From the Portland Tribune
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Merchants at 50th and Division try to ride out this recession
By Jim Redden
The Portland Tribune, Jul 30, 2009, Updated Aug 3, 2009
During the 28 years he has spent at the Oregon Transmission Center, Mike Regan has seen many nearby businesses come and go.
“Change has been pretty constant around here,” said Regan, co-owner of the one-story repair shop at 4851 S.E. Division St. “When I first started working here, there was a Franz Bakery and Rexall Drug Store across the street. Now we’ve got used clothing stores and a French restaurant.”
Many of the changes occurred within the past few years. When the economy was booming, some of the older buildings were remodeled and a burned-out house was replaced with offices. New businesses seemed to be opening all the time, including restaurants, bicycle repair shops and a hip home furnishings store.
“The changes have been good. There have been a lot more shoppers in the neighborhood recently,” said Regan, who watches the street scene through his office’s large front window.
But now the boom is on the verge of bust. Few new businesses opened this year. Some have closed, including the home furnishings store. A building housing the Bete-Lukas Ethiopian Restaurant is in foreclosure. A 28-unit condominium project has been put on hold.
Work has also dropped off at the transmission shop. Although new car sales may be down, many people cannot afford to keep their older cars on the road, either.
“If you don’t have a job, you can’t afford to fix your car,” Regan said.
Regan has not yet been forced to lay off any of his six employees, however. He has always been cost conscious, even burning used transmission fluid in the winter to heat the shop. Some recent jobs have been done at cost — just to keep everyone working.
“We’re doing OK,” Regan said. “Not as good as a few years ago, but not bad.”
Hunkering down, holding on.
Other business owners near the intersection of Southeast 50th and Division tell similar stories. They are trying to ride out the recession by cutting costs and expectations — adjustments they hope will allow them to survive until the economy improves.
A good example is the Blue Pig Café at 5026 S.E. Division St. It opened in May 2008 in a space formerly occupied by Gramma Lucy’s, an old-fashioned diner. Owners Jay Azevedo and Mike Garofallo knew the recession was well under way when they moved in. They hedged their bets by keeping remodeling costs down and planning what they consider an affordable menu.
“We knew it was risky, but this is our time to work for ourselves,” said Garofallo, who said he and Azevedo have more than 38 years of combined experience in the local restaurant scene, including catering gigs.
The two men put around $75,000 into the new restaurant, including remodeling costs. They recycled the existing booths and repainted the walls themselves to save money. They also decided to live with the existing kitchen, even though they hope eventually to expand it.
“We’d like to upgrade the kitchen, but that’s so expensive we’re putting it off for now. We’re making due with it,” said Garofallo.
As part of their cost saving strategy, Azevedo and Garofallo decided to serve only breakfast and lunch. Dinner is more expensive to prepare and serve, they said.
“The ingredients are more expensive and more expertise is required, so you have to charge more for dinners, which makes them harder to sell in this economy,” Azevedo said. “By only serving breakfasts and lunches, we’re also able to spend evenings with our families.”
As a result of their planning, the Blue Pig Café is more than a year old — an anniversary that many new restaurants never see. But Azevedo and Garofallo admit that they have made sacrifices to get this far.
“We have six employees now and could use at least two or three more people, but we’re not hiring,” Azevedo said. “We’re the first ones in, the last ones out and we usually end up doing the dishes. There have been months when we haven’t paid ourselves.”
Some stores go under
One business that didn’t make it was Ease, the former home furnishings store at 4823 S.E. Division St. Part art gallery, part furniture store, it sold goods produced by 42 local artists and craftspeople. When Elizabeth Daniels opened the store in June 2008, she said the neighborhood response was fantastic.
“We tripled our expectations in the first month. The neighborhood was so supportive. People said they were really happy to see us there,” said Daniels, who financed the store with $30,000 of her own money and a $15,000 micro-loan from Mercy Corps Northwest.
But business began to slow down last August and almost completely died after Christmas. Daniels hung on as long as possible, but was finally forced to close her doors a little more than one year after they first opened.
“Business dropped 75 percent in one year. People would come in for something to do, but they wouldn’t buy anything, not even for $10. Their wallets just snapped shut,” she said.
Daniels now is working with her former vendors to relaunch the company online. She still misses working in the neighborhood, however.
“I grew up around there and was so happy to be able to go back to the neighborhood and try to make something happen there. I still think it’s going to take off, but not with me,” she said.
Diverse business district
According to Regan, one thing that has not changed over the years is the wide range of businesses near 50th and Division. Unlike trendy districts such as Northwest 23rd Avenue or Southeast Hawthorne Boulevard, the businesses in the Division neighborhood aren’t as concentrated in the retail and restaurant field. Although some clothing stores and eateries can be found near the intersection, it is also home to a number of small industrial companies.
For example, the Oregon Transmission Center is part of a cluster of petroleum-related businesses on the northwest corner of the intersection. They include a home-heating oil distribution center owned by StarOilCo and Universal Applicators Inc. — a business at 2357 S.E. 50th Ave. that specializes in cleaning up leaking underground petroleum storage tanks.
At first glance, the cratering of the residential real estate market would seem to spell trouble for Universal Applicators. Co-owner Greg Babcock said most of the company’s work takes place when homes sell. A lot of older Portland homes have underground home-heating oil tanks, even if the heating system has been converted to natural gas. Because of the well-documented environmental hazards caused when these tanks break down, a lot of potential owners want them inspected, replaced or removed.
But Babcock says work has not dropped off as much as expected. It turns out that foreclosure sales generate the same demands from potential buyers.
“Work is down, but not down by a lot. Jobs come up at transactions and transactions are still happening, just differently. Conventional sales are down but bank acquisitions are up,” Babcock said.
New jobs are also beginning to come in because of a change in Oregon Department of Environmental Quality regulations. The DEQ regulates leaking underground petroleum storage tanks and recently lowered the amount of allowable pollution from leaks. This means that some tanks that would have previously been allowed to stay in the ground now must be removed.
“There are starting to be more physical cleanups than in the past and that work is just starting to increase,” Babcock said.
As a result, the company has not yet been forced to lay off any of its 13 employees. But Babcock and the other owners are careful to hold down costs. When one of their two excavators was stolen last year, they didn’t replace it.
“We rent equipment if we need it,” Babcock said.
Even thrift business is hurting
The intersection is also home to a social service agency, although it does not look like one. Bearly Worn, a large thrift store at 4926 S.E. Division St., is actually a nonprofit organization that provides free clothes and job training to at-risk youth. Despite the growing need for such services, it is in danger of closing.
“Sales are way off. People are so broke they cannot even afford used clothes,” said Lea Lakeside-Scott, the organization’s director.
According to Lakeside-Scott, the store’s overhead is around $26,000 a month, counting rent, salaries and utilities. But it only generated enough money in June to pay half the rent on July 1 and owes around $10,000 in back utility payments. Unless things pick up, the store may be forced to close in the near future, she said.
The financial problems run counter to recent news stories that say sales at thrift stores are up because of the recession. Lakeshore-Scott says sales may be up at resellers that screen their clothes, but not at thrift stores, like hers, that do not follow trends or specialize in used designer labels.
“We keep reading in the news that business at thrift stores is up, but that’s not true,” she said. “Our customers can’t even afford food and rent.”
New restaurant thrives in difficult times
Betre “Peter” Tesfu says the recession has been kind to him.
He opened Bete-Lukas Ethiopian Restaurant on 50th Avenue just south of Division a year ago, as the world financial system was tottering.
But neighbors in the area still like to go out to eat, Tesfu says, and they’re finding his modest prices and white-tablecloth ambiance make for an affordable date.
