Principals, stakeholders, creditors and assorted other interested parties are awaiting a ruling by U.S. Bankruptcy Judge Eileen W. Hollowell on an amended plan of disclosure statement that seeks to get Saguaro Ranch back on its feet and its debts paid off.
Eric Sparks of Eric Slocum Sparks, PC in Tucson, the attorney representing Saguaro Ranch, its various corporations and owner Stephen Phinny, said the amended plan shows that debtors have raised $3 million to make improvements, putting the finishing touches on a number of lots, cutting roads, building a spa and putting in a riding center.
Sparks said Saguaro Ranch engaged a California consultant who revalued the unsold properties and set out new prices to charge for the lots.
"We have six contracts waiting for the court to confirm the plan," Sparks said, "and two more that have come in and also are waiting."
He noted the revaluation of the lots has been "a real incentive and all of a sudden there have been lot sales going on, so they (Saguaro Ranch) will have cash flow to pay the mortgage."
Saguaro Ranch Development Corp., and four affiliates filed voluntary Chapter 11 bankruptcy petitions with the U.S. Bankruptcy Court for the District of Arizona on Feb. 13, 2009. The five debtors are Saguaro Ranch Development Corp., PCC Investments Inc., Saguaro Guest Ranch Management Corp., Saguaro Ranch Investments LLC, and Saguaro Ranch Real Estate Corp.
Saguaro Ranch's plan was to develop 180 single-family homes on a 1,085-acre tract in the Tortolita Mountains.
At the time of the filing, the bankruptcy petition's schedules of assets and liabilities reported Saguaro Ranch's assets as approximately $147 million, with liabilities of approximately $38 million. Kennedy Funding Inc. & Anglo-American Financial LLC were listed as the largest secured creditor with a claim of $23.9 million.
"We are waiting for the judge to approve the changes in the disclosure statement that she's asked for," Sparks said, "and then our plan can get mailed out to creditors. We expect a fight with Kennedy Funding, which has been opposing us all along."
Sparks noted that Saguaro Ranch has rewritten the mortgage with Kennedy Funding and reduced the default interest rate from 25 percent to 6 percent.
"We've objected to their defaults on interest because they themselves forgot to release liens on properties," Sparks said. "We think that will give us some justification to reduce the interest rates substantially."
He added that Saguaro Ranch also has re-amortized the payments over a longer period of time, reducing the amount to be paid monthly by a substantial amount.
Ben Bauer, an attorney for Fennemore Craig PC of Tucson, which represents Kennedy Funding, said Saguaro Ranch's amended plan of disclosure "as presented has concerns, and we are continuing to try to work through them."
However, responding to an additional $3 million in funding, Bauer added, "New capital is helpful to any project."
But the economic downturn and the bottom falling out of the real estate market have caused the price of Saguaro Ranch's lots to decline dramatically.
"The first 50 lots sold were for $1.25 million per lot," Sparks pointed out. "The consultant said they needed to be lowered substantially, so we're in the $500,000 to $700,000 range now for lots. We have 133 lots left and only owe $22 million to Kennedy Funding, so we have plenty of lots left, but need to get roads to them."
The infusion of $3 million in cash, coming from investors in California, will make a big difference for Saguaro Ranch and put a lot of people to work, Sparks maintained, especially with construction jobs building roads to get to new lots, a 6,000-square foot spa, tennis courts, riding area and casitas.
"The spa will go in not far from McClintock's, and one of the major changes is we're going to put casitas in on the ridge near the restaurant," Sparks said. "Casitas have done well at Miraval and other high-end resorts throughout the country, so our consultant advised we should start building casitas."
Robinette Architects in Tucson has been engaged to design the spa and casitas, he said.
Sparks noted that a half dozen or more lots have easy access that would not take much work to complete the roads to them.
"Those will be quick sales, but some others will take a few months to get the work done," Sparks said.