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October 6, 2008 Patterson, CA

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Financing approved for Diablo Grande

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Written by Jonathan Partridge \| Patterson Irrigator
Saturday, 12 July 2008
Developers struggle to sell project with $59M debt Uncertain future: Construction continues in the developing community of Diablo Grande, slowly filling the hillside terraces of Golf Canyon Court. Several would-be buyers will bid on the development at auction next month after the owners declared bankruptcy in March. Photo by Elias Funez / Patterson Irrigator MODESTO — The developing community of Diablo Grande is closer to being sold, and the U.S. District bankruptcy court gave it permission Thursday to receive $1 million in financing to tide it over in the meantime. Pismo Beach-based condominium developer Housing Source Partners offered $25 million for Diablo Grande, according to documents filed with the court in June. However, there are multiple buyers interested in the property, so it will be auctioned off next month. “We’re working next week to get the asset purchase agreement (completed),” said Dwain Sanders, vice president of development for Diablo Grande, at a homeowners association meeting Thursday night. “Once we get that done, we’ll know there’s light at the end of the tunnel.” The property listed includes 28,500 acres. However, only the 2,250-acre first phase of the initial 33,000-acre plans has been legally approved. That portion eventually could include about 1,300 homes, a winery and a hotel with shopping amenities, among other features. An auction for the property is slated to happen by Aug. 17, when Diablo Grande officials say they likely would run out of financing. Troubles: Some custom-built homes on Diablo Grande’s estate lots, shown Thursday, are unoccupied, while some occupied homes have problems with water quality. Photo by Elias Funez / Patterson Irrigator In addition to the property itself, any buyer would acquire a portion of land that contains conservation easements. Initially, developers had sought to make the purchase of the nature conservancy optional, but officials working the bankruptcy deal changed their minds to simplify matters, and Judge Robert Bardwil agreed to the changes in a bankruptcy court hearing in Sacramento on Thursday. Diablo Grande’s new owner also would acquire the developing community’s debts, which so far total about $59 million — a sticky selling point. “It has been very difficult to get potential buyers to get their arms around that,” Sanders said at Thursday night’s Western Hills Water District meeting. “It has been a huge, hairy beast.” Representatives with Housing Source Partners did not return calls seeking comment this week. The company’s Web site indicates it has condominium projects throughout Northern California, including one each in Modesto, Manteca and Dublin and two in Lodi. If Housing Source is outbid by another party, it will receive $500,000 from Diablo Grande’s buyer, as part of Thursday’s agreement. Sanders said last month that six parties had expressed interest in buying the development, and three of them were serious buyers. Diablo Grande has continued to receive financial help from the Bank of Scotland after the development filed for bankruptcy March 10. However, an attorney representing the bank made it clear in court Thursday that the bank would not continue backing the project if things did not work out with a new buyer. “Because of the huge negative carrying costs, there really isn’t going to be enough money to take a second run at this ... ,” Thomas Willoughby said. “We’re willing to try this once. We’re not willing to try this twice.” Developers previously received permission from the court to borrow as much as $1.5 million from the Bank of Scotland through June 22. Diablo Grande has been for sale since November, when Encinco-based Marcus & Millichap listed the project for $150 million. It later dropped that price to $85 million before Housing Source Partners made the $25 million offer. As the development awaits a buyer, creditors look on anxiously to see what will happen. Walter Schmidt, an attorney representing creditor Oak Valley Community Bank, was one of a few people who showed up in Modesto on Thursday for a teleconference of the Sacramento-based bankruptcy hearing. He said it is urgent that an agreement be reached soon. “They need to keep this thing moving,” Schmidt said. “There are people living up there.” Set as favorite Bookmark Email This Hits: 733 Comments (8) Subscribe to this comment's feed Diablo Grande Scam written by Right ! , July 12, 2008 You are all going to get a real ride on this scam the buyer is well known Alfred Nevis he is dealing both sides of the scam. RiW Hertel is in real deep poop, he is in default to Point Center Financial for the tune of $21 Million and is facing masive Liens and Civil suits report abuse vote down vote up Votes: +3 Jonathan, you got this wrong* written by Tom S , July 14, 2008 Jonathan, First, it was a Western Water Hills District Meeting, not a homeowners asociation meeting. Second, the current offer asumes the obligations on existing contracts, not existing debt. There is a big difference as most unsecured creditors will get nothing. report abuse vote down vote up Votes: +0 What a shame written by CountryDweller , July 15, 2008 How unfortunate this all turned out. The valley area which is now Diablo Grande used to be a pristine area. It was very quiet and peaceful. It was fun driving up old Oak Flat Road looking at all the Oaks. Even Donald Panoz commented before building Diablo Grande how nice the area is. So what do they do, build a huge road through the hills and fill the valley with cookie cutter homes. The founders went broke and apparently are going to take a huge loss on this project. Water is going to continue to be an issue for time to come. It would have been better if Diablo Grande was never started in the first place. report abuse vote down vote up Votes: +0 ... written by nice , July 15, 2008 Well country dweller, there are more than cookie cutter homes up there and what is wrong with a cookie cutter home anyways? The cookie cutter home concept was 1st desgined after the 1st World War for GI's to have afforable housing under the VA Loan to buy. I figure if all were to follow your thoughts of never build anywhere than none of California or the world for that matter would exsist. I do understand your point of the water issues/money problems but Diablo is not the only place that has problems. I know a good amount of people love the fact that Diablo is failing. I figure that is out of some kind of jealous place and now they are just eating it up over the daily reports of Diablo drama. I figure the thought of people living in mansions on a hill looking down on the town below just really ate at some people. Just like how people love how the prices have bottomed out on the homes on the lake in Patterson. People hated that development just for the mere fact it had gates and it keeps people out. No matter what the price of the homes were. So countrydweller who Im sure is taking up space with your home that was once a habitat that consisted of trees,bushes,coyotes,field mice,moles,poppy flowers,flies,ants,etc...Instead of sippin on hater-aid how about if you are so concerned with eye sores and living qualities maybe you should demand a clean up of the shacks so called homes in Patterson. It is a shame that the city and county allows people to live in such conditions. Just beacuse one is low income does not mean they should live in sub-standard housing. Also if Diablo has water issues which I believe they do, what is Pattersons excuse for their water problems? Yes, we all know the shortage is do to the housing boom but then why did they not take that into consideration before building. If I recall my days of scrubbing whote film off of my dishes Patterson water quality is not much to brag about either.I know their current water report was great but that was not always the case. Also why is the city of Patterson so activley seeking to tap into Diablo's water? Maybe Diablo is good for something. Patterson is developing in many ways, we all should want to see to the success of the city and not bask in it's shortcomings. We all should demand no matter where we live the City of Patterson, the country side of Patterson , or Diablo we should have better than what has been going on in this town. To play the I told you so and by the way it should have never been built game, is very simple minded. Solutions and pulling everything/everyone together in this town can help the city through a difficult time. report abuse vote down vote up Votes: +1 Nice written by CountryDweller , July 15, 2008 Well Nice, Great idea, build a bunch of homes in the middle of the desert. Patterson itself already has water issues and has to look for surface water. Diablo Grande has to already pull surface water. Just what is needed, another golf course in the desert. It isn't about jealously, it is true concern about the future and not acting like it is still the 1950's. If you read my posts in the past, I have been very critical of the City of Patterson and how it has grown. It is not about hate. Patterson is not trying to tap into Diablo Grande's water source. Diablo Grande itself faces water shortages. And by your thread, we should all just follow like sheep and not question anything. Well, if you want to call me a hater, feel free to do so. It only makes you look silly. I am definately not jealous of the " gated" community. No one could pay me to live there. report abuse vote down vote up Votes: +0 ... written by nice , July 16, 2008 Truly not not a follower..... sounds like hate when you make comments as you did, it leaves one to think that! I'll be one of the first bringing to light Diablo Grandes problems. I just happen to depsise the old "cookie cutter" comment that folks throw around so easly. It would be nice to afford some land in the middle of no where. Some people just bought a "cookie cutter" home in the desert in the middle of know where. Remember Patterson is in the middle of no where..hello Yes, Patterson is trying to tap Diablos water why don't you just go ask the mayor.Diablo's water water is not the same water as Pattersons. Leave it to the powers that be and Diablo residents will be paying for higher water rates just to clean up the horrible water issues and then Patterson gets to tap into the water. You still did not touch on my issue of unsighlty sub-standard homes in Patterson. I would think if some cookie cutter homes up in some hills that I'm sure you can not see from your country home bothered you , I was sure you would chime in on those homes. That you would show just as much concern and pasion for people living in poor conditions as to folks living in some failing financial pipe dream....are you out any money???? do you pay the bonds on Diablo???? are you with E.L.F and hate new home construction? Surely you can't claim urban sprwal. As a matter of fact Diablo kids don't even attend Patterson schools,so they're not taking clas space. I bet some would say the countryside was nice until people built homes on the land. I'm sure yes Diablo was a nice place prior to building but it is far from Las Vegas or an eye sore like some other new home developments. Some people did want to or can afford afford a little house on the prarie...some people settle with 1950's cookie cutter. A home is a home..where it is placed yes is a sore spot for some folks. I never said don't question the direction...I have posted many threads about about maintaining the small town feel of Patterson. Trust me it would take an act of god for Patterson to explode into a busy city. I just would like to see affordable decent housing for all,good paying jobs so that Patterson can self-sustain and not send folks away for jobs,shopping,healthcare,entertainment. Keep Patterson money here in Patterson. I say no more building any homes until the current ones are occupied and the demand is there.A buliding cap I feel is a must for towns like Patterson. That by far is not a follow the sheep way of thought. report abuse vote down vote up Votes: +1 ... written by CountryDweller , July 16, 2008 I am not sure what you mean by Patterson trying to tap Diablo's water. Patterson, like Newman, is looking into obtaining surface water but that doesn't mean it is trying to share Diablo Grande's source of water. Diablo Grande has an agreement to get water from a Kern County water district. It appears Diablo Grande itself faces potential cutbacks in its allocation so it doesn't make sense that Patterson as a growing community would be able to get enough water from Diablo Grande. You make not like the term cookie cutter, but it is what it is. They are homes that all look alike. It isn't the cost of ahome that creates character. Maybe you have never seen what the Oak Flat Valley was like before Diablo Grande was there, but I have. Surely I can't claim urban sprawl? Diablo Grande is the clasic definition of urban sprawl. People in this County were concerned enough about this sprawl to overwhelming pas Measure E. And what substandard homes are you refering to? "am I out money"? "Paying bonds" You just don't seem to understand. It is much more than money. Water among many things is going to be serious long-term problem in this valley. Land on the West Side is currently going fallow. Does it make sense to build more golf courses and houses in the middle of a desert? If we continue on this path, do you know what could happen? You can fallow farmland, can you fallow water going into subdivisions? It is shortsighted to focus on money. report abuse vote down vote up Votes: +0 heard something bout HOUSING SOURCE PARTNERS written by small and helpless , August 03, 2008 I heard that they have a management company that is terrible called REDEFINED PROPERTY CONCEPTS. Heard that they have vendors do work at their properties and then do not pay them. report abuse vote down vote up Votes: +0 Write comment Name Email Title Comment smaller \| bigger Subscribe via email (Registered users only) I have read and agree to the Terms of Usage.