2 p.m., Dec. 10
McGrory to Borrego's rescue?
Former city manager, other SD investors want to buy former Casa del Zorro, but face snags
A group of San Diego and outside investors is attempting to purchase Borrego Ranch Resort & Spa, formerly La Casa del Zorro, but is running into multiple snarls. The deal went into escrow and has fallen out, but the investors are still working on the purchase. "We are still interested but not under contract," says McGrory, who was San Diego city manager in the 1991-1997 period. Borrego Springs, which has experienced deep difficulties in recent years, desperately wants the deal to come together. "They [the potential owners] came in here, their backgrounds are perfect, they are the ones we want to have owning the casa," says Linda Haddock, who runs the local chamber of commerce.
In September, McGrory, who is now in the real estate business in La Jolla, was agent of service as CBJM LLC registered with the secretary of state. That entity wants to purchase the resort. Casey Brown, partner of BCL, Inc., and McGrory are among the top investors, according to documents, along with Jack Giacomini, chairman of San Diego's Hotel Managers Group. Some investors in CBJM had been sniffing around the property separately. "We have come together to form one purchase entity," says Giacomini. He knows of no other serious bidders that are familiar with the market. He says there are several clouds hanging over part of the deal. They will have to be cleaned up before title passes.
The seller would be LCDZ Investors LLC, an investor group out of Sherman Oaks that bought the resort from Copley Newspapers in late 2007 but closed it down in early 2010. It has always been stated that this group bought the property from Copley for $4.5 million. But I have come across an appraisal from 2008 indicating that the Sherman Oaks group actually paid only $2 million. Giacomini believes the number may have been $2.2 million and McGrory thinks it was between $2 million and $3 million. The sale was one of the early indications that Copley was unloading its newspaper empire, and the sale for less than $3 million suggests there was an urgency that was not widely known at that time. The appraisal report noted that the resort had "large negative cash flow" under Copley ownership.
Gregory Perlman, head of the LCDZ group, told me that the resort was losing $5 million a year under David Copley. "It was never operated for profit under the Copleys," says Brown, "although extremely well maintained." Perlman's group then used the resort as a tool for marketing the adjacent Rams Hill housing/golf course development, which has been through bankruptcy twice and is on the market once again, although having water problems. Brown would love to see the golf course back up and running for use of resort customers, if deals for both the resort and Rams Hill go through.
Another resort, Palm Canyon Resort, went into foreclosure recently, but is staying open during the process. It will be auctioned December 29. Giacomini says Borrego's nagging woes, such as Rams Hill and Palm Canyon, are not a deterrent. "We would like to restore the theme and character of the place," he says. Brown says the Internet makes the booking process more efficient. McGrory, Brown and Giacomini will not reveal the price the CBJM group is offering, but, says Giacomini, the offer "is nowhere near close" to what LCDZ was originally asking. The LCDZ investors may have put as much as $6 million to $10 million into the resort.
More like this:
- Borrego: Casa del Zorro coming back — Jan. 31, 2013
- Borrego: one resort for sale, two big properties in escrow — Jan. 14, 2013
- In Borrego, Prices Are Low, Anyway — May 30, 2012
- Borrego: Flipsville Seeks a Savior — June 29, 2011
- Copley's Former Casa del Zorro, Financially Troubled, for Sale Again — Aug. 25, 2009