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.”