Restorer’s financial base needs a lift

To take a stroll through downtown Los Angeles is to take a three-dimensional tour of the portfolio of historic-restoration specialist CK Arts Inc.

You’ll pass the 1926 Central Library building, where the construction firm replaced 109 different styles of terra cotta tile. At the turquoise Eastern Columbia building, CK Arts cleaned and patched more than 4,000 glazed terra cotta tiles on the four-story clock tower atop the 1930s high-rise. At the Plaza House off Olvera Street, it is restoring the 1880s brick and granite.

Third Street and Broadway is home to three buildings that the growing firm helped to restore, including the 1893 Bradbury Building and the 1918 Million Dollar Theater building. Over the last decade, the subcontractor has worked on 30 to 40 commercial and public buildings in L.A.’s downtown alone.

“It’s a great feeling to be able to enjoy the fruits of your labor, but there is still a lot to do,” says Charles Kibby, a trained sculptor who started the company in 1998 after doing similar work in San Francisco.

He and co-owner and Chief Financial Officer Anthony Tucker are booking more business in recent years, including jobs now underway at the Museum of Art in San Diego’s Balboa Park and the San Bernardino County Courthouse.

Last year sales hit $2.45 million, down 2.2% from the previous year but up 72% from 2004.

Much of the growth has come from the recent boom in the restoration and re-use of vintage commercial buildings in downtown Los Angeles.

And sales are expected to climb further this year as contractors and property owners such as Stronghold Engineering Inc. of Riverside, Charles Pankow Builders Ltd. of Pasadena and AIMCO Capital, a unit of Denver-based Apartment Investment & Management Co., continue to tap the company’s masonry skills.

Kibby projects $7.5 million to $8 million in sales in 2008, at least triple last year’s level.

It’s the kind of success small-business owners dream of, but it comes with its own challenges.

“Business is fantastic, but growing has with it growing pains,” says Tucker, who joined and invested in the company in January 2006.

The pair, who have doubled their workforce this year to 52, have to cover the growing tab for expensive materials and labor costs upfront. They also sometimes have to wait a couple of months to be paid by customers.

CK Arts has financed its growth with a long-standing $50,000 line of credit from a major bank and additional short-term financing that uses their accounts receivables as collateral, a practice known as factoring.

Factoring can be convenient for a company that may not yet qualify for, or want, a standard commercial bank loan, but it is usually more expensive money to borrow.

They also have borrowed money from a wealthy individual who believes in the company’s mission.

Kibby, 57, and Tucker, 60, are looking for long-term financing to fund growth -- their business plan calls for annual sales of $15 million by 2012.

This year they started the process of applying for a Small Business Administration-guaranteed loan to help them buy their own building, which they hoped to use as collateral for working capital. They had to drop the deal when toxic waste from a former dry cleaner shop was discovered on the site.

Talks with two major banks also ended unsatisfactorily, not an atypical outcome for small businesses in the best of times but even more common in today’s credit crunch.

The company is moving ahead with its growth strategy. Next month, it plans to announce a name change to Preservation Arts Inc. to show that the business has grown beyond its sole founder.

By the end of the year, it will launch a redesigned and renamed website to replace the current www.ckarts.com.

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CK Arts

Business

The Los Angeles company specializes in historic preservation and restoration of terra cotta, brick, marble, glass, porcelain mosaic, plaster and wood.

Owners

Charles Kibby and Anthony Tucker

History

* Founded: 1998

* Start-up funds: $2,000 in personal savings.

Company snapshot

* 2007 revenue: $2.45 million

* Employees: 52

Challenge

To find long-term financing to fund fast-paced growth.

Goal

To become the contractor of choice in the field of historic preservation and adaptive re-use and to achieve annual revenue of $15 million in four years.