In Borrego, Prices Are Low, Anyway

The little oasis of Borrego Springs now features more than 100 metal, life-sized sculptures of creatures who roamed there in prehistoric days — raptors, giant sloths, mammoths. They attract tourists. They also engender grim jokes among some locals: will the town revert to its prehistoric days?

Long term, there is a nagging problem: will there be enough water two generations from now? Short term, there is another problem: will there be enough patient capital for the town to develop? After enduring a run of asset flippers and big talkers through the years, Borrego finds itself once again needing facilities to attract tourists and amenities to bring in out-of-towners to purchase second and third homes.

“We have not given up on Borrego by any stretch,” says Linda Haddock, executive director of the Borrego Springs Chamber of Commerce, but she admits there are doubting Thomases wandering amid those prehistoric creatures.

The town needs the resuscitation of two major properties. The Borrego Ranch Resort & Spa (née Casa del Zorro), which had been losing bushels of money for years under the ownership of San Diego’s Copley family, closed down more than two years ago, throwing a number of people out of work. Investors led by Sherman Oaks–based GH Capital had bought it from Copley for $4.5 million and pumped $10 million into refurbishing it. But they gave up.

The adjoining Rams Hill housing development has depended on a championship golf course to attract buyers. But that course has closed and is going brown. Bonds that were refinanced in 2007 are in default. Water rights were sold to the Borrego Water District. Getting the golf course running would require solving the water and bond problems — costing at least $1 million. And when the course closed, few were playing; it could be a big money loser.

Last year, Borrego residents hoped that real estate entrepreneur Russell Geyser of Encinitas would breathe life into the town — selling lots for development, paying delinquent homeowner association fees and taxes, and getting the golf course up and running.

Alas, on September 22 of last year, David Schaack, president of the Rams Hill Community Association, and Blythe Cavanaugh, treasurer, sent a mourning missive to fellow residents. Geyser “is purely an asset buyer,” lamented the letter. “There is not, and never was, intent…to be a developer and grow the community.” The owner has “no interest in the golf course” and might let it go into foreclosure or back to the bondholders.

Worse, complained the letter, both GH Capital and Geyser “have continued to ignore their obligations to the community regarding the payment of their monthly dues assessments.” Together, they are $422,345 in arrears to the Rams Hill Community Association and $124,660 behind in payments to neighborhood sub-associations.

Schaack tells me that those arrearages are even higher now. Because of the lack of payments, Rams Hill residents “have to skinny things down” on services they would normally get from the association, he says. He fears some of the lots, as well as the golf course, could go into foreclosure. Geyser “isn’t making money now, although I have no idea what he paid” for the property, says Schaack.

Last year, Geyser gushed about his plans: he would slash prices on the lots, and the buyers would pay the back taxes and fees, although he would be effectively absorbing them through the discounts. He planned to pay off the bonds. However, “In this market people are not buying homes or parcels,” says Rick Vesci, who through his Rams Hill Realty is trying to sell Geyser-owned properties, as well as some still owned by GH.

Geyser is not so talkative this year. “We are working on a deal right now that cures everything, solves the bond problems, restarts the golf course, and begins to develop the lots. That is all I can say,” he maintains. He asserts that he has nothing to do with the golf course, now owned by a San Diego concern.

Unfortunately, such happy talk is what Borregans have been hearing since the early 1980s, when Di Giorgio Corporation first began to develop Rams Hill. The deal ran into trouble; several shaky buyers owned the property. It went through bankruptcy twice. GH changed the name to Montesoro, but recently, the name was changed back to Rams Hill. “The name Montesoro leaves a bad taste” with residents, says Schaack. However, he admits that the name Rams Hill is soiled among people in the financial community.

“I would be interested in buying [the resort] at the right price,” says Jack Giacomini, chairman of San Diego’s Hotel Managers Group, which operates 20 hotels and owns 4 of them. He notes that the landscape and buildings need work. “It is a great possibility for a mid-scale resort to appeal to San Diegans and other Californians.” Trouble is, GH’s price is too high for Giacomini. So the resort sits there.

One of Borrego’s disadvantages is that it is not accessible by freeway. Giacomini would turn that into an advantage. “It has a good future as a getaway destination resort, away from the hustle-bustle. It harkens back to the getaway locations of old California, although it has to overcome some challenges such as getting there.”

If the resort could be reopened “and there is a good operator, there could be an attractive package in that town,” says La Mesa resident Aaron Biggers, who once ran the Rams Hill property but left in 2003. But there is more bad tourism news: the golf course at Borrego Springs Resort & Spa, another popular tourist draw, will break precedent and close from July 1 to November 9.

Chamber’s Haddock says increased tourism, partly a result of the prehistoric animal sculptures, is lowering the unemployment rate. Also, a solar farm going up nearby will provide significant temporary employment.

Residential housing prices have plunged 50 percent from the peak, worse than San Diego’s 40 percent, says Vesci. Because of foreclosures and short sales, some people are getting incredible deals, he says, and Haddock agrees. In a recent distress sale, a home valued at $400,000 in the bubble years sold for $119,000. In a recent nondistress sale, a home once worth $525,000 went for $325,000. Some people can live without golf.