Displacement-Fighting Group in L.A.’s Little Tokyo Helps Small Businesses Own Their Real Estate

One of only three historic Japantowns left in the country, L.A.’s Little Tokyo is facing a sweeping wave of gentrification. In response, a consortium of local CDFIs have joined forces to help local small businesses put down roots.

The Los Angeles Little Tokyo neighborhood (Photo by dany13 / CC BY 2.0)

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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 displacement by another name, is sweeping over communities and neighborhoods from coast to coast with the inexorable force of a hurricane.

Downtown L.A.’s Little Tokyo, one of the most historic communities in America that was once home to upwards of 30,000 Japanese residents, is all too familiar with displacement —its former residents were banished to concentration camps during World War II.

“Little Tokyo has gone through a lot of displacement; it’s probably the most common theme in its history,” says Takao Suzuki, director of community development for Little Tokyo Services Center, a CDFI based in East Los Angeles.

Little Tokyo Service Center Director of Community Development Takao Suzuki (Photo courtesy of LTSC)

Suzuki has been the director of Little Tokyo for more than 10 years and has experienced the many changes, good and bad, that have rippled through this historic neighborhood. But he and other community activists are taking a stand against the current tidal wave of change: gentrification. In 2019, Little Tokyo Services Center joined forces 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 buy commercial real estate on the open market in communities facing the most gentrification and to rent or lease out those spaces to local entrepreneurs and nonprofits at mostly below-market rates. Backed by lending from Genesis LA, CORE has secured $5.5 million in loans to buy five buildings, with a total square footage of 26,000. Other community activists and CDFIs are also fighting gentrification by buying up buildings, but CORE is focusing on commercial buildings with a bit of a twist: The long-term aim is to turn tenants into owners of the spaces they’re now renting or leasing.

Inclusive Action for the City Director Rudy Espinoza (Photo courtesy of Inclusive Action for the City)

Rudy Espinoza, executive director of Inclusive Action, a CDFI that focuses on providing loans to small entrepreneurs, noticed that two years ago there was a “lot of activism around gentrification in LA.” Espinoza, who has a master’s degree in urban planning, also realized that small businesses are especially vulnerable 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 provides a foothold to stability.” Indeed, trying to beat back gentrification might seem like a “finger-in-the-dike” campaign, but CORE hopes its strategy of empowerment will encourage similar efforts across the country.

“All three of us really believe in empowering the community and in true community engagement,” Suzuki says. “One of the values we hold dearly is community control. CORE is one example of exemplifying that value.”

But in touting the promise of their efforts, the community activists also acknowledge o challenges — and there are many. Firstly, CORE is hustling to find funding to pay down the $5.5 million loan. Secondly, to bid on properties in a very competitive LA market. Thirdly, trying to find tenants for some of their buildings has been daunting. With so many people working from home in the pandemic era, brick-and-mortar retailing can be a hard sell. While CORE’s buildings are 70% leased, the owners are finding it difficult to get tenants for its latest building, a three-story facility.

In addition, the activists allow that some of the buildings they buy are in need of repair, and the rehabilitation of its latest acquisition has put CORE $150,000 over budget. But they’re confident the rehabilitation will be finished by in a few months.

“The cost of construction has gone up considerably due to supply chain (issues) and inflation,” Suzuki says. “We’ll find a way to finish the project, but the pandemic was an unforeseen challenge.”

In addition, Covid-19 delayed permitting of the building and even cost the group a restaurant tenant who closed due to lack of business.

Tom De Simone, president and chief executive officer for Genesis, notes that providing loans for these projects come with more risks, in part because many of the tenants were “non-credit tenants,” suggesting they lack traditional credit credentials and scores.

Genesis had to be creative in financing, allows De Simone, cobbling together money from foundations, loans and the New Market Tax Credit Program. This federal program generates $8 of private investments for every $1 of federal funding. The $5.5 million loan Genesis provided CORE carries a fixed 5%.

Despite the challenges, De Simone says he’s pleased with the progress and he and the others expect to continue the program, guided by new-found lessons on managing commercial properties. From now on, De Simone says they will likely hire a dedicated project manager. CDFIs, after all, aren’t typically in the business of managing commercial real estate.

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

The 34-year-old native of Mexico built her plant store, Latinx with Plants, from pop-up shops to now renting two spaces in buildings owned by CORE.

“If it weren’t for them, I wouldn’t have been able to get these spaces,” she says, noting that she’s especially excited about the prospect of eventually owning the spaces.

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

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This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses 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.

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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 has contributed to publications including the Wall Street Journal, The New York Times and Essence magazine. He focuses on the intersection of business, economic equity and racial justice.

Tags: los angelesgentrificationcdfi futures

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