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1987, when the retrofitting work began, until 1991, no portion of
the building’s first floor was rented by petitioner to a tenant.3
From mid-1987 through 1989, petitioner experienced a number
of unforeseen problems in his efforts to refurbish the building
and reopen the 5-4 Ballroom. Sometime in 1989, petitioner
exhausted the SBA loan funds and was forced to seek additional
financing. By the end of 1989, petitioners owed $231,992.67 on
the SBA loan and did not have the funds necessary to continue the
construction work.
In early 1990, petitioners applied for and received a
construction loan from South Coast Thrift & Loan Association (the
South Coast Thrift loan). To secure their repayment of the loan,
petitioners executed deeds of trust in favor of South Coast
Thrift on the 5401-9 S. Broadway property and on their home.
Based on representations made to petitioner by South Coast
Thrift, petitioner believed that South Coast Thrift would lend
him up to $850,000, an amount petitioner estimated would be
sufficient to (1) pay off the SBA loan, (2) complete the
refurbishing of the building, and (3) cover his initial operating
expenses in reopening the 5-4 Ballroom.
3From September 1980 through at least the end of 1993, the
second floor of the building (which had contained the former 5-4
Ballroom) was not used by petitioner in any business or rental
activity.
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Last modified: May 25, 2011