The sale of a California City icon is pending a judge's ruling on Aug. 19, according to an update from the California Department of Business Oversight.
Thomas W. McNamara, the court-appointed receiver for Silver Saddle Ranch and Resort, requested the San Diego Superior Court approve an offer of $1.77 million for the large ranch located northeast of California City.
The ranch property was originally listed on the market for $1.89 million when the receiver placed the ranch on the market on May 8 under real estate broker Kidder Matthews.
Court documents identified the prospective buyer as Kevin Feterik, who entered into escrow with the receiver on July 6.
The court date is set for Aug. 6, according to the DBO/receiver update. The property includes 130 acres, 62 acres of which sits the ranch's clubhouse/, admin building, sales pavilion and motel-style rooms.
Silver Saddle was placed into receivership in September 2019 following lawsuit filed by the Department of Business Oversight alleging that the defendant, Silver Saddle Commercial Development, used the ranch as a front for about $30 million in fraudulent land sale activities.
BBO named Thomas Maney of Lancaster as a major defendant in the case, along with Silver Saddle Ranch & Club, Inc.; Silver Saddle Commercial Development, LP; and the Galileo Commercial Property Owners Association, Inc.
According to DBO's lawsuit, Silver Saddle committed securities fraud in connection for the sale of 1,020 acres of vacant desert property, called the "Galileo Project" near California City.
An Oct. 1, 2019, DBO press release noted stated that Maney was the central figure behind "a scheme that violated state securities laws and targeted Filipino, Chinese and Spanish-speaking communities with high-pressure sales tactics and false promises" that stretched back as 2011. More than 2,000 investors paid as much as $30,000 for part of the undeveloped desert land.
According to the news release, "the investments were not qualified or
approved by the state as required and were sold with 'blatant misrepresentations' and
'deliberate omission' of material information, the complaint alleges.
An eventual injunction forced Silver Saddle Ranch to cease operation and its assets were seized or frozen. The court named McNamara as the receiver on Oct. 30, 2019. The injunction and appointment of a receiver prevented defendants from collecting money or payments from people who purchased land and still owed on promissory notes.
According to a Nov. 26 document, the court order also suspended further sales of lots within the 1,020-acre area. However, some of the promissory notes made were sold to third-party interests, of which a third indicated they would continue to collect payments.
The decision to sell the property comes as the receiver reported a loss in maintaining the property between November and March, according to the update and court documents.
McNamara reported that the during the five-month period "water, electricity, labor, and insurance costs for the Ranch was approximately $230,000."
In the court document filed July 10, the receiver claimed water was the highest cost at $201,273.85 for the five month period." The highest bill was $46,864 (from mid-October to mid-November); the lowest was $4,339 from March to April.
The receiver claimed in the court document that even though the ranch was a "centerpiece to the defendant's marketing efforts," it managed to run up a $1.5 million loss each year prior to the lawsuit.
According to the motion to approve the sale, four offers were received and the $1.77 million from Feterik will "will maximize its value and minimize additional costs to the Receivership Estate and, ultimately, provide funds to initiate a distribution to investors."
In addition to the ranch, Feterik made a separate $775,000 for nearly 160 acres of adjacent Galileo Project lands also under the receiver's management. The sale of those properties would be addressed in a separate request following the court's approval of Silver Saddle Ranch's sale.
An initial Kidder Matthews marketing brochure for the property included both the ranch and a portion of the Galileo Project land, which when combined totaled 288 acres.
While proceeds from the ranch's sale doesn't go toward refunding fraud investors, the receiver will advocate for that option, according to the court documents. The sale of the Galileo Project lands will go toward the reimbursement.
The intent to sale the ranch did not go without opposition, according to court documents. The receiver contacted all Galileo Project investors and received objections from 25 of them.
"While some investors oppose the sale, the Galileo Project investors do not have an interest in the property as the Ranch is owned solely by Receivership Defendant Silver Saddle Ranch & Club, Inc," the court document states. "Given the significant and ongoing operating expenses, the sale of the property (which will eliminate operating costs, in addition to providing a recovery for the investors) is necessary and in the investors’ best interests."
Some investors, working with Antonio Garcia and Carlos Novelo, filed a motion to intervene on the ranch sale. According to a response from the receiver, the motion to intervene claimed the receiver did not communicate with all the receivers.
The response stated the receiver "has maintained a line of communication with all investors" and that it informed all investors of the ranch sale via different forms of communication, including email, phone and its website.
The motion to intervene also claimed the receiver wasn't maintaining the ranch and "is now in a deteriorated state" and "is rendered in disrepair making the property to be classified as overly distress … to even be considered for sale."
The receiver countered that it has maintained the ranch while "still responsibly cutting costs when possible." It's biggest cost-cutter was water, according to the court document, reflected in "the appearance of some of the more desert-like land" of the ranch property. Additional savings came from water leak repairs.