Nicole is a commercial real estate agent with Clint Lukens Realty and one of the many commercial agents who has marked Highland Park as her new territory in the last several months. She now spends considerable time in this neighborhood, staking out old buildings like the Swap Mall and old stores like Frank’s.

“This could be broken up into two or three cute boutiques,” she said, sizing up the Swap Mall building. “That’s probably going to happen soon.”

One of Nicole’s specialties is something called “retenanting.” Maybe you’ve never heard this word, but in commercial real estate it is a term of art, an actual job: find commercial buildings with low-rent tenants occupying storefronts, ideally on month-to-month leases, then “kick them out, retenant the property with new tenants at market rate,” Nicole explained.

Nicole admits this can sound predatory. “I do feel bad,” she said. “But it is a business. And when these people are paying under-market rents, and we have a client that owns the property, we have to look out for our client’s best interest.”

Actually finding those clients, the landlords she hopes to pitch her retenanting services to, can be difficult. Property owners are notoriously hard to reach, their identities obscured in property records by the company names under which they frequently operate. And it’s not like you can just go into a building and ask the current tenants how to reach their landlord. Often, they don’t want to tell you.

Nicole has developed a strategy for this.

“What I typically do is I go in, I see a store that’s like an old appliance store that’s not going to last for another year or so,” she explained. “So I try to figure out how to get in touch with the owner – like say that I got hit in the back parking lot and I need to call insurance, so I need the property owner’s information.”

It’s a trick Nicole learned from another commercial real estate agent years ago, she said. “Sometimes you have to get creative and kind of do whatever it takes get the information.”

Once Nicole obtains a property owner’s information, her pitch is pretty simple. She asks how much rent current tenants pay. In a long-disinvested neighborhood like Highland Park, it’s usually quite low. “Like $1.25 a square foot or something ridiculous,” she explained. At that point, she’ll say to the owner: “Well look, I have spaces across the street that I’m leasing for $2.50 a square foot. How does that sound?”

If all goes as planned, she said, out goes the old appliance shop, and in comes “a cool new fitness studio, or whatever.” And Nicole makes a nice commission.

The ‘Gentrification Industrial Complex’

A retenanter like Nicole is just one player in what could be called the “Gentrification Industrial Complex,” a web of real estate leasing agents, listing agents, landlords and investors whose business models are built on stoking and profiting from neighborhood change.

This change often starts as just a trickle – new people priced out of other, wealthier neighborhoods move in to a neighborhood they can better afford, maybe one with a cute coffee shop they like. But the gentrification industrial complex turns that trickle into a flood, flipping homes to lure more people, who drive up home prices. Then those high home prices catch the attention of commercial real estate interests.

“Retail follows residential,” is an aphorism in the commercial real estate world. Patrick Dilanian, a commercial real estate agent with RE/MAX who has been focusing on Highland Park, explained it this way: “These guys coming in here spending $500,000 or $600,000 for a home – they want to have shopping. They want to have somewhere to eat, somewhere to drink, somewhere to spend their money.”

Patrick’s specialty brings about larger-scale change than retenanting a commercial building unit by unit. He mainly brokers deals where longtime property owners sell an entire building, usually to a new investor or investor group that plans to renovate and reimagine the space.  Patrick recently brokered a $1.5 million deal to sell the building on Figueroa Street that housed Frank’s discount store. The owners of an upscale coffee outfit have already signed a lease for one of the units.

Patrick also handled the sale of the building next door to Frank’s old place, an old bowling alley and bar that hosted punk rock concerts. The building includes a storefront unit where a family runs a discount sports souvenir shop; they lost their lease. The building, which sold for $2.9 million, is being gutted and restored. It will become a live-music venue/retro bowling alley/restaurant.*

Investor Cyrus Etemad recently bought Mr. T's Bowling alley and a row of storefronts on Figueroa Street. (Photo credit: Rafael Cardenas)

Investor Cyrus Etemad recently bought Mr. T’s Bowling alley and a row of storefronts on Figueroa Street. (Photo credit: Rafael Cardenas)

Yet another building is on the market next door, for $3.6 million. It contains the Swap Mall, which has a handful of single-occupancy units on its second story. Patrick is representing the owner.

Of the 20 storefronts on this two-block stretch of Figueroa Street. Patrick figures he has brokered or is brokering the sales of more than half of them, just in the last year.

“I kind of play chess with these buildings here,” he said. “A building at a time. One step at a time. We’ll get it done.”

The New Urban Landlords

Dave Walker and his partners at Engine Real Estate just bought one of the buildings that Patrick Dilanian represented.

“My goal is to build a portfolio and own while this area improves,” Dave said. “Up and down the street, up and down Figueroa.”

Dave Walker (right) with business partner Jeffrey Birkmeyer. Walker recently bought Frank's Camera. (Photo credit: Rafael Cardenas)

Dave Walker (right) with business partner Jeffrey Birkmeyer. Walker recently bought Frank’s Camera. (Photo credit: Rafael Cardenas)

Dave is a member of another key group in the Gentrification Industrial Complex: Commercial real estate investors.

One interesting thing about Dave and other investors who’ve taken a recent interest in neighborhoods like Highland Park is that, until recently, their portfolios were filled with properties far different than those found here.

Dave has spent most of his career developing “suburban, quasi-urban sprawling shopping centers,” he said. “You know, typically, with big-box retailers and things like that.”

But the suburbs are getting poorer, and the potential for high returns on an investment in a sprawling shopping mall has mostly been tapped out. Meanwhile, back in certain urban neighborhoods, places once considered “disinvested” because investors like Dave avoided them for so long, investment returns have started to soar.

One urban neighborhood Dave recently watched go through the cycle of gentrification is Abbott Kinney, on the west side of Los Angeles across town from Highland Park. Property values there, he said, went “from hundreds of dollars a square foot to multiple thousands of dollars a square foot – right under my nose. And I was very frustrated that I wasn’t participating in it. And I kind of swore that I wasn’t going to let that happen again,” he said.

And then Dave Walker found a cavernous building on Figueroa Street known to locals as Frank’s Camera. It was a giant camera emporium that did business in Highland Park for decades, until its elderly owners, Frank and Vera Vacek, retired a few years ago. With investors, Dave just bought the building for $3.4 million. After rehabilitating it and leasing it out, they hope to see a 25 percent return on their investment.

Inside Frank's Camera, which went out of business in October 2014. (Photo credit: Krissy Clark)

Inside Frank’s Camera, which went out of business in October 2014. (Photo credit: Krissy Clark)

“This does remind me of my grandmother’s basement, just a little bit,” he said when he visited the building in October.

Dave has spent the last few months giving tours of the place. First he had to court potential investors to help him finance the building’s purchase and renovation. He secured a handful of “high net worth” individuals, as they’re called—mostly friends and people he knew from his shopping mall days.

As he woos potential tenants, he tries to prepare them for what they will see.

A team of workers has filled 15 dumpsters with years of the store’s old inventory – three stories piled with old cameras, lenses, film, tripods and other photography paraphernalia. Not to mention the remnants of uninvited visitors to the long-vacant building – broken vodka bottles, small animal cages, blow-up doll sex toys.

But as Dave Walker helps people weave through the detritus, what he wants to focus on are the building’s “good bones.”

“You can see where the plaster has come off the walls,” he told a pair of potential tenants who own several trendy bars and restaurants in Los Angeles. “And you can see what’s cooking. We’ve got exposed brick, laying right behind that.”

“Oooh,” one of the potential tenants said.

“It’s got that intangible which is hard to come by, which is the cool factor,” Dave said.

He took them outside for his final pitch: Sure it looks bad now, but imagine on the top floor, offices for tech start-ups, Dave said. “A little cliché,” he said, “but there’s not a lot of it around. It’s an opportunity.”

And downstairs? “We think bar. Restaurant. We think potential gym,” Dave continued. Maybe the neighborhood would like one of those upscale spinning gyms, he posited. “Soul Cycle? Even though it’s not the right demographic for them – yet.”

Yet.

That little word is the key to the business plans of investors like Dave Walker. To make real money in a neighborhood like Highland Park you need to buy property before the demographics change too much, when prices are still relatively cheap. And then you need to do what you can to make sure the demographics keep changing, so people who can afford to shop at more expensive businesses keep coming, and you can rent to those businesses.

That’s the only way his investors will go in to a place like Highland Park, Dave said. “For a higher-risk neighborhood, that’s kind of what we look for,” he said. “Knowing with some level of certainty that the rents are going to go up – that that $1 rent is going to become the $3 rent or the $4 rent – or the $12 rent.”

And to achieve that ultimate goal, the cheap mom-and-pop shops that cater to people on a budget – the Swap Malls, Frank Cordova’s humble discount variety store – they have to go. Their going-out of business sales are not just unfortunate side-effects of the process. They are the process, in many ways.

Dave is relatively open about this, and about the downsides he sees.

“It’s a slippery slope, because in some instances the neighborhood will lose its local natural flavor,” he said.

But, he also talked about the vibrancy new shops can bring to a neighborhood. He sees what he does as investing in and improving Highland Park.

“And when you’re investing and improving, you just don’t stop,” he said. “There’s no natural stopping point. There’s no airbrake in the middle that says ‘That’s enough profit. That’s a high enough rent. I’ve made enough return on my money, I don’t need to make any more.’ That’s not human nature. That’s not how capitalism works. And that’s the life that we are in.”

And that is the process we are in, in many urban neighborhoods across the country, and across this neighborhood of Highland Park. Just a few miles away from Figueroa Street, investors looking for higher returns have been buying up property along York Boulevard, Highland Park’s other main drag.

Los Angeles-based GPI Companies raises millions from wealthy individuals and pairs it with many more millions from private-equity firms on Wall Street to buy portfolios of properties that – as the company’s website puts it  – “offer improving demand fundamentals due to urban re-generation, creative class movement and gentrification.”

GPI's vision for York Blvd, as represented in a GPI flier.

GPI’s vision for York Blvd, as represented in a GPI flier.

“We spend a lot of time thinking about where to deploy capital  – about where to buy things and build things,” said Drew Planting, GPI’s founder and managing partner,

A few years ago, Drew happened to drive through Highland Park while he was helping his stepfather buy a new house in another part of Los Angeles. When Drew saw a rundown pet store with a “for sale” sign on the front, right next to a craft-brew pub, he pulled over his car and called his partner, Cliff Goldstein, to tell him about the neighborhood.

“And I said, Cliff, we are all in,” Drew said. “And my 75-year-old stepfather looks at me like, ‘What are you talking about?’”

GPI has since bought the space that housed old pet store, which will soon open as Recess Eatery, specializing in Mediterranean-California cuisine. Down the street, GPI purchased an empty lot that it plans to develop as a retail or restaurant space. That’s two properties in Highland Park so far, and Drew says his company is looking for more.

CORRECTION: The original version of this story misstated plans for the bowling alley. It will be a live-music venue, bowling alley and restaurant. In addition, it incorrectly described the situation of the sports souvenir shop. It lost its lease. The article has been corrected.

5609-5619 N. Figueroa St

  • For Sale: $3,600,000
  • Current Owner: Howard and Pauline Lee Living Trust
  • Tenants: Ground floor tenants include Highland Swapmall, Amigos Liquor, Highland Wireless. Second floor has 28 SRO units.

5621 N. Figueroa St

  • Most recent sale: $2,925,000 in 2014
  • Current Owner: Accipiter Investments LLC/ Cyrus Etemad
  • Previous Owner: John Teressi, owner of the building and operator of Mr. T’s Highland Park Bowl, sold the building and moved out in 2014.
  • Tenants: Ground floor tenants include Highland Swapmall, Amigos Liquor, Highland Wireless. Second floor has 28 SRO units.

5627 N. Figueroa St

  • Most recent sale: $1,510,000 in 2014
  • Current Owner: Accipiter Investments LLC/ Cyrus Etemad
  • Tenants: Yoona Fashion and Noel’s Hair Salon expects to leave in next few months. Highland Park Discount, The Rock Factory (clothing store) and Hello Kitty Gifts For All Occassions left in 2014. Civil Coffee signed a lease in 2014.

5717 N. Figueroa St

  • For Sale: $3,400,000
  • Current Owner: 5715 5717 N Figueroa LLC/ Dave Walker & Jeffrey Birkmeyer
  • Previous Owner: Frank and Vera Vacek owned the building and operated Frank’s Camera there for more than 40 years. They sold the building and moved out in 2014.
  • Tenants: Currently vacant and under renovation. The new owners envision leasing to a bar, restaurant and perhaps a gym and creative office space.

The Team

Thanks to: Occidental College, Zoe Montano, Evita Chavez, Rafael Cardenas, Daisy Palacios and Ana Dapuetto.