By JENNIFER NETHERBY Staff Reporter Agoura Hills is emerging as a new development hot spot, as prime locations in Westlake Village and Calabasas become scarce. Of the three fast-growing Conejo Valley cities, Agoura Hills has been somewhat of a laggard. Westlake Village has benefited from Ventura County sprawl southward, and Calabasas has benefited from San Fernando Valley sprawl northward. But Agoura Hills, sandwiched in between Calabasas and Westlake Village, is just now catching fire. About half of the 700 acres of commercially zoned land in Agoura Hills has been developed so far. But the city now has another 1.8 million square feet of commercial projects in the pipeline. If and when all that space is built, only 15 percent to 20 percent of the city’s commercial land will remain undeveloped, said David Anderson, city planning and community services director. “There’s a strong attraction to the area,” Anderson said. “Agoura Hills is an area along the freeway corridor where property is undeveloped and highly visible, a rare commodity along the 101.” From a housing standpoint, Agoura Hills is a more-mature market. It was built out residentially in the 1980s and is now considering a slow-growth proposal that would stop further residential development on the city’s hillsides. But the city is aggressively marketing its commercially zoned land, located along a shallow strip paralleling the Ventura (101) Freeway corridor, to developers. And with freeway-adjacent land in scarce supply in other Conejo Valley cities, developers are receptive to the pitch. “The Agoura Hills market is seeing a lot of activity because it’s long overdue,” said Tony Principe, vice president of Westcord Commercial Real Estate Services of Westlake Village. “All the other cities are built out, or close to it.” Further encouraging the Agoura Hills development boom are the robust economy and office vacancy rates of between 3 percent and 5 percent, Principe said. At the current rate of growth, Agoura Hills could be almost totally built out within two years, Principe said. The 1.8 million square feet of commercial space currently in the city’s pipeline is more than twice the amount currently under development in Calabasas or Westlake Village. While Calabasas is seeing one of its busiest years, according to director of city planning and building services Mark Persico, only 400,000 square feet of office and industrial space is under construction in the city and another 210,000 square feet is set for approval. “We are very busy and I don’t see it slowing down,” Persico said. Unlike Agoura Hills, Calabasas has had steady development, with a couple hundred thousand square feet of space under construction almost consistently since the city incorporated in 1991. But the amount of undeveloped commercially zoned land, also concentrated along the Ventura Freeway corridor, is becoming scarce. “It’s probably going to end in three to four years,” Persico said. “The city is fairly built out in retail/industrial space.” Meanwhile, Westlake Village officials report a similar trend in their city, which has about 500,000 square feet of commercial space either under construction or in the planning stages, according to Robert Theobald, Westlake Village planning director. That’s considerably more than the 150,000 square feet or so that typically has been under development in previous years. “Since the mid-’90s, it’s been a fairly brisk pace for development,” said Theobald. “We anticipate within the next 10 years, we’ll reach build-out.” A plan adopted by Westlake Village in 1989 specifies that 1.4 million square feet of office and industrial space are to be developed on 130 open acres of city land. So far, 700,000 square feet of that has been developed. So Agoura Hills remains the city with the most available commercial land remaining in the Conejo Valley, primarily because of its location, not as close to L.A. as Calabasas and not as close to Ventura as Westlake Village. Also deterring developers from targeting Agoura Hills, until now, has been the city’s relatively small lot sizes, typically two to five acres, Anderson said. But with available land fading fast elsewhere, developers have been more willing to work with smaller lots or combine lots, sometimes buying out nearby businesses just to get the underlying land. In response, Agoura Hills’ commercial lease rates are slowly rising. With very little new space currently available in the city, top office space typically runs $1.65 to $1.85 a square foot, per month, Principe said. Once the new space is completed, Principe said, it will likely lease for as much as comparable class-A space in Calabasas and Thousand Oaks, $1.85 to $2.15 a square foot. But while commercial development is heating up in Agoura Hills, don’t expect it to look anything like Ventura Boulevard or Warner Center in the near future. Its commercial market consists primarily of suburban-style, pastel stucco buildings, rather than glass structures. Those buildings only shallowly line the Ventura Freeway corridor. And that’s unlikely to change, because of federal and state mountain reserves and growth-control proposals for the city’s hillsides. These are the very characteristics that Agoura Hills is using to market itself to potential developers. “A lot of what we’ve done is try to generate a higher-end image,” Anderson said. “The city is semi-rural, low-profile.”

By SCOTT BURNS Guess where you can get a better yield than a bank CD? (Sorry, “almost anywhere” is not an acceptable answer.) Old-fashioned, fixed-income, tax-deferred annuities. I learned this while looking through a recent monthly issue of the Fisher Annuity Index, a monthly publication of Dallas-based Fisher Publishing Co. Although the average annuity was barely competitive with a five-year Treasury a few years ago, the average now sports an attractive premium. Better still, with a little research you can expand the premium from attractive to compelling. Here are the numbers: In February, when the average five-year bank CD was yielding about 4.4 percent and a five-year Treasury was yielding just under 5 percent, the average tax-deferred annuity was yielding 5.64 percent. Either way, it’s a nice premium. Nor is it a fluke. It’s the average. About one-third of the 964 contracts tracked by Fisher Publishing offered rates between 5.64 and 7.07 percent. Some offered still higher rates. Curious, I put a recently arrived CD-ROM in my bag and went off to visit Danny Fisher. Dubbed “Mr. Annuity” more than 10 years ago when I first became familiar with his database and associated statistics, Fisher started publishing his data as it became clear that he had the largest and most complete database on fixed annuity products in the country. (Morningstar has a corresponding position in variable annuity data.) Agents and individual investors can buy a monthly print edition of his database for $25 (call 800-833-1450). Which brings me to the CD-ROM. You can now buy a single copy of his data on CD-ROM for $50 and use it to search and screen through nearly 900 annuities. Grounded in a run-time license for Microsoft Access, the program has a simple query language that allows you to do very specific searches. I found, for instance, that some 528 contracts offered yields greater than the 5.17 percent yield on a five-year Treasury note. Of those, 108 were CD-type annuities with limited early withdrawal penalties. And of those, only 28 had five-year terms, and only 17 had a rating of “A” or better from A.M. Best and Co. The highest yield among those 17 was a Transamerica annuity, with a yield of 6.6 percent on a minimum investment of $5,000. Does 6.6 percent sound puny to you? It’s not. It’s rare and worth the search. To put it in perspective, only 26 of more than 1,400 mutual funds that invest in corporate or government securities offer an SEC yield of 6.6 percent or better. None are tax-deferred, and most involve substantially greater risk. “They’re getting more aggressive,” Fisher said when I asked what had caused the yield improvement. “This isn’t creative genius. This is watching Sam Walton take a smaller spread on more dollars. We’re seeing more companies follow a trend toward higher-quality, consumer-oriented annuities. “There are some nice selections you can make if you watch what you are doing. There are five- to six-year rates out there that are 6 percent or higher, not over 7 percent, and the money is safe. There’s also a lot of flexibility about when you take the money, when you pay the taxes, etc.” Could he give me an example of flexibility? “Sure. Not long ago my mother wanted to do something with $11,000 she had in an IRA. We annuitized it over four years so she could make payments on a new car. The monthly check goes into her checking account automatically. And the monthly car payment is withdrawn automatically. That’s flexibility. You can’t do that with Treasury bonds or CDs.” The caveat here is that you can’t just go out and buy the annuity with the highest yield. Indeed, Fisher says that really high yields are usually fluky contracts with draconian penalties for early withdrawal. Basically, they are designed for salesmen, not consumers. His advice? Look for or ask for a simple contract with a surrender penalty that isn’t punitive. Questions and answers Question: We just moved from Japan to San Antonio within the last year. As this crazy stock market goes on and on, I’ve been thinking that we are falling further behind with each passing day. I got into the market in 1993 and chose my blue chips well. My portfolio has done wonderfully beyond any dreams and expectations. And yet I still have this sense that in relation to our peers, we are falling further behind. The number of new Silicon Valley companies continues to proliferate and, with them, the number of employees endowed with 401(k) plans and stock-option plans. So, too, the number of investors now equipped with a sense of derring-do and access to market information has resulted in a ballooning of day traders. My questions: What is happening to “slow and steady” small investors (like me) in real terms, and how should we factor in this new reality? A.B., San Antonio Answer: Let me suggest some easy reading: “The Tortoise and the Hare.” It may be a children’s story, but the moral applies to investors. Over a period of time, “slow and steady” will do just fine. Most day traders will trade themselves into oblivion. There is an old saying that “genius is a rising market.” A rising market underwrites a lot of mistakes and transaction costs. It also creates the illusion of great insight. The problem we all have is that winners in the stock-options game tend to be highly publicized. Where we once read about long-term employees at Wal-Mart becoming millionaires, we now read about short-term employees at Microsoft or Dell becoming millionaires. Still, the numbers are small compared to the number of people with jobs. To join the “option rich,” you can’t work in the public or nonprofit sectors; you can’t work at numberless proprietorships and small corporations; you can’t work at any of the really huge companies. Beyond that, you have to be at the right option-granting company at the right time. While the odds are a big improvement on any state lottery, winners in the stock-option lottery are still rare and uncertain. My advice: Set your goals and forget about the imagined competition. Syndicated columnist Scott Burns can be reached by fax at (214) 977-8776 or by e-mail at [email protected].

JENNIFER NETHERBY Staff Reporter When Valerie Red-Horse applied for minority-owned business status in 1984 for her advertising specialty business, it was a tough road. Being Native American meant that unlike other minorities, she had to prove her Cherokee heritage. Unfortunately, she grew up in Fresno and had no official tribal enrollment. To prove she is Cherokee, she needed her father’s birth certificate or some legal documentation. Problem was, her father, born in the 1890s on the reservation, had no birth certificate. “They said, ‘We can say you’re Hispanic,’ ” Red-Horse recalled. “If you’re Hispanic, Asian or African-American, you don’t have to prove your race. For Indians, we have to show proof.” Red-Horse was eventually able to prove her Cherokee ancestry and classify as a minority-owned business, a designation that can improve chances of contracts for government or corporate accounts. Fifteen years later, her company, Executive Specialties, has grown to $1.1 million in annual revenues and has become one of the top minority-owned businesses in the San Fernando Valley, according to the Business Journal’s list. “We’ve had a lot of success,” said Red-Horse, who now speaks to other Native Americans about entering the business world. “The number of Native American-owned businesses has grown, but we’re still way behind other ethnic groups.” Minority-owned businesses in the San Fernando Valley continued to see an increase in revenues in 1998, according to a sampling by the Business Journal. Simi Valley Pontiac GMC Buick topped this year’s list with $65.1 million in 1998 revenues. Valencia-based RAM Enterprises, a distributor of electronic connectors and connector contact accessories, came in at No. 2, posting $15.8 million in revenues. Richard Monstein, owner of RAM, started the company in 1985 after working for a decade in the electronic manufacturing business. He said he opened RAM because no other company was making electronic connector equipment in bulk for telecommunications and aerospace companies. With the growth in technology fields, the company has taken off, Monstein said. “It’s a very niche business,” he said, “but it’s growing.” RAM was awarded a quality assurance award from Lockheed Martin Corp. in March. To qualify as a minority-owned business, a minority person must have majority ownership. Businesses were rated on 1998 revenues. Computer Palace, a Glendale computer retailer, is No. 3 on the list, with $14.3 million in 1998 revenues. Rounding out the top five were No. 4-ranked Photo Max Film Supplies Co., a Glendale-based wholesale supplier of photographic materials which posted $9 million in revenues, and No. 5-ranked Trans-National Motor Cars Inc., a Burbank car dealership with $8.9 million in revenues. Businesses on this year’s list range from security companies to market research to computer sales. No. 9 on the list is Garcia Research Associates, posting $1.5 million in 1998 revenues. “We’re growing at a nice and steady pace,” said owner Carlos Garcia. He started the company in 1990, Garcia said, because he was tired of working for abusive bosses and wanted to create a pleasant place to work. He refinanced his home and gathered up money to start the Burbank firm, which specializes in researching the Latino market. In the last year, the company has seen a boom, part of which he attributes to corporate America’s growing interest in the Latino market. “They finally notice that Hispanics are over 11 percent of the population nationally and approaching 50 percent in L.A. County,” he said. “Hispanics spend $1 billion a day in disposable income.” Garcia started working in the research field in 1980 and has specialized in the Latino market since the very beginning. “I really do feel I’m helping the Hispanic consumer to get some respect,” he said. “This is what I love to do and so I’ve stuck with it.” Red-Horse’s business is No. 10 on the list. Her company specializes in corporate advertising on plastic objects, or lucites. “Anything you can put a logo on,” she said. She opened the business after working for a stockbroker, where her job was to find promotional items, have them emblazoned with a company logo and distribute them. “I always ran into problems,” Red-Horse said. “People said what we need is someone who specializes.” So Red-Horse decided to fill that niche herself, and Executive Specialties was born. In addition to running her business, Red-Horse speaks around the country to encourage Native American entrepreneurship. A film that Red-Horse wrote, produced, directed and starred in premiered at the 1998 Sundance Film Festival. The film, “Naturally Native,” is loosely based on her obstacles as a Native American businesswoman. It is scheduled to open in theaters this fall. “I like being an American Indian role model to other American Indians,” Red-Horse said.

By JASON BOOTH Staff Reporter Just as Angelenos were getting used to the arrival of the killer bee, they have another insect to worry about: the red imported fire ant. With a sting that can cause severe pain, swelling and in a few cases death, the red ant already has infested Orange County and is starting to gain a foothold in L.A. Among the hardest hit are plant nurseries, which face new restrictions on the transportation and handling of soil. Because the movement of potted plants can easily spread fire ants, nurseries are required to take measures (like setting traps and spraying soils with insecticides) to prevent infestation. They are not, however, receiving any financial aid to do so. “The state has given some money to the county to combat the ant,” said Russell Wojcik, plant protection manager at the 400-acre Monrovia Nursery in Azusa. “But none of that has trickled down to us.” A number of fire-ant colonies have been identified in Asuza, and portions of that San Gabriel Valley city have been quarantined. Individual colonies have been identified from Torrance to the Riverside County line. Wojcik said his company is spending tens of thousands of dollars on ant traps and pesticides to prevent infestation of its plants. It’s a price worth paying, he said, because if the nursery were to become infested, the bill for eradicating the pest would be in the hundreds of thousands of dollars. The construction industry also is being impacted. In Orange County, soil-transportation restrictions are making it difficult for construction crews to dispose of dirt that was excavated from construction sites. Delays also are being caused by the requirement that all earth-moving equipment be thoroughly cleaned before it is transported. Much like the killer bees that have also recently infested Los Angeles, the red ant is migrating into the United States from South America. It is estimated that $300 million in private and public money is already being spent each year in Texas to contain the ant. Orange Country Supervisor Todd Spitzer said it will take around $100 million over a five-year period to eradicate the red ant in Orange County. No comparable estimates are available for L.A. County, but a regional eradication effort is crucial, several sources agreed. “It’s going to take a concerted effort from everyone to control this pest,” said Cato Fiksdal, agricultural commissioner for the County of Los Angeles. “And it isn’t going to be done quickly.”

No Superscoopers Valley Industry and Commerce Association President Bonny Herman’s letter advocating that the state of California purchase numerous CL-415 Superscoopers (March 8) is well intended, but does not address the facts. The California Department of Forestry and the U.S. Forest Service have conducted extensive studies on effectiveness and efficiency of both fixed-wing aircraft and helicopters for fighting fires. Both agencies have reached the same conclusion: the Superscooper is not an appropriate aircraft for their needs and both agencies have repeatedly declined to purchase them. With a price tag of approximately $22 million each, Ms. Herman’s suggestion that taxpayers spend $220 million for aircraft that don’t meet the needs of our fire-fighting agencies lacks fiscal rationality. Ms. Herman further ignores the impact of purchasing these aircraft on the state budget and its ramifications on business owners and taxpayers. No fire-fighting agency in the United States, other than the County of Los Angeles Fire Department, uses the CL-415, and the county only uses them because an intensive lobbying effort saddled the department with a five-year contract. If federal and state fire-fighting experts don’t want the Superscooper, I think that should tell you something. JERRY DANIEL Board Member, Santa Monica Mountains Conservancy

NetZero Year Founded: 1998 Core Business: Provide advertiser-supported Internet service free to subscribers. Subscribers in October 1998: 0 Subscribers in March 1999: 660,000 Employees in October 1998: 15 Employees in March 1999: 70 Top Executive: Ronald Burr, CEO Goal: To top AOL in subscribers Driving Force: Free, simple to use service and growth of the Internet JENNIFER NETHERBY Staff Reporter Without spending any marketing money, Westlake Village-based NetZero has grown to 660,000 subscribers since the Internet service provider made its launch in October 1998 with 7,000 more joining each day. “It’s been a pretty phenomenal ride,” said founder and Chief Executive Ronald Burr. NetZero provides free Internet access. Subscribers download software over the Internet, fill out a 25-question profile from income range to gender, and get free e-mail and Internet access for the price of a constant running advertisement in the corner of the screen while they’re logged on. Advertisers pay for space, providing the company’s revenues. The company was the brainchild of Burr, Stacy Haitsuka, Harold MacKenzie and Marwan Zebian, all former engineers who were partners at Impact Software, an L.A.-based software development firm. “It seemed so obvious, we wondered why no one was doing it,” Burr said of the prospect of free Internet access. “Then we got paranoid about secrecy.” The quartet started NetZero in 1996 with the premise that the Internet was like a highway a free public space and ISPs were toll booths that charged customers for road space they didn’t own. “That kind of didn’t make sense,” Burr said. “We wanted to make it more like radio or TV.” They did market research. They studied other companies that had tried free access and tried to determine whether the business model could be financially successful. “We came back and everybody was like, ‘Oh my God, this is huge,’ ” Burr said. The partners wrote a business plan and by summer 1997, they began hunting for venture capital. They spent a year networking and making contacts and joined EC2, a University of Southern California business incubator. During that time they used resources from their other company, Impact Software, to develop the software used by NetZero. In July 1998, new-media incubator Idealab provided venture funding. Silicon Valley firms Draper Fisher Jurvetson and Foundation Capital soon followed. Last October NetZero was launched and by the end of the first month, 1,000 subscribers were signing on every day, according to Burr. Advertisers, the financial backbone of NetZero, were given discounts, but ad rates have steadily increased and the service is now supported by more than 60 national companies and brands, including Clinique, Netscape, eBay and NextCard Visa. While the company won’t release revenue information, Burr said sales have doubled every month over the last three months. Like most Internet companies, NetZero remains in the red; Burr says it will take at least 1 million subscribers before the company becomes profitable. The founders plan to take the company public by the end of the year. The idea of offering free Internet space has been tried before, though at least two companies have failed. San Jose-based Bigger.net went out of business in October after reaching just 18,000 users. Cincinnati-based Tritium Network attracted 100,000 users, but suspended access last year while searching for new investors. Burr said these companies didn’t succeed because they focused on regional markets and bought their own Internet servers. NetZero saves money by leasing server networks nationwide and is able to attract national advertisers, he said. NetZero’s founders boast that their company has become the first viable Internet advertising space. With most browsers or Internet sites, the demographics are fairly general, while NetZero allows advertisers to target people by region, income, gender and other specific categories. “They’re buying the user and not the site,” Burr said. “It’s more like direct marketing.” He says it’s better for users that way too, because they see ads that are more appealing to them. Kevin Wandryk, vice president of marketing and business development at AdKnowledge, a Palo Alto-based company that creates tools for marketers to manage Internet advertising, said NetZero’s business model has a good chance of succeeding, as Web-based advertising keeps growing. “The prospect of NetZero as a business concept is an interesting idea,” he said. “You get free magazines supported by advertising, we watch TV and listen to radio without paying. Absolutely, in my mind there is no reason we won’t see aspects of that on the Internet.” NetZero’s ability to succeed, however, will depend on how many subscribers it can attract. “It follows the adage that where the eyeballs go, advertising dollars follow,” Wandryk said. NetZero expects an even bigger gain in customers as it works to sign deals with modem and computer companies to bundle its service with new products. Up to now, the company’s name has been known by the public only via word of mouth and media reports. Analysts are keeping a hopeful, yet skeptical eye. Forrester Research, which tracks ISPs, predicted in February that NetZero and other products like it will likely be used as an entry point, but most consumers will move to paid, premium services. Services like NetZero offer only bare-bones amenities and aren’t as fast as paid services like America Online, Forrester researchers point out. When NetZero started, the goal of its founders was to reach 1 million subscribers in a year. At the rate it is growing, it will hit that mark by the end of May. The goal now is to top AOL in subscribers. “Our whole goal is the mass-consumer market,” Burr said. “We’re the only market that can challenge AOL. It’s taken others years to get to this stage.”

By JENNIFER NETHERBY Staff Reporter While debate at Burbank Airport has centered on passenger flight expansion, air cargo companies have been quietly increasing volume and even adding flights there. In 1998, Burbank saw a 10 percent jump in air cargo deliveries a 16 percent increase for Federal Express and 14 percent for UPS. The trend accelerated during January, when inbound air cargo jumped 43 percent over the like period a year ago. Federal Express, which had been operating only one daily flight at Burbank for outgoing cargo, added one permanent inbound cargo flight in December. The company started flights into Burbank 10 years ago as a way to avoid evening traffic and lengthen hours of delivering packages. “Federal Express sees Burbank as a critical area for hauling merchandise,” said Burbank Airport Authority spokesman Sean McCarthy. “We’re closer to downtown than LAX and there’s extra time to drop off packages.” The additional flight means an estimated $60,000 more in landing fees a year for the airport, McCarthy said. United Parcel Service has no plans to increase service. Still, the company saw a 30 percent jump in cargo volume in January. Deliveries to Burbank and other community airports have increased in part because fewer retailers are ordering products in bulk for their warehouses. Instead, they are turning to “just in time” deliveries that must be delivered faster, said UPS spokesman Bruce MacRae. Neither UPS nor Federal Express can expand too much in Burbank because of space constraints. They currently operate out of rented hangers and setup ramps at the airport.

By SHELLY GARCIA Staff Reporter When Dolby Laboratories Inc. won the competition to provide the audio portion of high-definition television, it may have looked like the war was over. But for the company’s Burbank offices, it was just beginning. HDTV is caught in a Catch-22 situation. With the cost of high-definition TV sets hovering around $5,000, public acceptance of HDTV has lagged, and broadcasters don’t want to invest the significant amount of money required for the digital format if it is not widely accepted. But until more broadcasters are creating programming in the digital format, it will be a tough sell convincing the public to buy into the HDTV phenomenon. “In any new technology, there’s a chicken-and-egg problem,” conceded David Gray, vice president at Dolby. Dolby has already become the national standard for HDTV sound equipment, which means that TV stations wanting to broadcast HDTV signals must use hardware built or licensed by Dolby. But broadcasters will also need special technology, especially software, to create and edit programs in the digital format and then distribute them to affiliate stations. Who provides those technologies is still up for grabs. That’s why the folks at Dolby’s Burbank offices are busy developing the software that helps broadcasters implement HDTV, and they have begun traveling across the world to demonstrate and hopefully sell the company’s technology. “It’s not a fevered pitch yet, but it’s starting,” said Gray. Right now about 20 percent of the efforts at Dolby’s Burbank offices are devoted to HDTV. But Gray projects that a year from now, that number will grow to 40 percent. The switch from analog to digital TV, which promises razor-sharp images and movie-theater-quality sound, is mandated by the Federal Communications Commission, but the rollout has been slow. So far, 42 stations nationwide have begun digital transmissions with very limited programming. Part of the problem is the cost of hardware for the home. Though prices have been coming down, many observers think it may take years before a large percentage of consumers embraces HDTV. “There are a lot of people who feel the average consumer doesn’t care (about HDTV),” Gray said. “Others think they don’t care until they see it. It’s safe to say we’re confident HDTV is going to fly.” Right now, most broadcasters are limiting their use of digital transmissions to movies, which are already formatted for the technology, and require the least amount of investment. “It exists and it’s there, and they (broadcasters) can purchase the rights and have everything they need to implement HD in all its glories,” said Gray. Creating programming for HDTV is a far more complex undertaking, but it can also mean substantial additional revenues for Dolby. Broadcasters have to manipulate just about every program they air, for such things as adding commercials, voiceovers or promotional messages or for editing, and because digital broadcasts contain much more data than do analog, the current technology can’t produce that programming cost effectively. Dolby is working on two systems to solve the problem, Dolby E and Metadata. At the same time, the company is hoping to help amortize the cost of its research and development by selling its systems for transmitting HDTV to overseas markets. Analysts say that when HDTV does take off, Dolby is in a very good position to profit. “Whatever flavor TV goes to, sound is going to be one of the key elements,” said Josh Bernoff, a principal analyst with Forrester Research Inc. in Cambridge, Mass. “No matter how digital TV rollout goes, far-improved sound is likely to be part of what’s created and delivered. (Dolby has) chosen a piece that’s likely to be successful.” Although most of the engineers working on Dolby E are based at the company’s San Francisco headquarters, the bulk of the development work for Metadata has fallen under the aegis of the Southern California office. So has the responsibility for promoting Dolby to overseas markets. “This office has done all the demos around the world for HDTV,” Gray said, including Argentina, Brazil, Thailand, Singapore, China and Western Europe. “The more countries that follow the U.S. standard, the better the market (for us).” The staff at Dolby’s Southern California office has more than doubled as a result. Five years ago, the company had 11 employees at its Southern California location, but today there are 26, with three more engineers slated to be added to the roster shortly. To accommodate the growth, Dolby has just acquired a $3.7 million building it plans to renovate in Burbank. The 20,000-square-foot facility will provide more than twice the space Dolby has currently. Dolby’s research and development in the field of digital technology has already paid off somewhat in the DVD market, where the company’s technology is also the industry standard for audio. “We’re fortunate in that we’ve succeeded in spreading out the initial development investment over a number of formats, and that’s been paid for,” said Gray. But that is not the case with the investment required to develop Dolby E and Metadata. “E is basically a newer R & D; development, and that development we clearly have not begun to scratch the surface (in recouping the investment),” Gray said. The privately held company doesn’t divulge information about the cost of its research and development efforts, and Gray points out that as a technology-based company, it is obliged to make big investments in research and development as a matter of course. Still, it behooves Dolby to find markets for its technology, and the company is gearing up to do that. Dolby has already begun meeting with executives at the networks as well as producers of content to help foster acceptance of its HDTV technology, and the company expects to step up the pace as the format gains greater acceptance. To truly establish HDTV with consumers, more content is necessary. “Our job is to make sure that happens, which involves marketing, sales and engineering wrapped into a big package,” Gray said.

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.”

By HOWARD FINE Staff Reporter The New Los Angeles Marketing Partnership, which for the last five years has been heavily promoting L.A., closed its doors last week, to be replaced by a smaller group now being organized. The group, tentatively dubbed The Alliance, is being jointly formed by the L.A. Area Chamber of Commerce, the L.A. Convention and Visitors Bureau, and L.A.’s Business Team in Mayor Richard Riordan’s office. “As NewLAMP has been winding down, these organizations came together and decided that the work needed to continue,” said Regina Birdsell, NewLAMP’s outgoing executive director. “While this new group will still be focusing on L.A.’s image, it will also have a lobbying component to address the concerns of small and mid-sized businesses.” So far, the Alliance has a budget of $250,000, a fraction of New LAMP’s annual $4 million budget. The group is scheduled to hold its first board meeting later this month, when it expects to choose an executive director, start seeking more funds from L.A.-area businesses, and begin laying out goals and strategies. Birdsell does not plan to be involved in the Alliance, at least not initially. Instead, she plans to take a three-month break and consider her options. Meanwhile, NewLAMP itself wrapped up its work with an advertising blitz on radio and in local print media. In late March, the group took out two full-page ads in the Los Angeles Times one to celebrate the Democrats’ decision to hold their 2000 national convention in L.A. and the other to let people know the group was disbanding. “We had some money left in our ad budget and we decided we wanted to let our investors know that we’re going away,” Birdsell said. As NewLAMP disbands, opinions are mixed on how well it has achieved its core mission: to boost the city’s image and let people know that L.A. is a good place to do business. “Overall, it may not have been a blockbuster, but it did make a difference,” said Tom Decker, chairman of the L.A. Area Chamber and executive vice president with Bank of America. “On the margin, we are better off now than we would have been without NewLAMP.” Few would dispute that when NewLAMP formed in early 1994, L.A.’s image was in desperate need of a boost. Pummeled by the 1992 riots, several fires, the 1994 Northridge earthquake and the deepest recession in 60 years, L.A. was so down on itself that Riordan and other city leaders decided to forego bidding to host the 1996 Democratic National Convention. NewLAMP then launched its image-boosting campaign with a series of radio and print ads, as well as the ubiquitous banners proclaiming L.A. as “The nation’s #1 manufacturer,” or “Home to the nation’s #1 port.” In addition, NewLAMP established a hotline for business assistance programs. “At a time when things looked pretty bleak, NewLAMP helped the business community feel good about the successes of the L.A. economy and businesses,” said Lynne Doll, executive vice president and partner of Rogers & Associates, a Los Angeles public relations firm. “That was important. At the time, L.A. was a prime target for other cities and counties to lure away businesses. If our businesses didn’t feel good about where they were, they would have been more likely to listen to those other cities.” But once the city’s image began improving, NewLAMP should have changed its focus, said Larry Kosmont, a local economic development consultant. “With the local economy on a roll, people feel pretty good about things. There has been little need over the last year or two for a campaign designed to make local people feel better,” he said. “What is needed is a focus on the future, telling people and corporations outside L.A. that this is where the action is and, if you are not here, you need to be here.” Birdsell said such a campaign would require tens of millions of dollars, involving ads in national publications and commercials on national television. “We looked at this strategy and found that we would need an annual budget of $20 million to $40 million, or about 10 times our budget,” she said. “We felt that, with our limited resources, it was much more effective to focus the message to local people, who could then convince other people or companies to come here.” Birdsell said that with a budget of only $250,000 to start with, the new Alliance is unlikely to do much advertising at all. “The advertising program will be taken over by the Business Team and the Convention and Visitors Bureau,” she said. “For now at least, most of their efforts will be focused on print ads.” The business assistance hotline, Birdsell said, will be transferred to the Los Angeles County Economic Development Corp. Much of the focus of the new Alliance, she said, will be on lobbying on behalf of small and mid-size businesses in the L.A. area at both the local and the state levels. While each of the Alliance’s member groups already have formal or informal lobbying arms, Birdsell said that on many issues the three groups should speak with one voice. Rogers & Associates’ Doll agreed. “There are still regulatory and legislative hurdles to businesses being able to operate competitively and successfully,” she said. “We need an effort like this Alliance to address those issues.”