Investors Attempt to Buy Galleria
An investor group led by an unidentified former San Diego Chargers football player is negotiating with developer Ray Jessen to buy Jessen’s financially troubled Old Town Galleria shopping center, according to sources familiar with the deal.
If Jessen doesn’t sell the 47,500-square-foot retail center by Oct. 1--he’s asking $8.3 million--then San Diego Trust & Savings Bank will foreclose on Old Town Galleria, thereby ending a two-year attempt to reorganize the center under Chapter 11 bankruptcy.
The bank is owed nearly $6 million in principal and interest for money it loaned to a partnership headed by Jessen to build what was then called Old San Diego Square.
The bank doesn’t want to become the center’s operator, according to bank sources. “We’re not at all convinced that we could make it happen any better than he did,” said one bank source, referring to the center’s meager 50% occupancy rate.
Nonetheless, the bank and Jessen are now enjoying a relatively upbeat relationship--selling the center appears to be in both parties’ best interests, sources say.
“We’re looking forward to an amicable resolution of the relationship between the borrower and the bank,” said Ted Graham, San Diego Trust’s attorney. “We’re working with (Jessen) and are cooperating with him.”
Continued financial problems at Old Town Galleria has left the bankrupt center with only two alternatives--sell it or “let the bank take it back,” according to Carl Bettis, Jessen’s assistant.
“We’ve tried to renegotiate the loan,” Bettis said. “But the bank is taking a very strong stance.”
It was the bank’s threat of foreclosure that forced the center to file for Chapter 11 bankruptcy protection from creditors in early 1983. Relations between the bank and a partnership managed by Jessen--he owns only 37.5% of Old Town Galleria--had actually soured the previous year. The Old Town partnership sued the bank for $30 million in November, 1982, alleging breach of contract and claiming that the bank tried to take over the project by intentionally causing a default on the property.
The suit was later settled and the bank restructured its loan--all as part of the bankruptcy reorganization plan.
The retail center’s bankruptcy does not involve Jessen’s real estate development firm, Bettis said. The firm is developing a three-building, 100,000-square-foot commercial project in Kearny Mesa and is a joint venture with Robinhood Homes on a 1,200-unit community in Oceanside.
