County transit officials are lending $1.3 million to a prominent Wilshire district developer despite a bank's refusal to issue the loans because of the borrower's weak collateral, records and interviews show.
The loans are being issued by the Metropolitan Transportation Authority to two investment groups managed and partially owned by Wayne Ratkovich, proprietor of the Wiltern Theatre and an adjacent complex of office and retail space.
A bank had previously rejected the loans to Ratkovich, which were to carry below-market interest rates and other favorable repayment terms. The loans would have been the first under a new MTA program designed to help businesses harmed by expansion of the Red Line subway.
After Ratkovich threatened to sue the MTA over the rejection, transit commissioners approved separate loans of $1 million and $300,000 to his partnerships two weeks ago at a meeting that was closed to the public.
The $300,000 loan is not secured by any asset. Records show that the $1-million loan is secured by the Ratkovich-managed Wiltern Theatre and adjoining offices and shops already pledged as collateral for two private loans totaling $15 million.
Officials said Monday that the MTA only recently began an appraisal of the real estate that secures the $1-million loan, which is expected to be issued within days.
The chairman of the MTA defended the loans, saying county lawyers had warned that Ratkovich had strong grounds for a lawsuit because the commission's staff had delayed establishing a loan program.
"This was a special circumstance," said Chairman Richard Alatorre, a Los Angeles city councilman.
Lawyers for the MTA, however, did not obtain a pledge from Ratkovich not to sue, agency spokeswoman Stephanie Brady confirmed.
Under the program, the MTA would guarantee loans administered by commercial banks. East-West Federal Bank, which is administering the program, rejected the applications from Ratkovich after reviewing the property's existing loan encumbrances and the diminished cash flow of the Wiltern complex.
An executive of the San Marino-based bank informed the MTA's treasury department of the rejection in a letter June 11--five days before transit commissioners voted to lend public funds directly to the Ratkovich partnerships.
Bank Vice President Derald D. Borup also noted that no appraisal had been performed on the real estate offered as collateral. He wrote that "any appraiser would be hard-pressed" to reach an asset value that would justify an additional $1-million loan.
