Whiting Ranch Is Sold to Avoid Foreclosure

The Bank of Montreal is taking possession of the 2,700-acre Whiting Ranch from Carma Developers “in lieu of foreclosure” for payment of $35 million owed on a delinquent loan, an attorney for the Bank of Montreal said Thursday.

Attorney Dennis Arnold said that Carma Developers, a Houston company whose Canadian parent, Carma Ltd., is in financial trouble, has agreed to sell the prime expanse of undeveloped property north of El Toro for a small fee to cover Carma’s expenses. The land will be sold to JC/RG Corp., a newly formed California subsidiary of the bank.

Arnold refused to disclose the size of the bank’s payment to Carma, but he said such payments are not unusual, even when a company is facing the possibility of foreclosure.

He said that in essence the bank was accepting the land for full payment of its loan. “We are taking the property over,” Arnold said.

While declining to estimate the value of the ranch, which is zoned for up to 3,900 homes and industrial and commercial development, Arnold claimed that it is “much, much less than the indebtedness secured by the project.” Arnold said that, including interest, Carma owes the Bank of Montreal about $35 million on a loan it received to help acquire and develop the ranch.

Carma officials were unavailable for comment Thursday. On Wednesday, Wayne Sramek, chairman of Carma Developers, denied that the pending sale of the Whiting ranch had anything to do with Carma’s efforts to rid itself of its debts. He said only that the estimated $100-million cost of developing the property did not fit into the company’s “near-term business plan.”

E. A. (Sandy) Sandling, an Irvine builder who since 1979 has managed Carma’s real estate holdings in Southern California, said Wednesday that he believed the new owners of the ranch would quickly revive its development, which has been stalemated since 1982.

However, Arnold said “it is uncertain whether the bank will build out the property or develop it or sell off part of it. . . . They will do whatever is economically rational.”

Arnold said he believed that the Whiting Ranch eventually will be developed, “but (to say) when and how and by whom would just be speculating.”

Development of the Whiting Ranch has been mired in controversy for years. Kent B. Rogers, an Orange County businessman who agreed to purchase the Whiting Ranch in 1975 for $2 million, made a $400,000 down payment but never paid the remaining $1.6 million. Rogers was later convicted for fraudulently attempting to conceal the ranch from creditors in a bankruptcy action.

The ranch, put up for auction by the U.S. Bankruptcy Court, was purchased in July, 1979, for $12 million by a group of Iranian investors who turned around and sold it to Carma Developers Inc. next December for an undisclosed price. Recollecting the 1979 acquisition, Sramek said: “We thought it was just a good buy at the time.”