December 2012

Complex receivership sale to conservation group tops $11 million

San Diego (Dec. 20, 2012) – After negotiating twists and turns not unlike the cross country ski trails along the Donner Summit, the Douglas Wilson Companies has completed the $11.25 million receivership sale of 3,240 acres of Sierra Nevada land rich in history and biodiversity to two conservancy groups.

On Dec. 20, the Truckee Donner Land Trust and The Trust for Public Land, working together as part of the Northern Sierra Partnership, acquired the property off Interstate 80 near Lake Tahoe in what Perry Norris of the Truckee Donner group called “arguably one of the most important conservation victories for the Sierra in a decade.”

Included in the sale are the Royal Gorge Cross Country Ski Resort with its 3,000-plus acres of trail systems and the Summit Station day lodge as well as the surrounding watershed area of Serene Lakes, the area around Lake Van Norden – also called Summit Valley – and 350 acres of pristine land in Negro Canyon.

The property’s lender, Armed Forces Bank, N.A., successor by merger to Bank Midwest, N.A., sought the appointment of a Receiver in 2011 after the partnership of Kirk Syme and Mark and Todd Foster defaulted on a $16.7 million loan. They had proposed the development of a 950-unit recreation-centered conservation community, including trailside cabins, condominiums, single family homesites, new ski areas and lodging, using sustainable and low-impact design in and around what is known as America’s largest cross country ski resort. Planning constraints related to availability of public services such as water, sewer and access, a concerted community effort to “Save Donner Summit” and the real estate crunch were too much for them to overcome.

But the Douglas Wilson Companies saw value in the distressed asset.

Because of its range of terrain, the resort is a draw for Nordic skiers and has been used as training and teaching ground by Olympians Keterina Hanusova Nash and her husband Marcus Nash, Glenn Jobe and Andrew Newell. It is also a popular training ground for European national teams, Norris noted.

In the warmer months, it attracts hikers and naturalists on the lookout for more than 500 species of plants, 100 bird and 115 butterfly species as well as dozens of mammals, including a beaver that moved in this year and 16 types of amphibians that have been identified there.

“In my 30 years in this business, this is one of the most challenging – and yet rewarding – transactions I’ve been involved with,” said Douglas P. Wilson, the named Receiver and chairman of San Diego-based Douglas Wilson Companies (DWC) whose firm has provided problem resolution on more than 1,000 properties from multi-family and office buildings to hotels and recreational properties including the Tamarack Resort in Idaho.  “We usually find a bump or two when we are named as Receiver, but this time we faced a backdrop of jumbled entities, comingled properties, water rights, dam safety and the challenge of keeping a ski resort operating.”

“Then there was the community’s sensitivity about the land,” he added. Donner Pass is known as the trail used by the first wagon train through the Sierra Nevada as well as the site of the first transcontinental railway and the first transcontinental telephone line. It is perhaps best known historically for the ill-fated Donner Party who became trapped during a legendary early Tahoe winter.

Petroglyphs and Native American grinding rocks and grinding slicks thousands of years old have been found there, said Bill Oudegeest, of the Donner Summit Historical Society. With its biodiversity and history, he added, “it is probably the jewel of the Northern Sierra.”

For that reason and more, Wilson said they knew the land trust groups wanted the property “and we knew they were the right buyer. … It just came down to the art of crafting a deal all parties can support.”

But the deal could never have come to fruition unless a seemingly endless number of hurdles could be cleared, Wilson said.

Immediate challenges

The first challenge once Wilson was named Receiver was doing the basic analysis and deciding whether to operate the resort or shut it down. The receivership estate also includes the historic Rainbow Lodge, a 33-room bed and breakfast that includes about 115 acres along the Yuba River.   During the first year, Wilson operated the resort and lodge with the existing staff while DWC began tackling other challenges.

“Out of the gate, we faced a deadline on whether to participate in the water district’s environmental impact report that would renew the license to access future water rights,” said Wilson.

It was not clear that Royal Gorge would be reimbursed for the $400,000 fee, but they knew if the property wasn’t included in the EIR it was unlikely there would be any water for future development. “In the end, the receivership estate simply didn’t have $400,000 to gamble on such a speculative prospect,” he said.

Later, the Receiver’s engineering consultants confirmed Wilson’s instinct.  The consultants reviewed the development plans and found that, although the zoning would permit up to 900 units to be built, developing the land was not economically feasible.

“The reality was that there were not enough services – water, sewer, fire or access – and there were the political implications,” Wilson said. Also on the services front, the local sewer district was forming an assessment district. Owners could opt in and preserve future rights to hookups. In that case, Wilson said, they opted in.

Unraveling details

Making the water decision was fairly simple compared to the sorting out the documentation. The Royal Gorge assets were comingled with other assets owned by the defaulting entities; documents and contracts were in the wrong names, and even agreements for the trails were not clear, Wilson said. “This was the first time we were faced with this range of complications.”

They had to segregate what he described as a “complex organizational chart,” figure out which entities held the liquor licenses that were essential to the day-to-day operations of the ski lodge, and take care of unpaid sales tax on other assets that were threatening the receivership license.

There were also nine separate license agreements with neighboring property owners regarding trail rights, most of which had not been documented and were out of date.

“An accurate map of where the trails went didn’t even exist,” Wilson said.

More about water

In the past year, Wilson’s team spent a lot of time with state officials sorting out a notice of violation about the safety of the dam on Lake Van Norden. The state contended the capacity and spillway height placed the dam within the state’s jurisdiction; the Receiver countered that the change in height was due to erosion below the structure.

“It is a 100-year-old dam that has been deconstructed a couple of times,” Wilson said. “We either had to get it out of the state’s jurisdiction or upgrade it to their safety standards.”

Due to its age, upgrading the dam was not feasible, so Wilson and his team began analyzing the various options to remove it from the state’s jurisdiction.  Meanwhile, they also completed annual repairs to the dam to alleviate any fear of failure. The buyers accepted the deficiency and agreed to make additional repairs in the coming year as well as resolve the jurisdiction issues, Wilson said. “The state gave us another year to work those issues out.”

Another complication arose when the State Water Resources Control Board said the Receiver did not have an application on file for water rights and was “illegally impounding, diverting and appropriating water,” he added.

Wilson’s team went to work, researching the history of the dam since its construction in 1900 and subsequent acquisition in 1910 by PG&E. Once they sorted that out, they learned that the utility had retained the water rights so there was no issue for Royal Gorge.

“The receivership estate owned the property and the water is just here,” they told the state. “It’s not used for anything. The remnant dam doesn’t divert any water – it just slows the rate of flow. … The state had a tough time getting their head around that.”

Satisfying result

John Slouber, a native of Auburn, Calif., taught Alpine skiing in France before returning to the U.S. and opening Royal Gorge in 1971. He pieced together the land over a period of decades and then sold the entire organization to the Foster-Syme group, which could explain why the documentation was so confusing to unravel, Wilson said.

Through it all, he added, it was important that all of the material information was uncovered and cleared up so that all of the details were “very transparent” to all parties, including the court which had to approve the sale.

Initially, the Royal Gorge, Negro Canyon and Rainbow Lodge properties were offered as a portfolio at $26 million by Douglas Wilson Companies’ brokerage division, which has recently sold the former Wyndham O’Hare, a 466-room hotel located in Rosemont, IL; Shadow Ranch, a 65-acre property located at Interstate 10 and Monroe St. in Indio, CA; and C.W. McGrath Quarries, two rock quarries totaling 86.57 acres in San Diego, CA.

“But we couldn’t find anyone who wanted it all,” Wilson said. “People were interested in pieces or there were the conservation groups. It quickly became clear that we were looking for two buyers and decided to sell the Royal Gorge property apart from the lodge.”  Rainbow Lodge is now being marketed separately.

As they proceeded with the sale transaction, Wilson allayed concerns about Royal Gorge’s future by negotiating an agreement with nearby Sugar Bowl to carry on the ski operations. Moving forward, Sugar Bowl operators and the land trust have worked out an exchange of the lodge and ski area for 271 acres of Sugar Bowl land in Van Norden Meadow that will keep Royal Gorge operating and protect “one of the most important subalpine meadows south of Tuolumne Meadows,” Norris said.

“History will reflect that this is one of the most impactful acquisitions in the region in terms of its size, location and history of the property,” said Wilson. “This is the right thing in terms of conserving this land for perpetuity.”

The sale was handled by Tom Olson and Alan Scott, who lead the Douglas Wilson Companies’ brokerage division.

Founded in 1989 and headquartered in San Diego, Douglas Wilson Companies is one of the largest firms of its kind, providing a wide range of specialized business and real estate services to law firms, state and federal courts, corporations, partnerships, pension funds, REITS, financial institutions and property owners nationwide. To date, the company has provided problem resolution services in over 1,000 matters involving assets valued in excess of $15 billion; DWC’s brokerage division has handled the sale of diverse assets with a combined value in excess of $3 billion.

 

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DWC Sells Rare San Diego County Quarries

by DWC Team on December 13, 2012

Douglas Wilson Companies (DWC) is pleased to announce that it exclusively listed and sold two San Diego County quarries for the C.W. McGrath family for an undisclosed sum. The McGrath family had owned and operated the quarries since the 1940s. The buyer was JJB Silverhawk, LP an entity closely related to Escondido-based Superior Ready Mix, LP.

The larger quarry was a “grandfathered” (no Conditional Use Permit required)  64.75-acre granite pit located on Jamacha Road in El Cajon, CA and owned by McGrath Jamacha Road, LLC.  The property will continue to be mined for crushed rock, rip rap, aggregate base and manufactured sand.  Extensive operating equipment including rolling stock and processing plants were included in the sale.

Granite Pit in El Cajon, CA

The smaller quarry was a “grandfathered” 21.82-acre sand mine located on Willow Road in Lakeside, CA and owned by McGrath Willow, LLC. The property will be mined for sand products.

Sand Mine in Lakeside, CA

The buyer plans to operate the quarries immediately, utilizing the materials from the mines in its concrete business and selling other aggregate products. The sale of the quarries comes at a time when there is strong demand for aggregate products and local production is steadily decreasing.

“Operational mines are complex entities with multiple moving parts,” stated Douglas Wilson, whose firm has sold a diverse range of large operating businesses nationwide. “These quarries had a number of components that required extensive knowledge of this specialty asset class – mineral reserves, heavy equipment, significant acreage, etc. – and DWC’s brokerage platform was uniquely qualified to market and successfully complete these transactions.”

DWC’s Brokerage team is led by Tom Olson and Alan Scott. Click here to view all current listings.

Villa Real Apartments Sold for $20.1 Million

by DWC Team on December 5, 2012

Douglas Wilson Companies (DWC) is pleased to announce the sale of Villa Real Apartments, a 163-unit community in Carlsbad, CA, to Beverly Hills-based Triumph Properties Group for $20.1 million.

The unique complex – 14 buildings located on 10.5 acres with more than 65 percent open space – was built in 1979 and has been owned by family members of the developer since its construction. Following a partnership dispute Douglas Wilson was engaged as the court-appointed Referee in October 2011, and later named Receiver of the property.

In this capacity, Douglas Wilson and his team interviewed and retained the onsite management team to handle day-to-day operations at the property, oversaw various capital improvements to the complex, worked closely with the listing brokers to identify a qualified buyer, and is now dissolving the partnership.

“Our firm has an excellent reputation for being an even-handed neutral party who understands how to oversee complex transactions,” stated Wilson, who has served as a court-appointed fiduciary in over 1,000 matters involving assets valued in excess of $15 billion nationwide. “Through diligent and responsive management, DWC’s team was able to maximize the value of this asset by mitigating issues that arose beyond the partnership dispute.”

DWC’s sale of Villa Real Apartments is the latest receivership sale in a year marked by high profile sales for the firm, including: the National Oceanic and Atmospheric Administration’s headquarters in Silver Spring, MD; Half Street in Washington, D.C.; Metrocenter Mall in Phoenix, AZ; the former Wyndham O’Hare in Rosemont, IL; and Glynn Place Mall in Brunswick, GA.