O.C. Developer, 5 of His Care Sites Seek to Reorganize
Orange County developer Robert J. Zinngrabe has filed for Bankruptcy Court protection in an effort to resolve financial problems affecting his multimillion-dollar empire of care facilities and homes for the elderly.
The bankruptcy filings indicate that some of Zinngrabe’s operations have developed cash-flow problems, including his 98-bed Pacifica Hospital in Huntington Beach. Zinngrabe himself filed for a Chapter 11 financial reorganization July 7, and five of his ventures have made separate similar filings since then.
Among other things, Zinngrabe seeks court permission to use income from other properties to shore up the hospital.
He also hopes to sell his 161-unit Huntington Terrace senior care facility, also in Huntington Beach, for $16 million to raise cash.
But a lawyer for a lender, Pacific Life Insurance Co. of Newport Beach, contends that none of the five companies in bankruptcy appeared to be in trouble financially. She questions whether Zinngrabe sought court protection to avoid loan penalties that would have been triggered if he had proceeded with the sale of Huntington Terrace.
“I’m not sure that there’s any economic crisis at all,” said the attorney, Sheri Bluebond. “I think these are solvent entities with sufficient cash flow to pay their operating expenses. This is all about trying to avoid certain provisions of the loan agreement that the borrowers don’t want to comply with, that they can well afford to comply with.”
The financial fiasco marks the second setback for the 70-year-old entrepreneur in less than a year. Zinngrabe was the majority owner of the Piranhas, the Arena League football team in Anaheim that folded last year after two seasons.
Zinngrabe wasn’t available for comment. His lawyer, Robert Opera, said he knows of no connection between the Piranhas’ demise and Zinngrabe’s bankruptcy petitions.
On July 7, Zinngrabe personally filed for Chapter 11. Among other things, he sought to protect his stock holdings in five companies that serve as collateral for a $29 million loan. The loan is administered by Pacific Life.
In August, the five companies also filed for protection from creditors. The five companies have assets of $60 million and liabilities of about $35 million.
Although associates provide varying assessments, the hospital seems to be at the heart of Zinngrabe’s financial problems.
Although the hospital itself is not in bankruptcy proceedings, it’s losing money, according to Zinngrabe’s associates. The hospital does have facility leases with three of the Zinngrabe businesses in bankruptcy proceedings, according to a lawyer.
The hospital’s rent is “too high for the revenue coming in,” said H. Gordon MacKenzie, chief executive of delmapacifica Corp., which manages some of the Zinngrabe businesses.
The facility’s inability to keep up with its lease payments has had an adverse impact on the three businesses, said Paul Couchot, a lawyer for the businesses.
According to figures reported to the state, the hospital posted a loss of $611,112 on $33.5 million in revenue for the year ended March 31. Officials didn’t explain why the hospital itself isn’t in bankruptcy.
In the last two years, MacKenzie said, delmapacifica tried to attract new financing, but failed. At the same time, according to court filings, Zinngrabe and some of his businesses borrowed an additional $7.4 million, but couldn’t line up a lender to replace the troublesome $29-million loan.
The properties now in bankruptcy proceedings include Huntington Terrace; the 4.5-acre site for the hospital; a 262-bed care facility with a special 24-bed Alzheimer’s unit; and an 11-story medical office building, all in Huntington Beach. There’s also a 10-acre senior community in Morro Bay, with 74 apartments, 88 assisted-living beds and 145 skilled-nursing beds.
Three years ago, the Zinngrabe properties borrowed $29 million through a loan agreement. The borrowers received an initial interest rate of 9.45% on the loan, which was later put into a pool of loans that was sold to individual public investors, Bluebond said. If the income properties backing the loan are sold, Zinngrabe interests must pay a penalty of up to $8 million to assure investors of their expected return, she said.
A lawyer for the properties said they are all operating as usual.
Lawyers for Zinngrabe, his businesses and Pacific Life agreed that they expect that all creditors eventually will be paid in full.
Overall, Zinngrabe owns or controls assets worth more than $94.9 million, according to his personal bankruptcy filing. Debts totaled $57 million.
A developer and investor in senior living and care industry since 1960, he is chairman of delmapacifica.
Assets listed in his personal bankruptcy include his Newport Beach home, a condo in Maui, properties in Santa Ana, Antelope Valley, Morro Bay, and his interests in his businesses.
Opera, who represents Zinngrabe in his personal bankruptcy, said: “Mr. Zinngrabe is an individual who has always paid his debts, and he is committed to pay his creditors in full.”
