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Saturday, Dec 9, 2023


By JASON BOOTH Staff Reporter DD Western Wear has survived in Pacoima for 35 years. Its owners, Abel and Ben Diaz, have steered the store through two major earthquakes, the riots and various robberies. But DD might not survive doing business with the Los Angeles Community Development Bank. Just a year after receiving a $420,000 loan from the LACDB to refinance its mortgage and renovate its property, the company, which sells Western fashion and equestrian products, is more than $26,000 behind in its payments and faces foreclosure. The problem is symptomatic of the difficulties faced when financially at-risk small businesses seek help from community lenders that might be flush with cash but also are heavy on bureaucracy and red tape. “It shows that a deal like this requires a lot of hand holding,” said Roberto Barragan, vice president of business lending at the Valley Economic Development Center. “The borrowers have to be more patient and the lenders need to be more diligent.” The soured deal is also typical of the problems with loan quality that have beset the LACDB since its inception in 1995. Concerned by the slow pace of lending by the Community Development Bank and the relatively high level of problems involving its loans, the Los Angeles City Council in February requested a full report on the bank’s operation. It showed that nearly 60 percent of the portfolio consisted of problem loans where borrowers are either behind in payments, have bounced checks or have cash-flow problems. That’s not surprising given that other banks must turn down borrowers before the LACDB, which is backed by federal funding, can approve a loan. “Any time a borrower fails, the bank has to accept responsibility for part of the problem,” said state Sen. Richard Alarcon, whose district includes Pacoima and who initially referred the Diaz brothers to the LACDB for the loan. According to the brothers, the LACDB has dragged its feet ever since they first approached the bank in the spring of 1997 in search of mortgage refinancing. They point out that whereas the bank gave initial approval of the loan in May 1997, the deal was not closed until February 1998. They say the delay, together with paperwork associated with securing the loan, resulted in DD Western Wear incurring so many added expenses that it hobbled the company’s ability to eventually make its loan payments, resulting in the threat of foreclosure. “I thought the LACDB was there to help small businesses, not put them out of business,” said Abel, a stocky man who wears chaps and work gloves as he delivers horse feed to his customers. Robert Kemp, president of the LACDB, tells a different story. He describes how the bank came to the aid of a troubled company, agreeing to refinance its mortgage and help the brothers secure a reconstruction loan from another institution. But while the bank was there to help, Kemp says, the Diaz brothers were not entirely forthcoming about the depth of their financial difficulties. In particular, he says they failed to disclose that they owed $22,000 to Glendale Federal Bank. “Lenders such as us try to accommodate borrowers that are less sophisticated in their accounting practices,” Kemp says. “Sometimes we take a chance based on the assumption that the borrower is giving us full disclosures.” The Diaz brothers say they did disclose the loan, which they were forced to get to make ends meet while waiting for the LACDB to process their loan. Founded in 1964, DD Western Wear is an old company by Los Angeles standards. When it opened, much of the north San Fernando Valley was made up of open fields. Today, the business is nestled between a gas station and an exit of the Simi Valley (118) Freeway. Over the years, the Diaz brothers estimate that they have employed more than 120 local youths from the neighborhood, giving them their first taste of business in an area sorely lacking work opportunities. That’s why the LACDB and other agencies have taken an interest in preserving the company. “DD is a good business that is looking to grow,” said Barragan. “It is now a matter of working together and making a fresh start for these people.” In recent years, however, the Diaz brothers acknowledge that times have been rough. The earthquake of 1994 and a subsequent robbery cost the brothers $20,000 in uninsured losses. In the longer term, the closure of the GM Plant in Van Nuys and the Lockheed plant in Burbank, as well as the continuing move of horse-owning customers to outlying communities like the Santa Clarita Valley, have cut into their business. It was under these circumstances that the brothers turned to the LACDB, looking to refinance their mortgage and secure cash for redevelopment of their property. The plan was to subdivide the property and rent half of it to a third party. The cash flow from that rental would be used to pay down the LACDB loan. According to Able Diaz, the delay by the LACDB in processing their loan and the $22,000 Glendale Federal debt have made it impossible for him to finish the construction associated with the subdivision and thus pay down the loan. “The question is to what extent the exacerbation of the process added to the failings of the company,” said Alarcon. Despite the recriminations, the LACDB still looks ready to horse trade with the Diaz brothers. While the bank has initiated foreclosure procedures, Kemp pointed out that the company still has a four-month window before the bank seizes its assets. And according to Kemp, the LACDB is in no hurry to turn the brothers out. “If they agree to make partial payments based on their ability to pay and they stick to that agreement, we will work with them,” Kemp said. “We are more interested in sustaining the jobs over there than getting our money back.”

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