A U. S. Bankruptcy Court judge Tuesday refused to approve a $19.5-million sale of the Ventura Harbor Village to a Canadian company that has provided little information about itself or its finances to the Ventura Harbor District and creditors.
Judge Calvin K. Ashland ruled only on the specific issue of whether Ocean Services Corp., a private Ventura firm that has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, could sell the 32-acre shopping and boating site to KWM Investments Ltd., a Canadian company operated by real estate developer Kenneth W. Mariash. Ashland said he disallowed the sale because Ocean Services, which owes $16.3 million, failed to submit a complete proposal of its plans.
Mariash's initial offer was opposed by creditors Security Pacific Bank and Great Western, as well as the Ventura Harbor District. They said Mariash failed to provide creditors with a feasible financing plan and released few facts about his firm, excerpt to say it had developed commercial real estate in Dallas, Denver and Canada.
Creditors Balk at Terms
In addition, creditors shied away from Mariash's proposed terms of sale, which included a $250,000 cash deposit, a financing arrangement for $13.3 million with an outside lender and $5 million loan to be assumed by one of the existing bank lenders--all of whom are already owed millions.
Harbor Village, a complex of about 50 retail shops and restaurants that surrounds the more than 1,800 boating slips at Ventura Harbor, is at the core of all tourist activity at the harbor.
While the village generated record revenue last year, Ocean Services claimed it could not pay off its long-term debt and was forced to sell the complex. Critics of the firm claim that Ocean Service's financial difficulties stem at least in part from mismanagement.
An attorney for Great Western Savings said Tuesday's court ruling clears the way for Great Western to foreclose on three Harbor Village parcels. Attorney John McNamara said after the court hearing that Great Western has scheduled a foreclosure sale this morning.
However, an attorney for Ocean Services said he would seek an injunction to block the sale on the grounds that Great Western does not have the legal right to foreclose on the property.
This week's court ruling and subsequent maneuvering by both sides illustrates the tangled legal and financial net that has tightened around Harbor Village since Ocean Services filed for reorganization in February.
Some Harbor Village tenants and bank creditors charge in court documents that the Village is mismanaged. They also claim that Ocean Services is paying its chief executives steep salaries and sweetheart fringe benefits while failing to make a bona fide effort to reorganize its business or find a legitimate buyer for the property.
Attorney Steven F. Biegenzahn, who represents Ocean Services, declined to comment on the allegations, but said creditors would have sought a court-appointed trustee if the property were grossly mismanaged. He said all salaries have been approved by the court, Mariash's offer was made in good faith and that "we certainly take it seriously."
Even critics of Ocean Services acknowledge that Harbor Village generated $350,000 in revenue for the district last year--more than ever before. The district leases the Harbor Village land for a nominal fee to Ocean Services, which subleases parcels to about 50 individual tenants, including restaurants, retail shops and harbor-related businesses. In turn, the district receives a percentage of the fees that Harbor Village charges its tenants for boat slips and commercial space.
In 1979, Harbor Village was little more than sand dunes where sea gulls congregated. That year, Montecito businessman Edward K. Jenks formed Ocean Services to develop the 32-acre parcel into a bustling shopping, dining and boating area.
District officials welcomed Jenks' proposal.
"It wasn't like they were selected. They were the only ones interested in doing it," Ventura Harbor Manager Richard Parsons said.
Municipal Bonds Issued
To help fund construction, the harbor district agreed to issue $9.5 million in municipal bonds, with Bank of America acting as trustee. The agreement called for Ocean Services to repay the bonds to the bank, but held the Harbor District conditionally liable should Ocean Services default. Parsons said the agreement allows the bank to attach any surplus funds that the harbor district generates. But he said the harbor district barely meets its existing obligations and there is no surplus.
Court documents show that Ocean Services raised another $10 million from its shareholders, borrowed $5 million from Bank of America and $4.8 million from Great Western Savings. Security Pacific National Bank loaned the firm another $3 million.