RECEIVERSHIP SERIES, PART 3: When Partnerships Go Bad

 

Part III: Partnership Disputes: Horizon Country Club
 
What is now known as The Bridges At Rancho Santa Fe — a private, Robert Trent Jones II-designed 18-hole club and luxury real estate development in greater San Diego — may be remembered by some as Horizon Country Club: the center of a high-profile partnership dispute involving a Northern California investor and San Diego real estate developer. 
 
Many know the outcome of the story: a court ruling that ultimately ordered the developer to pay $1 billion in damages to real estate giant Lennar Corp. several years ago, prior to filing for bankruptcy.
 
What many don’t know is the origins of the real estate deal, and DWC’s role as receiver of the property for a roughly 5-year period, which ultimately resolved with its sale to Lennar. 
 
Initially the developer partnered with financier Ronald Williams to develop the Rancho Santa Fe parcel through a corporation called New Horizon Group. They soon agreed to reorganize the project, creating Horizon Properties, a general partnership, in which they were equal partners and co-owned the 540-acre property. They planned to build the golf course and 240 luxury homes on the site. 
 
Within a few years, the two partners ran into disagreements about the project, with the developer ultimately alleging Williams was trying to force him to sell his interest to Williams by creating financial pressure and delays. 
 
Work stopped, and an arbitration proceeding took place ordering Williams to pay damages to Horizon, but allowing the judgement to be offset by what Williams was owed on the property — at his partner’s objection. The arbitration panel appointed one of its members as receiver to oversee the sale of the property and dissolution of the partnership. 
 
Two receivers later, the dispute was ongoing and the property was yet to be sold. 
 
This is when DWC was appointed receiver and tasked with sale and distribution of the property, as well as legal defense support of the partnership’s interest in two lawsuits. 
 
Over a period of 5 years, DWC worked to sell the club property and credit the sale proceeds toward payment of the partnership’s debts. During the process, DWC preserved the property’s entitlements and maintained the facilities to maintain its value. We also created a due diligence package for the prospective buyers, ultimately selling the property at public auction for $21 million to Lennar. 
 
The story between the San Diego developer and Lennar continues, but the initial disputes and partnership hurdles indicate the types of problems such partners can encounter — entangling extremely valuable assets and high-profile players. This partnership was formed during a stronger economy than we have today, and we’ve observed that typically in cycles like this one, with markets somewhat stressed, this stress percolates to the surface. When things are well and good, people get along, but stressed markets can lead to disputes like this one. 
 
“We have been seeing some similarities over the past year, I would expect to see more of them in the coming year,” says DWC Chairman and CEO Douglas Wilson. “In partnership disputes, it’s important to have a receiver with the temperament required to deal with a very litigious environment and partnership complexities. To maintain the value, which often is in the entitlements, the receiver is the steady hand to navigate the direction for all parties.” 
 
If you or your contacts are seeking problem resolution or receivership and fiduciary services, please contact us to learn more about how DWC may assist.