A Promise of New Life for the Executive Hotel : Cuyamaca Club and Spa Will Open Under Schmucker

If all goes according to plan, the posh but financially struggling Executive Hotel complex--which includes the fabled Cuyamaca Club and Spa, a 102-room hotel, a 25-story office building and an 11-story parking garage--will be completely up and running by year’s end.

That’s the optimistic prediction of Dennis Schmucker, the San Diego businessman who a fortnight ago was appointed receiver of a limited partnership that owns the downtown complex. The partnership, managed by a San Bernardino developer, has been accused by state regulators of securities violations and of drawing unauthorized fees and loans from the partnership.

“I want to restore the image of that entire complex. I want to restore an elegance to the hotel,” Schmucker said.

The one-square-block ornate facility, built in 1963 by financier C. Arnholt Smith, is on the north side of Broadway between 1st and 2nd avenues. Its colorful history, prime location and intricately designed interior will help re-establish the facility as an “in spot” in the rejuvenated downtown area, Schmucker contends.

Schmucker’s Executive plan, he said, is to open both the spa and the downstairs First Avenue Grille “immediately,” then refurbish the rest of the building by year’s end.

Great Pacific Hotels, which owns several area hotels and manages several others, has managed the hotel complex for more than a year. But as of Friday, the local management firm and Schmucker agreed to part ways.

Great Pacific’s departure was amicable, according to Schmucker, adding that he would assume overall management of the complex. Otto Svensson, the hotel’s general manager for the past year, will continue in that job, said Schmucker.

Occupancy at the hotel has averaged only about 52% in recent months, while occupancy at the office complex has climbed from 50% earlier this year to nearly 71%, according to the facility’s staff. (But Crocker Bank, the tenant on the building’s ground floor, is moving out next month.)

The complex has an appraised value of more than $40 million, with $26 million owed in first and second trust deeds.

Schmucker said he did not know yet how much it would cost to refurbish the Executive, although he has reached an agreement in principle with a New York bank to provide funds for the renovation, he said.

Insiders have suspected for some time that San Bernardino developer William Crowder, who organized the limited partnership that owns the hotel and office complex, was in financial trouble because the renovation “has been dragging” and there were several overdue bills, according to hotel sources.

Sources close to the hotel maintain that Crowder, operating under the name of Bretcourt Financial Inc. (BFI), and Great Pacific each blamed the other for refurbishment delays.

Crowder’s woes involved more than cash flow, however: the state Department of Corporations has alleged that Crowder violated securities laws, commingled partnership assets, received unauthorized and interest-free loans from the partnerships, and paid himself excessive and unauthorized fees for operating the partnership. The allegations are contained in a lawsuit and summons filed by the department in San Bernardino County Superior Court.

The partnership, BFI XV Realty Fund Ltd., has 4,500 investors and poured $25 million of its $30 million into the hotel. Schmucker would not comment on what happened to those funds and said he was investigating the status of the money.

Bretcourt Financial has three limited partnerships, with 6,000 investors and about $50 million in funds, according to Schmucker.

According to Crowder’s limited partnership prospectus on file with the state Department of Corporations, he and his affiliated ventures received fees for nearly every aspect of operating the partnership.

The 1982 prospectus reveals that the Crowder-controlled entities were to receive 5% of the gross proceeds of the offering, up to $100,000, for organizational expenses; 10% of the offering, or $1.5 million, for underwriting commissions; 9%, or $1.35 million, for investment advisory fees; 9%, or $1.35 million, for acquisition fees, and fees for property management and cash flow distribution.

Crowder could not be reached for comment.

For Schmucker, the task of revitalizing the hotel and returning it to profitability takes on something of a prodigal-son tale. A veteran San Diego businessman, Schmucker has built a reputation as a tough, aggressive turnaround specialist.

Schmucker in 1975 was appointed chief officer of the bankrupt U.S. Financial, one of the nation’s largest real estate sales and financing firms, which collapsed in 1973 amid massive fraud. Claims by investors topped $100 million, although the value of the estate at the time was about $28 million.

After a successful reorganization, the value of the estate reached $44 million, and Schmucker said last week that investors eventually received $1.50 to $1.75 on each dollar.

In addition, shareholders who sued the company eventually collected more than $50 million in the settlement. Their suit was filed after the Securities and Exchange Commission found that the company had conspired to fraudulently inflate its assets and profits.

Schmucker is now completing liquidation of American Home Mortgage Corp., a Costa Mesa-based second mortgage firm that collapsed in 1983. Since then, he has commuted between Orange County and San Diego.

American Home Mortgage attracted 7,100 investors and used $56 million of their IRA and retirement pension funds to invest in trust deeds. The firm was actually a “massive Ponzi scheme,” Schmucker said. Investors actually lost only about $10 million, however.

The company’s owner, Orange County financier John Rinaldo, began serving a three-year federal prison term in September.

Closer to home, Schmucker considers himself something of a “whistle blower” for his role at American Federal Financial, the San Diego-based second-trust-deed mortgage company that collapsed into bankruptcy in March, 1982. About half of the firm’s $50-million to $60-million loan portfolio was in foreclosure at the time.

Schmucker was an executive of American Federal Financial who claimed the company’s overhead was too high and that it had made too many bad loans.

Schmucker has had prior dealings with Great Pacific, or at least the firm’s principals.

In December, 1978, Schmucker, while in charge of liquidating bankrupt U.S. Financial Corp., sold the company’s 198-room Dana Inn on Mission Bay for $6.3 million to J. Nevins McBride and Henry A. Gotthelf, owners of Great Pacific Hotels.

In addition, McBride and Gotthelf reportedly had an option to buy the Executive complex, which they sold to Crowder for $3 million in cash and a $2-million note. They have not been paid on the note.