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| First hurdle cleared in Diablo Grande auction |
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| Written by James Leonard / Patterson Irrigator | |
| Wednesday, 13 August 2008 | |
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At a glance
Diablo Grande passed the first hurdle in its attempted sale Friday, when its attorney received multiple notices from potential buyers stating their intent to bid in this week’s sealed auction. Attorney Michael Ahrens wouldn’t specify how many notices were received by Friday’s noon deadline, except to say there were “more than two and less than 100.” “I can say it went very well,” Ahrens said. “It’s obvious we have a lot of interest in this property.” The notices themselves do not include bids and do not require those submitting them to ever put in bids. But no buyer can bid without having turned in such a notice. Diablo Grande, the bankrupt golf resort and housing development nestled in the hills west of Patterson, is set to be sold by way of a sealed-bid auction that will culminate with a Tuesday hearing at the U.S. Bankruptcy Court in Sacramento. The bids are due by 11:59 p.m. today, and each must be accompanied by a $500,000 deposit, Ahrens said. On Friday, Diablo Grande will select the two highest bidders and request them to submit their final offers by Monday. Initially, a “stalking horse” bid of $25 million was made by Pismo Beach-based developer Housing Source Partners. But that deal fell through when Housing Source balked at signing an asset purchase agreement that included contractual obligations to Western Hills Water District — which provides water to Diablo Grande — and others. The stalking horse bid would have been the starting point for an open auction, and it would have allowed Diablo Grande officials to rest easy, knowing that the $26 million sale price they believe is needed to settle certain secured debts would almost certainly be reached. Faced with the possibility of an open auction with no low bid in place, Diablo Grande opted for a sealed bid process in hopes of ensuring that all potential buyers will put forth their best offers, rather than bid incrementally against one another. When the Housing Source offer fell through, it opened the possibility of low bids or incomplete ones — in which a potential buyer could reject parts of the asset agreement — meaning a sale might not be approved. Much of the $26 million Diablo Grande is hoping for would pay for debts such as those owed to Bank of Scotland and Fountainhead Development Corp. Inc., which loaned the project money to keep operating during the sale process. The Bank of Scotland said in July that it would not make another loan to Diablo Grande if a sale does not go through. Without a sale, Diablo Grande could run out of money to continue operations, leaving residents in limbo. That’s still a possibility — albeit an unlikely one, since another loan could be given if there is no sale. But Diablo Grande at least has official word that there are interested buyers. The question now is how high the offers will be and whether the court will approve the sale. “We’re hopeful,” Ahrens said. “We’re hopeful that this will all get done.” To contact James Leonard, call 892-6187 or e-mail This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Comments
(9)
 written by Interested from the outside , August 13, 2008
hmmmmmm!makes me think that those homes are just not sitting do to the market and b.k for d.g. i've heard 1st hand account of the suspect construction of those homes. does anyone have facts to support the article maybe a homeowner or someone who lives in one of those homes.
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written by Interested from the outside , August 14, 2008
Hertel has built very few homes up at Diablo Grande. From a production stanpoint, DR Horton has built a vast majority of the homes and there have been no major issues from vertical construction.
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Homes not being sold at DG is not a Hertel issue but rather a market, developer BK, and water issue. There seems to be some major Hertel bashers that read this site and like to stir the pot, but Hertel is a minor player for the homes they built. However, they have done one heck of a lot of earth moving in Legends. report abuse
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I am a homeowner in DG and purchased a DR Horton home. I purchased here because of DR Horton. Although the market is a bit depressed, WWHD water issues, and DG sales concerns can make one nervous, My wife and I are willing to stay the course. We believe the benefits outweigh the short term distractions.
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Also, the HOA objected. NOt only are they owed from past which has more security than a general unsecured creditor, DG has not kept their a*sessments current for post petition debts. So, the $26M minimum keeps on going up.