LOS ANGELES — It wasn’t an earthquake, but the swift departure of the Morse family last week from the California Mart has shaken up the West Coast fashion industry.
Inside and outside the trade center, built by the Morse family 30 years ago, people are wondering what went wrong and what lies ahead.
The Equitable Life Assurance Society of the United States, as reported, assumed complete ownership of the property last week, more than a year after the Morse partnership failed to make mortgage payments on $265 million in real estate loans.
The most common explanation is that the lingering California recession and plummeting real estate values, which put pressure on rents, combined to cause the Morse downfall.
Sidney Morse, who was managing partner for the family; his cousin Susan Morse-Lebow, a general partner, and his aunt Adele Morse-Platt, also a general partner, vacated their offices Aug. 30. David Morse, Morse-Platt’s son and a third general partner, continues to maintain space for his firm, which manages a trade mart in Singapore.
The Morses took with them busts and paintings of the late brothers Barney Morse — Sidney’s father — and Harvey Morse, onetime lingerie manufacturers who built the mart in 1964.
Sidney Morse has moved back to his home in Arizona and declined to discuss the situation.
The Mart’s 180 employees have been asked to reapply for their positions with the new owner, but their jobs do not appear to be immediately in jeopardy. Tino Argimon, senior vice president of Equitable Real Estate Investment Management Inc., asserted, “There is no restructuring or downsizing that automatically follows this process.”
Tenants at the 1.9 million-square-foot complex who were concerned that their rents might be raised have had their fears allayed for the time being, too.
“We are in the process of reviewing all leases and we’ll be working with our tenants in the next week to reaffirm those leases,” a Mart spokesman said.
Equitable’s Argimon said, “We have not contemplated the possibility of raising rents.”
Maurice “Corky” Newman, California Mart president and chief executive officer, declined to talk to reporters, but in a letter to tenants, he wrote, “Equitable wishes every tenant to know that it is its desire to continue your occupancy at California Mart.”
Many observers consider the state’s troubled economy, which brought higher vacancy rates and forced the Morses to lower rents, the major culprit in the Morse crash.
In 1992, responding to criticism from tenants about high costs, the Morses cut rents 23 percent, which significantly lowered the Mart’s income. Sources said this loss of income affected the Mart’s ability to make its mortgage payments.
Despite the 1992 rent rollback, many tenants complained that California Mart rents were still too high and prohibited many companies from leasing space.
Local designer Anne Cole said rates were especially steep for new firms, particularly the small designer companies that many retailers come to California to discover. Unlike New York, where showrooms are busy during the weeks between markets, Los Angeles showrooms are basically busy just several weeks a year during markets. Renting that space for 52 weeks doesn’t make sense to small resources, Cole pointed out.
“There were a lot of young designers who couldn’t afford to go in the Mart,” Cole said. “When a company that does less than $1 million can’t afford to show, you’ve got a problem.”
Some tenants, however, commended Sidney Morse for the rent rollback. Even Jeff Krinsky, co-director of the 110 East Ninth Street Tenant Association, praised the outgoing managing partner. The 400-member Mart tenant group has threatened to move out of the complex for several years now.
“We have never been compelled to act based on who owned the building,” Krinsky said. “Our association was very pleased with what Sid Morse did when he emerged from retirement. He addressed issues of rent and safety. He rolled up his sleeves and applied himself tenaciously.” Morse had retired briefly from the managing partner post in the early Nineties, when the Mart was managed by David Morse.
The tenant association’s nine board members meet regularly and are looking at several buildings on the west side of the city, Krinsky said.
“We obviously have concerns about who our new landlord is, but Equitable’s appointment of Corky Newman inspires our confidence. He clearly is experienced in this business,” added Krinsky, referring to Equitable’s approval of Newman when he was hired by the Mart in May.
Gene Zuckerman, an owner of a multiline showroom in the Mart, said that while he had no personal gripes about the Morses, part of the Mart’s problem has been having the same management for 30 years. While crediting the Morses with many accomplishments, he said it is difficult to create change when the same people run things.
“Other than being rocked by an earthquake, this building has been in need of a good shaking up,” Zuckerman said. “It had old roots that were too deep.”
Zuckerman said the Morse management was fine during the “glory days” of the Seventies, but the Eighties and Nineties needed a different approach. Even the addition of Newman was tempered by the fact that he was controlled by the Morses.