4 Westamerica Companies File for Bankruptcy : Land ventures: The real estate investment and development firms may be followed by the parent company and another subsidiary shortly.
A group of affiliated real estate investment and development companies with more than 200 acres of land in Riverside and San Bernardino counties has thrown in the towel and filed for bankruptcy liquidation in the face of mounting debts and lawsuits by disgruntled partners.
The filings represent the largest bankruptcy of an Orange County development firm since the recession began last year.
And the four subsidiaries of Irvine-based Westamerica Inc. are expected to be followed into bankruptcy in the next few days by the parent company and one other subsidiary.
Ernest Leff, attorney for the companies, said Westamerica would file for relief from creditors’ claims under Chapter 11, while its fifth and last subsidiary, Westamerica Properties Group, would file for liquidation under Chapter 7 of the bankruptcy code.
Westamerica Properties, which owns parcels of undeveloped land, sold its majority ownership of the landmark Melrose Abbey cemetery and mortuary in Anaheim for an undisclosed sum as part of a corporate restructuring effort earlier this month. The mortuary, housed in a complex of buildings built to resemble a medieval French monastery, is a familiar sight to travelers on the Santa Ana Freeway near Disneyland.
Leff would not disclose the assets or debts of the two Westamerica companies that have not yet filed for bankruptcy.
The four other subsidiaries all filed for Chapter 7 liquidation Friday in federal bankruptcy court in Santa Ana. Together, they claimed total assets of $8.4 million and liabilities of $22.5 million.
The assets, four separate undeveloped parcels of residential land, had been valued much higher in previous years, Leff said.
But the value of the properties--none of which have yet received final government approval for construction--has declined sharply because of the weak market for new homes.
Most of the combined debt is owed to various lenders and to the property owners from whom the Westamerica companies acquired the parcels, Leff said.
He said the bankruptcies were spurred by a series of lawsuits filed by former property owners who claim that they have not been paid off in a timely manner.
In most cases, Leff said, the property owners who provided land to the Westamerica companies received little or no cash but became partners in the ventures. They took back notes and were to receive a share of the profits when the land was resold at a future date to a home builder, he said. Each subsidiary was formed to acquire a different property.
Westamerica Inc., the parent company, is a publicly traded firm that moved to Orange County from Minnesota in 1987.
In an interview last year, its majority owner and chairman at the time, Theodor Nickolas Bodnar, said Westamerica’s strategy was to buy undeveloped land at low prices years before there would be an appreciable market for the properties.
The company then would obtain the necessary zoning and building clearances, do some of the grading and other infrastructure work and, when the area became more desirable, sell the land to other builders “at a big profit,” Bodnar said.
That strategy backfired, however, when the Southland residential market collapsed in late 1990 before residential building in the Inland Empire caught up to the Westamerica properties.
Bodnar, while still the major shareholder, was forced to relinquish his operating role in the company because of health problems last year, Leff said. Westamerica stock is traded in the so-called pink sheets, meaning there is a very limited market for the shares, which sell for well under $1 apiece.
Robert V. Murton, president of Westamerica Inc. and its subsidiaries since August, said the ailing companies have had to file for bankruptcy “because there is no more money available from any entity at all--not the banks or private investors--to continue development of the properties. All of the sources of capital that we are aware of have dried up.”
He said most of the Westamerica properties were purchased between 1985 and 1989, when Southern California land prices were rising rapidly.
Murton said that in reviewing the companies’ books after taking over from Bodnar, he was “amazed at how good the deals were. The raw land was acquired at very low prices.”
But the ongoing costs of financing and preparing development plans for the land “have eaten everything up,” he explained.
“If you cannot renew your loans and you don’t have permits to start building, it’s like hitting a brick wall at 100 miles an hour.”
Westamerica’s Financial Structure The Westamerica Inc. subsidiaries that went into bankruptcy reported these assets and debts:
Westamerica Capital Partners II. It owns 120 acres in the Riverside County community of Temecula, which is listed as its only asset, valued at $4.5 million. The company listed $13.4 million in debt, most of it loans secured by the property.
Westamerica Partnership II, owner of 54 acres in Riverside County near Lake Elsinore. It listed the land as its only asset, worth $2.5 million, but said it was $6.4 million in debt.
Westamerica Capital Group Inc., which owns 12 acres near Victorville in San Bernardino County. It reported assets of $353,443 and liabilities of $1.2 million.
Bodnar Builders Corp., which has a 50% interest in a 32.5-acre tract in the Riverside County city of Moreno Valley. It reported assets of $1 million and debts of $1.5 million.
