Black in the Red

Everyone expected Charles Howze's Z Mart to be a model for minority-run businesses in Dade. In a sad way it was: It went bankrupt.

The company invited Howze to transfer to Baltimore, but rather than uproot his wife and two kids and move again, Howze and two of his store managers, John Kilby and Joan Donaldson, joined forces to open their own store. To the partners, there was no question as to the site: Zayre, and later Ames, had maintained a store at 1100 NW 54th St. in Liberty City, and all three had worked as managers at that location. (Howze says the Liberty City Zayre was particularly successful, turning a profit of about one million dollars per year at its peak.) But when Ames pulled out, the neighborhood lost 100 jobs and for the first time in eleven years was without a large retail discount store.

Set on eight acres of parking next to a large indoor flea market, the new store was to provide a commercial and aesthetic boost to a shoddy corridor. Howze envisioned a thriving mall that in addition to Z Mart as an anchor tenant would include a grocery store and smaller retail shops.

Howze, Donaldson, and Kilby pooled about $500,000 in cash, deferred salaries, and property in order to raise collateral for a loan. (Howze, Z Mart's president, says his contribution was $300,000.) They agreed to forgo vacations and incomes until the store was up and running, which meant radical changes in lifestyles: Howze's wife, an accountant, returned to work after several years away. Kilby's son, at that time a 24-year-old assistant manager for Phar-Mor, became his family's sole source of income. "We worked every day for a year without a salary, six or seven days a week," recalls Donaldson. "I couldn't afford to do anything else A no going out."

For help in closing the deal, the three called on Roderick Petrey, a partner in the legal firm of Holland & Knight, who a decade earlier had helped form Tacolcy Economic Development Corporation in Liberty City. (Founded by Otis Pitts, who is now deputy assistant secretary of the U.S. Department of Housing and Urban Development, Tacolcy has won national praise for its efforts in housing and commercial revitalization.) Having leased the space on NW 54th Street, the group began approaching local financial institutions, hoping to raise sufficient capital to open for business by year's end.

But the reception wasn't particularly warm. "We'd get commitments, then the commitments would fall through," Howze remembers. "Then they'd renege on other commitments."

The partners pushed back their target date, first to February 1991, and later to May. Both dates had to be rescheduled. Finally, at the end of June, they signed a $1.38 million loan agreement with eight lenders, and hired 75 people, most of whom were Liberty City residents. "There was a sense of pride, being part of a startup operation like this," says Howze, contrasting the experience with his prior stints at Zayre and Ames. "It is a lot easier to feel part of an organization when it's all in one location. It creates a close-knit organization, more than if you're working for a corporation somewhere else."

Business realities soon superseded the communal optimism. In its first year, Z Mart pulled in about $3.5 million in sales, Howze says, well below the owners' original projection of $5.4 million. In July 1992 they sought additional funding from the City of Miami, which had provided $325,000 of the original loan. Howze scaled back the staff to 60 and reduced the retail space from 54,000 to 40,000 square feet. As sales continued to flag, the store subleased space to a hair salon, a pharmacy, and an insurance business in an effort to draw more customers. Z Mart also expanded its niche marketing, opening an African boutique and augmenting its selection of clothing and paraphernalia decorated with insignias of black colleges, sororities, and fraternities. (That same year, John Kilby left the business. While Kilby, now a store manager for Office Max, refused to comment for this story, Howze says his former partner was hard hit by Hurricane Andrew and left Z Mart to take care of personal matters.)

Sales continued to fall. Second-year revenues dropped to about $2.5 million, while third-year earnings hit $1.5 million. By the third anniversary, the staff had been cut back to twenty and the retail space to about 25,000 square feet. Howze's proposals to create a mall were rejected by the lenders and development groups he approached. This past June, Donaldson, too, left the company because, she says, "We couldn't afford to have both of us on salary." (She is now a store manager for Marshall's.) Finally, on November 15, Z Mart filed for reorganization under Chapter 11, citing debts of $1.9 million and assets of $135,499.

The news shook the black business community. Under the headline "Z Mart failure is ours too," the Miami Times published an editorial lamenting "the painful process" of the store's existence. "This Christmas season, as for any other, our community will be spending millions of dollars. Z Mart should get some of those dollars," the editorial urged. "Mr. Howze and Z Mart should be given every support. For the failure of Z Mart will be the failure of all of us black people in Miami."

Howze and his creditors sift through the remains of Z Mart, there emerges a primary -- and unsurprising -- reason for the failure: The store never had enough money. Howze points out that it took nine months longer than he had anticipated to finalize a loan, during which time he paid rent and utilities on an empty space.

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