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Why Warner Springs Ranch is in hot water

Pala Indians willing to buy property

The most attractive asset of the Warner Springs Ranch is the spring-fed, hot mineral water pool. So maybe it’s fitting that through the years, this backcountry ranch has been in financial hot water. After opening in the early 1980s as a facility to be owned by 2000 tenants-in-common, rather like a country club, the ranch suffered through a succession of business failures by early developers. Now there is a bitter battle among the 1000 owners who plunk a slug of money down, plus annual fees and assessments, and extra for lodging and food. (Warner never got to the planned 2000 owners.)

With annual fees and special assessments spiraling upward, an apparent solid majority wants to see Warner Springs sold so the individuals can recover their original investment, or part of it. Most in this faction live a long distance from Warner; some haven’t visited it in years. But another group — many living near the ranch — just as adamantly want a resort timeshare company to take over the place so their own leisure lifestyle can continue as usual. Those wanting a sale claim that the board of directors is biased toward the resort timeshare concept. They are attempting to have the board removed — something they failed to accomplish in 2006.

Hostile emails are flying back and forth. “I don’t like going up there. It’s so acrimonious,” says one of the San Diego owners, Greg S. Maizlish. “Owner, schmowner,” he says, stressing that he is only expressing his own opinion. “The owner designation means nothing because the ranch is controlled by a small group” that he calls “the Los Tules crowd,” residing in a development of that name adjacent to the ranch. “Folks like myself who live in towns and cities away from the ranch are tired of subsidizing folks who treat it like their backyard.”

“We’re financially indentured servants,” says Patrick Roche, a board member and San Diego owner who is spearheading the recall effort. He was recently elected to the board with more than twice as many votes as any other candidate. He notes that in a poll of owners in May, 80.5 percent wanted the facility listed for sale. The board argues that fewer than half the owners voted, and they were told in advance that a nonvote was the same as a no vote.

This donnybrook threatens to produce a trail of tears — which, after all, is part of the Warner Hot Springs history. The Cupeño Indians had lived there for countless generations before the early 19th Century, when Spanish, Mexican, and later American settlers moved in. The Indians remained there in a serflike relationship with the settlers, but in 1903, after a Supreme Court decision, the U.S. government ordered them ousted as trespassers. They took a 40-mile journey to join another tribe in Pala. They call the three-day trek their “Trail of Tears.”

Irony of ironies: while the ranch struggles, the Pala Band of Mission Indians is now prospering with a fancy gambling casino and a raceway under construction. At one point, the Pala Band appeared to offer the most money for Warner Springs Ranch and was favored by a consultant who weighed the various proposals at the board’s invitation. Pala is still favored by those wanting to sell the ranch, but the deal is no longer officially on the table. “The tribe is still interested in buying back their ancestral homeland,” says a spokesman. Pala offered $30 million for the property in 2005 and later said it would pay the fair value as established by an appraisal. The tribe would pay cash, give continued use rights to current owners, and not place a casino there. “The board never mailed the Pala offer to the owners,” says Roche; that’s one reason he is stumping for a board recall.

Warner has a geographical problem: located by the foothills of Palomar Mountain, 15 miles from Santa Ysabel, it is an hour and a half from North County and two and a half hours from Los Angeles under good driving conditions. The price of gas inhibits many members from visiting. Room occupancy is barely above 30 percent, despite the hot water pool, golf course, equestrian center, and 234 casitas, some historic. Even with income from the rising special assessments and from nonowners who pay to use the facility, “In my opinion, the dining room is in poor shape, the cantina could use work, the golf course needs work, the food is horrendous,” says Maizlish.

Owners initially paid from $13,500 to $30,000, and annual dues are now $4404 a year. There is a special assessment of $240 this year. With many original owners seldom using the facility, many are not paying their annual dues. Ranch usage is open to nonowners who pay onetime fees for lodging and recreational facilities. “Why spend $5000 a year when you can go up there whenever you want?” asks David Gee, a former board member from San Diego. “It’s cheaper to go on a weekend than have a membership.”

With the recall campaign just under way, owners expect more hostilities. There were plenty in 2006. Gee and Roche led that recall campaign. “After [the board] successfully defeated the recall campaign, they went into executive session and decided to fine me and Patrick $33,000 each and suspend our ownership rights,” recalls Gee, who was threatening to file a lawsuit. “Then they indicated that the motion to fine us would go away if the threat of litigation would go away.” Gee considered that “extortion and blackmail” and made that specific charge under oath. The suit was filed and later withdrawn. Gee and Roche haven’t been fined, but the board recently assessed a $15,170 fine against Roche for allegedly misusing the list of owners in his communications. He refuses to pay the assessment. He has been banned from using the facilities, although he can still come to the property to attend board meetings.

However, the 2006 tactic has intimidated some people who are afraid to speak publicly, fearing a defamation suit or some similar maneuver by the board.

At one point, eight investment groups expressed interest in doing a deal for the ranch. But it’s down to two: Eagle Energy LLC, a Korean group, will buy the ranch outright for $25 million; Highlands Resorts LLC wants to partner with the ranch and gradually convert it to a timeshare. It does not want to purchase or take over the ranch.

Both entities wanted to bargain exclusively, according to Jim Stilwell, general manager of the ranch, and they were the only two to put down $3000 to cover the board’s consulting costs. The board decided that Highlands had the potential both to satisfy those who want to sell their interest and to give continued rights to those who want to stay. It would also put in cash for property improvements. “If the Eagle group were successful, it would effectively close out all other options,” says Stilwell.

However, Eagle is offering less than Pala was earlier willing to pay, say those who want to oust the board. Also, they say, it is seldom a good idea to negotiate with only one party: you can’t play one against the other.

Under Warner Ranch rules, it will take two-thirds of the owners to agree on a deal. But, says Stilwell, some strategies may not require a membership vote. If, for example, Highlands simply wants to buy out some of the owners, no vote would be needed. However, ownership units that were purchased for $30,000 are now being sold for $3500. The Pala or Eagle buyouts would bring much more money to those who want to sell. They say the Highlands deal is a decidedly lowball one. “In my opinion, the board owes the ownership an answer to the question of how Highlands jumped to the front of the line,” says Maizlish.

The battle is likely to rage for some time. “There are factions,” says Stilwell. “Some want to sell the ranch, others want to preserve the ranch.” But neither side “wants to see the ranch destroyed. Nobody wants to see a developer come in here and build 3000 homes and make it a subdivision of San Diego.”

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The most attractive asset of the Warner Springs Ranch is the spring-fed, hot mineral water pool. So maybe it’s fitting that through the years, this backcountry ranch has been in financial hot water. After opening in the early 1980s as a facility to be owned by 2000 tenants-in-common, rather like a country club, the ranch suffered through a succession of business failures by early developers. Now there is a bitter battle among the 1000 owners who plunk a slug of money down, plus annual fees and assessments, and extra for lodging and food. (Warner never got to the planned 2000 owners.)

With annual fees and special assessments spiraling upward, an apparent solid majority wants to see Warner Springs sold so the individuals can recover their original investment, or part of it. Most in this faction live a long distance from Warner; some haven’t visited it in years. But another group — many living near the ranch — just as adamantly want a resort timeshare company to take over the place so their own leisure lifestyle can continue as usual. Those wanting a sale claim that the board of directors is biased toward the resort timeshare concept. They are attempting to have the board removed — something they failed to accomplish in 2006.

Hostile emails are flying back and forth. “I don’t like going up there. It’s so acrimonious,” says one of the San Diego owners, Greg S. Maizlish. “Owner, schmowner,” he says, stressing that he is only expressing his own opinion. “The owner designation means nothing because the ranch is controlled by a small group” that he calls “the Los Tules crowd,” residing in a development of that name adjacent to the ranch. “Folks like myself who live in towns and cities away from the ranch are tired of subsidizing folks who treat it like their backyard.”

“We’re financially indentured servants,” says Patrick Roche, a board member and San Diego owner who is spearheading the recall effort. He was recently elected to the board with more than twice as many votes as any other candidate. He notes that in a poll of owners in May, 80.5 percent wanted the facility listed for sale. The board argues that fewer than half the owners voted, and they were told in advance that a nonvote was the same as a no vote.

This donnybrook threatens to produce a trail of tears — which, after all, is part of the Warner Hot Springs history. The Cupeño Indians had lived there for countless generations before the early 19th Century, when Spanish, Mexican, and later American settlers moved in. The Indians remained there in a serflike relationship with the settlers, but in 1903, after a Supreme Court decision, the U.S. government ordered them ousted as trespassers. They took a 40-mile journey to join another tribe in Pala. They call the three-day trek their “Trail of Tears.”

Irony of ironies: while the ranch struggles, the Pala Band of Mission Indians is now prospering with a fancy gambling casino and a raceway under construction. At one point, the Pala Band appeared to offer the most money for Warner Springs Ranch and was favored by a consultant who weighed the various proposals at the board’s invitation. Pala is still favored by those wanting to sell the ranch, but the deal is no longer officially on the table. “The tribe is still interested in buying back their ancestral homeland,” says a spokesman. Pala offered $30 million for the property in 2005 and later said it would pay the fair value as established by an appraisal. The tribe would pay cash, give continued use rights to current owners, and not place a casino there. “The board never mailed the Pala offer to the owners,” says Roche; that’s one reason he is stumping for a board recall.

Warner has a geographical problem: located by the foothills of Palomar Mountain, 15 miles from Santa Ysabel, it is an hour and a half from North County and two and a half hours from Los Angeles under good driving conditions. The price of gas inhibits many members from visiting. Room occupancy is barely above 30 percent, despite the hot water pool, golf course, equestrian center, and 234 casitas, some historic. Even with income from the rising special assessments and from nonowners who pay to use the facility, “In my opinion, the dining room is in poor shape, the cantina could use work, the golf course needs work, the food is horrendous,” says Maizlish.

Owners initially paid from $13,500 to $30,000, and annual dues are now $4404 a year. There is a special assessment of $240 this year. With many original owners seldom using the facility, many are not paying their annual dues. Ranch usage is open to nonowners who pay onetime fees for lodging and recreational facilities. “Why spend $5000 a year when you can go up there whenever you want?” asks David Gee, a former board member from San Diego. “It’s cheaper to go on a weekend than have a membership.”

With the recall campaign just under way, owners expect more hostilities. There were plenty in 2006. Gee and Roche led that recall campaign. “After [the board] successfully defeated the recall campaign, they went into executive session and decided to fine me and Patrick $33,000 each and suspend our ownership rights,” recalls Gee, who was threatening to file a lawsuit. “Then they indicated that the motion to fine us would go away if the threat of litigation would go away.” Gee considered that “extortion and blackmail” and made that specific charge under oath. The suit was filed and later withdrawn. Gee and Roche haven’t been fined, but the board recently assessed a $15,170 fine against Roche for allegedly misusing the list of owners in his communications. He refuses to pay the assessment. He has been banned from using the facilities, although he can still come to the property to attend board meetings.

However, the 2006 tactic has intimidated some people who are afraid to speak publicly, fearing a defamation suit or some similar maneuver by the board.

At one point, eight investment groups expressed interest in doing a deal for the ranch. But it’s down to two: Eagle Energy LLC, a Korean group, will buy the ranch outright for $25 million; Highlands Resorts LLC wants to partner with the ranch and gradually convert it to a timeshare. It does not want to purchase or take over the ranch.

Both entities wanted to bargain exclusively, according to Jim Stilwell, general manager of the ranch, and they were the only two to put down $3000 to cover the board’s consulting costs. The board decided that Highlands had the potential both to satisfy those who want to sell their interest and to give continued rights to those who want to stay. It would also put in cash for property improvements. “If the Eagle group were successful, it would effectively close out all other options,” says Stilwell.

However, Eagle is offering less than Pala was earlier willing to pay, say those who want to oust the board. Also, they say, it is seldom a good idea to negotiate with only one party: you can’t play one against the other.

Under Warner Ranch rules, it will take two-thirds of the owners to agree on a deal. But, says Stilwell, some strategies may not require a membership vote. If, for example, Highlands simply wants to buy out some of the owners, no vote would be needed. However, ownership units that were purchased for $30,000 are now being sold for $3500. The Pala or Eagle buyouts would bring much more money to those who want to sell. They say the Highlands deal is a decidedly lowball one. “In my opinion, the board owes the ownership an answer to the question of how Highlands jumped to the front of the line,” says Maizlish.

The battle is likely to rage for some time. “There are factions,” says Stilwell. “Some want to sell the ranch, others want to preserve the ranch.” But neither side “wants to see the ranch destroyed. Nobody wants to see a developer come in here and build 3000 homes and make it a subdivision of San Diego.”

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14

Response to post #6: You may email any documents to me at [email protected] Best, Don Bauder

Aug. 21, 2008

Response to post #7: There was a lawsuit filed two years ago that was ultimately withdrawn. Best, Don Bauder

Aug. 21, 2008

I commend Mr. Bauder for his well researched and skillfully written article on Warner Springs Ranch. He attributes to current general manager Jim Stilwell a fact I believe is erroneous. I believe that subsequent events and investigation prove that Highland Resorts never tendered a three thousand dollar ($3,000.00) deposit to Warner Springs Ranch pursuant to the established unsolicited Letter of Intent process. Instead, the Highland Resorts “draft MOU” that was announced by Mr. Stilwell in a post to the Warner Springs Ranch website on August 17, 2008 was the product of a solicited process, and therefore, not subject to the established unsolicited LOI process. This revelation bring Owner-Schmowners closer to the truth as well as a complete and honest answer to the question I’ve been asking for over three months; as referenced in the article, how did Highland Resorts cut in front of other offerors and jump from last in time to first in line? Moreover, also unanswered are questions of who first solicited Highland Resorts and when the solicitation process first began. I hope everyone who has ever "taken the waters" at Warner Springs requests answers from Mr. Stilwell via email at: [email protected] and the current Board of Directors via email at: [email protected]

Sincerely,

Greg S. Maizlish

Aug. 20, 2008

Thank you, Don Bauder, for articulating the frustration and financial hardship so many WSR owners are experiencing bacause of the questionable practices of both the current and past Boards of Directors. We understand that the folks who live around the Ranch are using whatever means they have to maintain the lifestyle they have there. What we don't understand is how they justify enjoying it at the expense of so many of their fellow Ranch owners.

Sincerely, Charles & JoAnne Peinado

Aug. 20, 2008

Response to post #1: I was told by interviewees that Highland had not put $3,000 down to cover expenses. I put the question to Stilwell; he said that Highland had put down well over $3,000. Best, Don Bauder

Aug. 20, 2008

REsponse to post #2: That is the gravamen: that the small group of owners, many living in Los Tules or close to the ranch, use it regularly, often boarding horses there. The argument is that the majority, living far distant, want the ranch sold so that they can recover at least some of their investment. They claim that those nearby are in a distinct minority, but control the board. Battles lie ahead. Best, Don Bauder

Aug. 20, 2008

Response to post # 3: Dear Mr. Bauder, I don't doubt that you put the question to Mr. Stilwell, nor that he said that Highland had put down well over $3,000. In my opinion, there exists considerable doubt that he was entirely forthright in distinguishing the preexisting unsolicited LOI deposit requirement from the solicitation of Highland Resorts, which has been going on for a time certain known only to those who have done the solicitation, and which is not subject to the unsolicited LOI process requirements. Again, in my opinion, at least semantics, and possibly much worse, are in play. In recognition of the possibility that I could be wrong, I invited queries to Mr. Stilwell and the current BOD, which I still regard as appropriate, whether or not any reader has "taken the waters" at Warner Springs Ranch. My best, Greg S. Maizlish

Aug. 20, 2008

Dear Mr. Bauder, Thank you for shedding some light on the less than savory goings on at Warner Springs Ranch.

I was also told by Mr. Stilwell that Herrick Co. handed over the required $3000. However, when pushed on the date of that payment Mr. Stilwell retracted that statement in an e-mail to me on 8/12 and went on to say he regretted any confusion that may have resulted from his prior eroneous statement and, that the Board Of Directors decided Herrick Co. didn't have to.

The fact is, according to the same Jim Stilwell you spoke to, Herrick Co. never did pony up the $3000. I'd gladly FWD that mail to you for the asking. Interesting how Herrick Co. made it to the front of the line when an all cash offer FOR APPRAISED VALUE got brushed off.

So, you didn't get the straight scoop on that little detail and I don't think you got the straight scoop from Mr. Stilwell on the Pala offer either. Wanna bet?

Welcome to how the Ranch does business. Pete Buckley

Aug. 20, 2008

Greg S. Maizlish. the current "board" are breaching their fiduciary duty to ALL the owners and can be held personally liable for such breach of fiduciary duty (such as not notifying ALL the owners of the Pala buy out offer).

Why not just sue them for that breach??? A judge will be able to get to the bottom of this a lot faster than the self help pace going on now-which is a snails pace, with the current board reaping all the benefits.

That's what I would do. Either that or make the current board buy out the other owners who want to sell at market rate.

Aug. 20, 2008

Response to post #5: Stilwell and the board should answer certain queries, such as: 1. How long have the negotiations with Highlands been going on? 2. Was Highlands solicited by the board, or did it come voluntarily? 3. Did in fact Highlands come up with the $3,000? 4. Was it leapfrogged over other possible bidders as Maizlish suggests? Best, Don Bauder

Aug. 21, 2008

Did you question Gee and Roche why they have pursued for so long the sale of the ranch for the lame excuse that they want to give it to the Pala Indians and why they have change their purpose of the sale every time they can? Did you question Gee and Roche what was their financial benefit or commissions they were getting on the sale of the ranch and the cost of having the board recalled twice?

I think that Roche has his own agenda to recall the board and sell WSR and profit from the sale disregarding the WSR owners.

Aug. 21, 2008

Response to post #11 Yes, I asked them if they would personally profit from such a sale and both said they would not. Best, Don Bauder

Aug. 22, 2008

I am appalled at these people at Warner Springs Ranch. SELL THE PLACE BACK TO THE INDIANS!!!! Are they nuts or just money hungry?The Pala Band deserve to have their ancestral lands back and are willing to pay a healthy price for something that was stolen from them. This country is looking at a recession and part of the problem is that Americans don't own America anymore!A Korean group?!?! Oh, excuse me...they must be Korean Americans right? [email protected]#$%.No offense to the Korean people but what is the real problem? I read this story and was again sickened by my own race and the problems we create for ourselves.Greedy so and so's.

Aug. 23, 2008

Response to post #13: Pala definitely seems to offer the best deal -- including the most money. Native American casinos are in a slump now. That may affect what is going on. But Pala wants to buy Warner and will permit current owners to use it. Best, Don Bauder

Aug. 23, 2008

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