In Watts, A Lesson For CRE On How To Provide Economic Opportunity

For Primestor Development CEO Arturo Sneider, the new Freedom Plaza in Watts holds a special place in his heart and career.

The 115K SF retail shopping center is more than just a neighborhood shopping center, he said. In Watts, a historically Black neighborhood in Los Angeles that hasn't seen a lot of economic activity or investment, Freedom Plaza could be the economic engine that nearby residents want and need.

"This is a project long overdue and I'm hopeful that in the wake of the death of George Floyd and the Black Lives Matter movement, that people realize that these underserved and minority communities deserve everything and then some," Sneider said.

While neighboring Inglewood and Hawthorne have seen a multitude of new developments and hundreds of millions of dollars in investments, Watts has lagged far behind in its economic development. The lack of economic development spotlights the development disparity in neighborhoods just a few miles apart.

For decades, Watts has struggled to attract investment capital, as investors have struggled to understand the neighborhood or passed on it entirely.

Freedom Plaza and other new projects are hoping to change that, by bringing some economic life to the area. Earlier this year, Primestor completed the Freedom Plaza, a $50M 114K SF grocery-anchored retail shopping center on South Alameda Street. The shopping center with about 17 tenants is primed to become the economic anchor for the bigger redevelopment of the Jordan Downs area.

The city of Los Angeles teamed up with developers to turn this former housing project into a mixed-use neighborhood with more than 1,400 new residential units, a retail center, park space and a community center. Rather than displace the residents whose units in the former housing project would be demolished, area locals will move into new units, as they are built and at the same rent price.

Bridge Housing and The Michaels Organization are developing the residential units. The plan, at least 15 years in the making, is the first major project in the area in the past 30 years, Sneider said. 

"Freedom Plaza is doing well because there is a void of services in this community," said Sneider, whose company is also developing a community center and park space for the neighborhood. "We finally have a major grocer. We've opened up Ross again after it was shut down because of the coronavirus and the big news in the month of August is we’re going to open up the Nike and Starbucks and other stores."

Experts say it is a good start, but that Watts still has a long way to go before it reaches economic vitality. The area's neglect by major financial players has been massive and long-standing.

Known for its towering Watts Tower sculptures, the neighborhood is remembered for the 1965 Watts riots, the largest race riot during the civil rights era. A police officer tried to arrest a Black man for allegedly driving drunk in the neighborhood, and it soon escalated into one of the largest scenes of civil unrest in U.S. history. Simmering racial tensions, unemployment and other factors led to the six-day riot and killed more than three dozen people, according to Time magazine. 

“Watts is the kind of community that cries out for urban renewal, poverty programs, job training. Almost anything would help. Two-thirds of its residents have less than a high school education; one-eighth of them are technically illiterate,” according to an Aug. 20, 1965, Time story. “Only 13% of the homes have been built since 1939 — the rest are decaying and dilapidated.”

Those socioeconomic conditions have not changed mightily in Watts over the years, even as other distressed areas of Los Angeles have seen a renaissance of capital inflows and social mobility initiatives by policymakers.

Driving by on a recent day, single occupancy motels, tightly placed housing and liquor stores dot the area, which is largely unwalkable and mostly void of transit systems. The area has a population of a little more than 41,000 people, 98% of whom are Latinx and Black, with a median income of $25K, and only 2.9% have a college degree, according to an LA Times profile. 

In 2013, a Health Atlas for the city of Los Angeles found that residents in Watts have a life expectancy of 72.8 years, almost 12 years shorter than city residents who live in affluent areas such as Bel Air-Brentwood-Pacific Palisades (84.7 years). 

"The Watts PUMA (Public Use Microdata Area) has the lowest rate in California, representing the same life expectancy rate for the U.S. from almost 40 years ago," the study reported.

The city compiled the data as a way to analyze the conditions that contribute to health outcomes in Los Angeles.

Helping residents access healthy living conditions is vastly limited compared to the options other local neighborhoods have. The U.S. Department of Agriculture has designated most of Watts as a food desert, with residents living more than a half-mile from the nearest supermarket and many have no access to a vehicle.

Developers and city planners are largely responsible for those issues, either via direct intervention of long-standing neglect.

"This is largely a systemic problem," Sneider said. "This is by design. Many of these minority and underserved communities have been isolated without proper transportation, proper housing stock and business, therefore creating an environment not conducive to building something. That's why capital has been very slow to come to this community."

Los Angeles Local Initiatives Support Corp. Executive Director Tunua Thrash-Ntuk said unlike neighboring Inglewood, which is benefiting from public investment in infrastructure for transit and other projects, no such investment and activity is occurring in Watts and other parts of South Los Angeles. 

Some of the major developments happening in Inglewood include the development of SoFi Stadium and its mixed-use components, the Clippers' new basketball arena, hotels and the new headquarters of LA's Youth Orchestra. Nothing close to that size has even been considered for Watts.

"It's hard raising capital," Azure Development President Vanessa Delgado said. "You have to package in a way that it's not scary. The underwriting has to be sound. The marketing has to be sound... It takes more time, more effort and [investors and lenders] have to be ultra-comfortable with the project."

Delgado specializes in developing projects in minority and Latinx communities in Los Angeles. 

Additionally, investors and lenders are just wary of investing in an area that shows little-to-no return. That has hobbled economic development and upward mobility in the neighborhood, local residents said.

"People that are [in Watts] haven’t been able to have access to greater economic opportunities," Thrash-Ntuk said. "There is a return on investment. It may not be the market return, but there is a greater return on society. We are creating neighborhoods and more opportunity." 

But there is a greater impact for not putting developments in these areas, Thrash-Ntuk said, and it will play out in residents' quality of life and ability to access the basic trappings of a lifestyle unencumbered by poverty.

"We're going to be paying for it on [the] other end with increased healthcare and property taxes," she said. "Having developments in these areas means less people on unemployment or on long-term disability. It means less people that are depending on other social services and networks in order to survive."

WLM Financial & Realty CEO Odest Riley Jr.'s grandmother was originally from Watts before moving the family to nearby Inglewood. Riley Jr. said growing up in Inglewood and in the Slauson Avenue neighborhood of Los Angeles during the 1980s and 1990s, he thought his area had it bad. But Watts was in worse shape.

"I thought I lived in the 'hood," Riley Jr said. "Watts, Jordan Downs and the Nick (Nickerson Gardens) that was the 'hood out there. Our area was doing good compared to them and that was saying a lot back then." 

Riley Jr. said the Freedom Plaza will provide much-needed jobs into the area and could kick-start more investments. 

"There's a lot of commercial real estate lenders and companies that have made commitments to improving diversity," Riley Jr. said. "Here's a chance to deploy some money into an area and help improve a community."

Sneider said that he has pushed for Freedom Plaza to create a lot more economic opportunities for residents, including local jobs, community input and stakeholder positions for longtime locals.

As part of the lease deal with tenants, he asked them to at least have 30% local hiring. He said as of July, 78% of all workers in that retail center are from the area, nearly half are categorized as disadvantaged, meaning they were either a single parent, homeless, receive public assistance or lack a high school diploma or GED. Sneider said Starbucks' and Nike's Freedom Plaza staffs are 100% local hires. 

Starbucks spokesman Jonathan Cruz said in an email to Bisnow that its Los Angeles Community Store in the Freedom Plaza "is part of our larger commitment to open 100 Community Stores by 2025, focused on providing economic opportunity in underserved rural and urban communities."

Sneider said these aren't just retail jobs; they are a way for workers to gain work experience and climb the corporate ladder. 

"This is the beginning of the repositioning of this whole area," Sneider said. "There's incredible talent, energy and labor capacity here but we haven't tapped into it."