Montesoro, Borrego's upscale golf and homes venture, has not broken par
  • Montesoro, Borrego's upscale golf and homes venture, has not broken par
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For decades, financial carpetbaggers have pulled the wool over the eyes of the citizens of Borrego Springs, the unincorporated desert town of 2600 full-time residents in northeast San Diego County. Now Borregans hope that a financier closer to home, Encinitas’s Russell Geyser of Geyser Holdings, will clean up the scummy residue, including delinquent taxes, back homeowner association fees, and defaulted water bonds at the town’s gated housing development, Montesoro Golf & Social Club.

Montesoro “has had so many messes,” concedes Linda Haddock, executive director of the local chamber of commerce, who stands to gain personally from the cleanup attempt. But she understands why scarred residents are so skeptical.

Borrego “has had a real run of very bad luck or bad ownership with poor vision or strategy,” says San Diego hotelier Jack Giacomini, who has been looking at one property there. Borrego Springs lacks a nearby expressway for easy access. “Investors think it is too remote.” And it has been afflicted by speculators “trying to buy inexpensive land and sell expensive lots” — in short, fast-buck real estate flippers.

Beautiful golf course, no players

Beautiful golf course, no players

Late last month, Geyser Holdings, which has a portfolio of $400 million in real estate assets, closed escrow on the 3100-acre Montesoro for an undisclosed price. Beginning in the early 1980s, under the name Rams Hill, this was planned as an 800-home, largely upscale development with a championship golf course. But it was beset by one scandal after another, and much of the land went undeveloped.

Geyser is initially focusing on selling 140 finished lots at a discount of around 65 percent. The lot buyers will pay the back taxes and homeowner fees, but Geyser expects to absorb those costs, in effect, by slashing the prices. He says, “We may end up accepting offers much lower; prices may be discounted 75 to 80 percent. One way or another, the back taxes and [homeowner association] fees will be paid. I was picked to stave off the bondholders,” who could try to take over the place. Geyser has already cured bond delinquencies on some of the lots and is negotiating with the company representing the bondholders.

He expects that a Borrego resident will buy the golf course, now closed, along with other leisure amenities such as the clubhouse, tennis courts, and swimming pool. The purchase of the sports properties is “pretty much of a done deal,” although escrow has not closed, says Rick Vesci, who is spearheading the Montesoro sales effort. Another local resident is negotiating to buy the adjoining resort, formerly named Casa del Zorro. It is now shuttered. That purchase is “not a firm deal” now, says Vesci.

“Montesoro is a tough project” to sell, allows Vesci. He gave his pitch unsuccessfully to such developers as Del Webb, Shea Homes, and the Trump Organization. (The Donald sent one of his vice presidents.) Nobody was interested until Geyser stepped forward.

One reason may be the stench of past shenanigans. In the early 1980s, the Di Giorgio Corporation, then based in San Francisco, had grand plans for Rams Hill. But Di Giorgio had too much debt, along with other troubles, and sold out to San Jacinto Savings Association, a unit of Southmark, a Dallas conglomerate. That was disastrous. Southmark and affiliates were financed with junk debt from Michael Milken’s machine. Southmark purchased everything it could get its hands on through subsidiaries such as San Jacinto. Southmark did business with characters such as Charles Keating of Lincoln Savings & Loan and the late, notorious Morris Shenker, lawyer for mob-financed deals in Vegas — and also one who provided tainted money for San Diego’s growth. Southmark went bankrupt, and San Jacinto was seized by the federal government, which also charged a Southmark founder with racketeering and other sins.

Rams Hill was bought by Western United Life Assurance, which was placed under receivership by the state of Washington. The Borrego property filed for bankruptcy in 1994 and again in 2002. Then it went into receivership. In 2004, Sherman Oaks–based GH Capital and a group of its investors bought Rams Hill and, in 2007, the adjoining Casa del Zorro, which had been losing $5 million a year under the ownership of former San Diego newspaper publisher David Copley.

The swashbuckling investors made other purchases around Borrego Springs. They changed the name of Rams Hill to Montesoro and Casa del Zorro to Borrego Ranch Resort & Spa, paying $14.5 million for the two properties and plunking $25 million into them. In early 2010, at the height of the tourism season, the ranch and golf operation closed down, each losing more than $200,000 a month, and went on the market. So did other projects that the GH investors had pushed. People were laid off. Unemployment soared. Tempers flared. “We have been through it all,” sighs Katherine McHenry, who has lived with her husband at Rams Hill/Montesoro since 1986.

The bitterness escalated as one developer after another wouldn’t touch Montesoro or the ranch/resort. Then this spring, Geyser sprung on the scene. Initially, the homeowner association thought any new buyer would pick up delinquent dues — which are $250,568 on the properties Geyser purchased. Then the association was surprised to learn that payments were to be made incrementally as (and if) the lots sold. “[Geyser] says he will [pay the arrears], but we have no assurance,” says Blythe Cavanaugh, treasurer of the homeowner group. “I have seen owners come and go. I could not begin to predict what will happen.”

This summer, discounted build-ready lots will be offered to developers and Borrego Springs residents. Until the end of July, the Borrego Springs Chamber of Commerce gets 10 percent of sales. Haddock, the chamber’s manager, helps sell lots for Vesci, who doubles as the chamber’s treasurer. Some cock an eyebrow at that arrangement, but Haddock says she has a license and everything has been fully disclosed. “In small towns people wear a lot of hats,” says David Schaack, president of the Montesoro homeowner association.

Borrego is not a high-income town, and many people doubt that locals will line up to buy the Montesoro lots. Haddock thinks at these low prices, developers will. One long-range problem is that no homes can be built on undeveloped lots until a new fire station is built, says John Hardcastle, local fire chief. The ready-to-build lots don’t have that problem.

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Comments

surfdog June 29, 2011 @ 9:59 a.m.

Significant real estate bargains abound in overbuilt Las Vegas, Riverside County, Phoenix, Palm Springs. An associate of mine just paid over $3 million for an18 hole golf course in Palm Desert.

Borrego properties have no value and lenders won't touch it

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tomjohnston June 29, 2011 @ 10:09 a.m.

Would that be Palm Desert Country Club Golf Course?? That's the only one I know of in the area that might be available at that price. It fell into bankruptcy about two years ago.

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Don Bauder June 29, 2011 @ 12:10 p.m.

Don't ask me. I'm not in the market for a golf course. Best, Don Bauder

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Don Bauder June 29, 2011 @ 12:02 p.m.

True enough. There are all kinds of deeply discounted real estate assets in similar places that are near expressways. That is one explanation for the Montesoro homes being priced so cheaply. Best, Don Bauder

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Javajoe25 June 29, 2011 @ 12:17 p.m.

Great article, Don;

Can't say I am sympathetic to the situation investors and speculator find themselves in out there. I would prefer less development as I only go to Borrego for recreational hiking and camping trips, and it seems more development just brings more development. I'm glad the area is primarily surrounded by the Anza Borrego State Park, which will contain potential sprawl.

I think the mistake made in Borrego Springs is the developers thought people would be willing to make the long drive from a major freeway and be satisfied with golf, a spa, one grocery store, a few small gift shops, and occasional grapefruit stands on Christmas Circle. Compare that to Palm Springs and it is easy to see why property sales are a challenge, to say nothing of the association fees and back taxes. Unless you are a hiker, photographer, or just a naturalist with an appreciation for southwest flora and fauna, and cultural history, there's just no there there.

Incidentally, I just have to comment on that sentence you wrote,"Then this spring, Geyser sprung on the scene." I loved it. There are writers, and there are wordsmiths, and you Sir, are the later.

Keep up the great work. Always enjoy your column.

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Don Bauder June 29, 2011 @ 12:42 p.m.

Some people prefer to have a home in a remote location not near a freeway. But commercial interests, of course, want a nearby freeway. It's an eternal battle between quality of life and greed. Best, Don Bauder

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Twister June 29, 2011 @ 1:22 p.m.

There you are. That's the there that's there, and there never will be more than that there. So there!

Re: Javajoe25 12:17 p.m., Jun 29, 2011

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Don Bauder June 29, 2011 @ 1:50 p.m.

I can think of a number of towns and cities where there is no there there. The words were first applied to Oakland. Author was Gertrude Stein. Best, Don Bauder

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Twister June 29, 2011 @ 1:26 p.m.

It would be interesting to get the water bills for those golf courses. I'll bet that they use more than five million gallons of water PER ACRE, per year or more.

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Don Bauder June 29, 2011 @ 1:52 p.m.

Both Dorian Hargrove of the Reader and I have written on Borrego's water problems. Best, Don Bauder

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Twister June 29, 2011 @ 1:54 p.m.

Have either of you confirmed or refuted numbers in that neighborhood?

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Don Bauder June 29, 2011 @ 7:14 p.m.

I looked into how much water Montesoro used, but I don't remember if I put it in last year's column. And I don't remember whether Dorian touched on Montesoro's water use specifically. Best, Don Bauder

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Twister June 29, 2011 @ 9:14 p.m.

I'm not suggesting that y'all's reporting is flawed, only that the relevance of the amount of water poured onto golf courses is humungous and rarely considered. Most people simply cannot believe that such outrageous numbers are real, but they can be verified or refuted (and reported correctly) by getting meter records. If the meter(s) for the golf course are not separate, there are standard "indoor" usage numbers that can be subtracted from the total. Five million gallons per year per acre is about two million gpy/ac more than the maximum potential evapotranspiration would seem to "require," so that would be the amount "needed" to properly maintain the golf course. That's over 100 inches per year, or about 36 times the average annual rainfall (guessed at about three inches--which mostly evaporates). I haven't double-checked the records on any of this, but it should be in, if you will excuse the expression, the ball-park.

Water is the major limiting factor, and when the tap runs dry and the water prices go sky-high, what would the experts conclude in the realm of economics then? But then which economists ever consider such "minutiae?" I suspect they think it's irrelevant to their predictions or projections.

Any interns want a project?

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Don Bauder June 30, 2011 @ 8:13 a.m.

There is a website devoted to Borrego Springs water issues. You should be able to find it online. Local resident Dennis Dickinson is active in water matters. The electric and water bill for Montesoro is about $1 million a year. I had that in a 2010 column. Best, Don Bauder

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REMAN July 1, 2011 @ 10:59 a.m.

for every 100 cars going down the freeway, one gets lost and ends up in Borrego. The occupants fall in love with this place and call it home. It will never be a Palm Desert, Vegas or Scottsdale and that’s why the people love it, even with its “faults”!

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Don Bauder July 1, 2011 @ 11:53 a.m.

Precisely. As I said above, some people prefer a town that is NOT accessible by freeway. What happens when a resort community is accessible by freeway? Merchants, particularly restaurants, raise prices. Pretty soon everything is more expensive. Then rich Texans, New Yorkers and other scum come in and build homes that they occupy only a couple of weeks out of the year. The homes initially provide construction jobs and property taxes, but not sales taxes. All kinds of things go wrong. Developers consider Borrego's remoteness a disadvantage. If I were a resident, I would consider it an advantage. Best, Don Bauder

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Visduh July 1, 2011 @ 9:48 p.m.

It is too bad that Borrego could not keep such things as a good supermarket or the former Casa del Zorro afloat. Borrego is a nice, low-key place, and if the Casa had been operated properly could still be viable. There are at least three golf courses in Borrego and a couple of them seem to be fairly busy. But it will only be only about so busy and will only attract a limited number of visitors. Maybe the place ran for years on the strength of a persistent deficit at the Casa and at Ram's Hill (now Montesoro.) All of the local booster talk has ignored the water shortage that is going to persist. Pumping huge amounts of water from the aquifers to keep golf courses green and to irrigate grapefruit groves in the valley is not a sustainable strategy. Until they solve the water issue the place will languish.

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Don Bauder July 2, 2011 @ 7:36 p.m.

Exactly. Dorian Hargrove and I have written extensively on Borrego's water problem for the Reader. Yes, Casa del Zorro priced itself out of the market. Best, Don Bauder

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Twister July 1, 2011 @ 11:09 p.m.

The Borrego Valley is not likely to "solve" its water problems; imports will go elsewhere. As prices go up, the unsustainable golf-courses and those wonderful grapefruit groves will wither, whether or not we--or "they," like it. They will keep their heads in the sand until it's all gone.

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Don Bauder July 2, 2011 @ 7:38 p.m.

You may be right. Borrego could lose its fruit groves as well as golf courses. Best, Don Bauder

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Twister July 2, 2011 @ 10:25 p.m.

Don, I’m not hung up on the water issue alone nor am I all that concerned about the goof-courses and grape fruits; I simply believe that it’s a major elephant in the room. I am especially puzzled that it continues to be given little consideration when it's relevant.

Re: dbauder 8:13 a.m., Jun 30, 2011

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Don Bauder July 3, 2011 @ 7:03 a.m.

Borrego's water, golf course and fruit concerns certainly have not been given short shrift by the Reader. I did a major column last year and this year, and did a bunch of blog items while the old Rams Hill and Casa del Zorro were collapsing and being sold. Dorian Hargrove of the Reader staff has also done pieces on Borrego. That's a lot of coverage for a town of 2600. Best, Don Bauder

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Twister July 3, 2011 @ 3:16 p.m.

Don, it's not those specific items, but their place in the "equation" that have not, to my knowledge, been factored in by anybody in terms of numbers and analysis. I do remember reading an excellent piece you did some time ago, but have not read anything by Hargrove (Is there a lesson here somewhere for the web designers? Don't tell me to talk to them; I have looked high and low for a way to do so and have found nothing. The Reader website is designed primarily for administrative convenience, not, primarily, for the user.).

Moreover, I am interested in the generic issues much more than this particular case, but this case provides the kinds of extremes that illuminate the principles quite well. And, it is not the numbers themselves, but their proportion and relevance to the other factors that interest me. In other words, this tiny community could be a canary for the San Diego coal mine, not to mention broader and larger examples. The case is useful precisely because the issues are exaggerated.

In any case, it is your option, not your obligation, to follow the commenters' points. I'm not trying to make waves.

Re: dbauder 7:03 a.m., Jul 3, 2011

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Don Bauder July 3, 2011 @ 6:28 p.m.

Don't worry about making waves. That's what we are here for. The more waves the merrier. If you go to the Reader search box and put in bauder + borrego you will find the two columns and a number of blogs I did. If you put in hargrove + borrego you will find the work Dorian did. I agree that this community could be the canary in the coal mine. Best, Don Bauder

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Twister July 3, 2011 @ 10:54 p.m.

All levels of government, from HOA's and similar principalities, to the federal government, should post, in an easily-accessible form, a chart SEQUENCE, with numbers and reference to TRENDS, showing inputs and outputs over time, with links to supporting evidence. All technology should be FULLY integrated and PUBLIC, except for information that actually affects the security of the PEOPLE (not the corporate interests). This IS the 21'st century, not the 18th. We are not living under George III (gulp!) YET.

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Don Bauder July 4, 2011 @ 9:05 a.m.

Yes, but the principles of information freedom have taken steps backward in both the Bush II and Obama administrations, despite all the rhetoric. Best, Don Bauder

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Don Bauder July 5, 2011 @ 1:31 p.m.

Your call for open disclosure is right on target. But don't bet the house on it happening. Best, Don Bauder

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Twister July 5, 2011 @ 6:25 p.m.

If we keep letting them get away with it, it will get worse and worse--until it's all gone . . .

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Don Bauder July 6, 2011 @ 6:57 a.m.

I am all for disclosure, but it's no panacea. Lawyers are paid big bucks to bury the "disclosure" in legal Latin that is indecipherable. Ditto for accountants. Then the cozeners can claim that they "disclosed" their scam. Best, Don Bauder

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Twister July 7, 2011 @ 4:33 p.m.

Well, yeah. But ain't this revelation a disclosure itself?

So forearmed, is it not important to call them on it?

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Don Bauder July 8, 2011 @ 8:49 p.m.

Trouble is, not enough people understand this revelation. That's why contrived complexity is the essence of white collar crime. Best, Don Bauder

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Twister July 8, 2011 @ 10:52 p.m.

Thanks to you, Don, a lot more do. If they will only link their friends to your pieces. HEAR ME, all you fellow commenters? Then, when they link their friends and they link . . . Get it?

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Don Bauder July 9, 2011 @ 9:08 a.m.

I've spent much of my life exposing crooks. But, like the preacher who inveighs against adultery, I will never proselytize so many folks that I will work myself out of a job. Greed ye shall always have with ye. Best, Don Bauder

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valueinvestingisdead July 14, 2011 @ 1:04 p.m.

Wasn't Brandes involved in this at one time to race cars out there?

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Don Bauder July 14, 2011 @ 10:06 p.m.

Yes, an enormous home there was built for Brandes. Auto racing was part of the equation. I believe this may be the same deal in which the previous Borrego developers began building a track through government property and ran into trouble. It's in my 2010 Borrego article. Best, Don Bauder

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