Equestrian Center Optimistic in Spite of Its Huge Debts

Since its opening three years ago, the $15-million Los Angeles Equestrian Center at Griffith Park has earned a reputation as one of the finest of its kind in the nation.

Its location on easily accessible public land, the wide range of facilities, the classes it offers and its proximity to more than 50 miles of trails in Griffith Park distinguish the center from all others, say horse enthusiasts throughout the United States.

Yet the 70-acre center, built on land leased by the City of Los Angeles to Burbank-based Equestrian Centers of America Inc., has lost $7.5 million since it opened and remains only partly completed.

Last fall the beleaguered center filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code, became embroiled in an acrimonious multimillion-dollar legal battle with its principal lender, Gibraltar Savings of Beverly Hills, and fell thousands of dollars behind in tax payments to the state and in rental payments to the City of Los Angeles.

Retail Space Vacant

Thousands of square feet of retail space at the center sit vacant; several practice rings remain only partly constructed; a planned public restaurant has yet to open, and the deficit-ridden, members-only Riding and Polo Club now serves lunch to the public in hopes of increasing revenue and attracting new members.

Dreams of a trailside health club and fitness center, athletic facilities, specialty shops and a convention lodge remain unrealized.

“I think our only sin was that we were optimistic,” Equestrian Centers of America President J. Albert Garcia said, reflecting on the mounting losses. “We moved fast because we had a lot of doubters and we had a lot of pressure when we first started. . . . We built before the income stream got caught up with us.”

Garcia’s optimism, remarkably enough, prevails today. Despite the center’s problems, it has been business as usual, and the equestrian community of Southern California and the City of Los Angeles continue to praise it in glowing terms.

For four days ending Sunday, thousands of horse enthusiasts attended the California Professional Horsemen’s Assn. Benefit Horse Show, the second major show at the center in as many weeks.

The center also received a significant vote of confidence from the U.S. Bankruptcy Court in Los Angeles late last month when Judge James R. Dooley agreed to give center operators four more months to prepare a reorganization plan.

But the center has never been an easy venture for Garcia and his partners. Situated on land in Griffith Park bordered by Burbank and Glendale, it was built in 1981 amid protests and legal challenges from nearby Burbank residents who feared it would create congestion, noise and odors and would become a busy training stable for thoroughbred racehorses.

Those initial problems, however, were mild compared to the turmoil that surrounded the center in 1984.

In May, Garcia parted ways with Patrick Terrail, founder of Ma Maison restaurant in West Los Angeles, who was hired a year earlier as “just the right man” to manage the “exclusive” Riding and Polo Club restaurant and other food services.

Garcia said Terrail, who served chilled Champagne and Ma Maison box lunches at horse shows, lost $500,000 in five months of the restaurant’s operation. Terrail has denied those charges and said Garcia has not paid him “one nickel” for his work. Terrail declined to quote specific figures but insisted he earned a profit for the center.

In June the center was sued for $500,000 by Arthur Gottfried, a Sherman Oaks horseman who runs the livery and horse rental operations. Gottfried charged that center officials, apparently eager to run the operations themselves during the Olympics, tried to back out of a three-year lease with him “so as to gain substantial profits” during the busy summer season.

An attorney for Gottfried said the horseman, who still runs the livery and horse rentals, expects to reach an out-of-court settlement. A spokesman for the center confirmed that the two sides are talking.

In August, center executives looked on bitterly as attention during the Olympics focused on equestrian competition at the Santa Anita Race Track in Arcadia and Fairbanks Ranch in San Diego County. The center was bypassed by Los Angeles Olympics organizers, a major setback in terms of revenue and exposure.

Garcia said the Olympics “would have had a materially different effect” on the center. “Everyone would have been very conscious of our existence,” he said.

“Gibraltar and everyone else who had a peripheral--let alone primary--involvement would have been up taking kudos and announcing that they were associated with it and would have seen that we got the tools to finish it.”

In September, the center filed for bankruptcy in U.S. Bankruptcy Court in Los Angeles to block Gibraltar Savings’ foreclosure proceedings on its $10-million loan. Garcia said the center had withheld seven months of payments to Gibraltar--about $850,000--because of a dispute between the two companies over terms of the loan.

At the time of the filing for protection, the center had fallen $80,000 behind in rent payments to the City of Los Angeles, owed $79,000 to the state Franchise Tax Board and was in debt at least $5.7 million to other firms and individuals, according to documents in bankruptcy court files.

In October, the center sued Gibraltar for $50 million, charging that the financial institution withheld $2 million of its loan in an attempt to wrestle control of the center from Equestrian Centers of America, a publicly held corporation with nearly 700 shareholders.

The suit alleged that Gibraltar, after learning of expansion and development plans for the site, secretly intended to acquire and develop the facility for its own profit. Garcia said Gibraltar tried to “steamroll” the facility into submission by withholding needed cash.

In November, Gibraltar sued Garcia and Charles Spira, secretary and treasurer for Equestrian Centers of America, for $10 million for allegedly reneging on their personal guarantees in the $10-million loan agreement. At the same time, the savings and loan formally denied any misconduct in its dealings with the equestrian center and asserted that the center was not damaged “in any amount whatsoever” by the financial institution.

In December, Garcia and Spira filed for personal bankruptcy in U.S. Bankruptcy Court in Los Angeles. Both executives listed a $10-million unsecured debt to Gibraltar as a liability.

The litany of problems last year at the equestrian center, executives said, can be traced, for the most part, to its rapidly deteriorating relationship with its principal creditor, Gibraltar Savings.

A severe shortage of money needed for construction--a shortage that executives attribute to “deceit” and “false promises” by the financial institution--prevented completion of improvements to the site, which in turn blocked the facility from earning the money it needed to meet its loan payments and operating expenses, they said.

The equestrian center contended that Gibraltar agreed to forward the full $10-million loan to Equestrian Centers of America in one lump sum, thereby allowing the firm to build all the improvements to the site at one time. A completed facility, Garcia said, would suffer some start-up losses but would turn a profit in two or three years once it became established in the equestrian community.

Just before the loan was made in December, 1982, Gibraltar informed Garcia that only $8 million of the loan would be disbursed and that the rest would be withheld until the center reached a certain occupancy rate and income level at its commercial building, the center alleged in its suit against Gibraltar.

‘9 Months of Begging’

When some of the $2 million was given to the center in September, 1983, “after nine months of begging,” it was too late for the center to recover from its losses, the suit alleged.

The savings and loan denied that it harbored any clandestine plan to take control of the equestrian center. In its answer to the center’s lawsuit contained in court documents, Gibraltar alleged that the center knew that the $2 million would be withheld from the first payment and that the problems arose when the center began falling behind in its monthly payments.

“Gibraltar is in the business of lending money and hopefully getting repaid,” said Clifford J. Meyer, Gibraltar’s attorney. “Gibraltar is not interested in taking over and operating the equestrian center. All Gibraltar wants is to be repaid the loan and the interest.”

Settlement Efforts Under Way

Garcia and Gibraltar officials said, however, that efforts are under way to settle their differences out of court.

Problems at the center last year were not limited to the major financial and legal struggles that arose almost monthly.

Last summer the center was sued by its own public relations firm for allegedly falling months behind in payments for services. Richard Taylor, corporate division president for Rogers and Cowan Inc., said the firm waited as long as possible for a $46,000 fee before taking the center to court.

Besides, the center has been barraged with claims from more than 600 creditors in bankruptcy court, including Rogers and Cowan and the City of Los Angeles, since it entered into Chapter 11 proceedings.

Taylor’s patience, although it eventually wore thin, reflects a common feeling expressed by many creditors and equestrians who have dealt with the center: The Southern California horse community wants to see it succeed.

‘Great Use of Public Land’

Alan Balch, who serves on the board of directors of the American Horse Show Assn., said it would be “nothing short of a disaster” if Los Angeles were unable to support a healthy equestrian center at Griffith Park.

Balch, senior vice president at Santa Anita Race Track in Arcadia, described the center as “a great use of public land in the public interest.”

Since holding its first horse show in June, 1982, the center has become the most popular show ground in California. That popularity is partly because of the center’s facilities, which include a 3,500-seat covered arena, an International Grand Prix jumping course, stalls and corrals for more than 500 private, livery and polo horses, training arenas, bullpens, barns for 500 show horses and a clubhouse and club restaurant.

Garcia said the center has 32 major shows scheduled this year, with each attracting 600 to 800 horses. Earlier this month, 700 horses participated in a five-day show that drew more than 2,000 enthusiasts each day, said Syd di Craiker, publicity director for the center. Di Craiker said an estimated 125,000 attended shows at the center in 1984.

Several show exhibitors and suppliers have complained to the American Horse Show Assn. about unpaid prizes and reimbursements, Balch said.

Garcia acknowledged that “a lot of innocent people and suppliers got caught up in the legalistics” of the center’s battle with Gibraltar, but he emphasized that the center was not trying to avoid payment. He said bankruptcy regulations prohibit the center from paying those debts until the corporation has reorganized.

Association Plans No Action

None of the unpaid exhibitors has filed a formal complaint with the show association, Balch said. The association has no plans to take disciplinary action--in the form of fines or the rescinding of show dates--against the center’s management, he said.

“I think the horse community has been very understanding of this,” Balch said. “I think the community really wants to see this thing work.”

Los Angeles city officials, who waited three decades for a private group to build an equestrian center at Griffith Park, point to the city’s profitable contract with the center and speak with enthusiasm about the center’s future.

The Los Angeles Department of Recreation and Parks, which administers the lease with Equestrian Centers of America, receives $2,500 a month in rent from the center or 5% of gross receipts, whichever is greater.

During the first two years of operation, the department was receiving from $10,000 to $20,000 a month in rent payments, said Sheldon Jensen, the department’s general manager for the metropolitan region.

That payment fell to $8,000 in January, 1984, and dropped to the minimum $2,500 a month on several occasions last year while the center was trying to avert bankruptcy, city and center officials said.

Garcia said the $80,000 in rent owed to the city accumulated from June to September. The rent, which represents 5% of gross receipts during that period, was withheld while city and center officials were negotiating a moratorium on rent payments for the rest of the year, he said. The moratorium became irrelevant once the firm filed for bankruptcy.

‘We Paid Them Rent All Along’

“We paid them rent all along, regardless of whether we were losing money,” Garcia said, defending the center’s rent-payment record to the city. “I don’t think the city finds fault with us.”

Indeed, city officials, pleased to receive any revenue from the center, expressed little concern over the delinquent payments.

“We have achieved a rather substantial annual rental,” Jensen said. “Garcia needs to do things to make it economically feasible, but if he were to walk away from the project, we would end up with a $15-million development. It was raw land before this was built. We had never received a dime from the land.”

In a report prepared for Gibraltar by a Pasadena real estate appraiser, vacant commercial space and losses at the Riding and Polo Club were attributed to possible management problems at the center. The report was used in bankruptcy court in December in Gibraltar’s unsuccessful effort to win approval to foreclose on its loan despite the Chapter 11 protection.

Garcia insisted that the center’s management is sound and that he remains undeterred in his mission to bring a world-class equestrian center to Los Angeles.

“I am in this for good,” he said. “We know now that we could do it without Gibraltar if we have to. We have paid our learning fees. That is all behind us.”