Malibu Golf Club is facing a more uncertain future than ever after Dick Fuld, the embattled former chief executive of Lehman Brothers, was unable to save it from foreclosure.
He and his partners in Malibu Associates had taken out millions of dollars in loans to renovate the picturesque 650-acre property, which is tucked within the canyons of the Santa Monica Mountains, after they bought the property for $32.8 million in 2006. The co-owners had lofty plans for the leafy course, but they never worked out. The club closed in late 2014.
Malibu Associates owes U.S. Bank more than $50 million, court records show. The lender is now working to take possession of the property, said Bill Hoffman, a court-appointed receiver tasked with handling the process.
“A few details regarding the sale process are still being resolved,” Hoffman said, adding that the club’s asking price is among those details.
This marks another disappointment for Fuld, who served as Lehman Brothers’ chief executive from 1993 until its collapse in 2008. The investment bank was liquidated after it declared bankruptcy with $619 billion in debt – the largest bankruptcy filing in American history.
Kennedy Wilson, a real estate investment firm in Beverly Hills, will be hired as the broker to list, market and sell the Malibu Golf Club, according to court documents. A representative from the firm did not respond to requests for comment.
The planned sale comes on the heels of Malibu Associates’ failed effort to find a buyer or new equity partner to help pay off existing debt. The group filed for Chapter 11 bankruptcy protection in March, hoping to buy enough time to raise capital and stall the foreclosure.
By October, U.S. Bank agreed to a settlement with the partners that would allow them to find a buyer on their own. But there was a catch: The sale had to close before the end of last year for no less than $35 million.
A deal was not reached in time, court records show, and the bank got the bankruptcy court’s blessing to proceed with its own sale in foreclosure.
Lofty plans
The golf course, built in 1976, was among local golfers’ favorite places to tee off before it shuttered.
“If you love solitude and golf, this is impressive,” David R. Holland, a senior writer for Golf Channel, wrote in a 2013 review of the course. “You are only 10-15 minutes from the busy 101 freeway and 10 minutes in the opposite direction to the Pacific Ocean. So folks who live in the hustle and bustle of Los Angeles could really appreciate the quiet.”
Yet despite the prime location, the 18-hole, par 72 course was in need of major renovations. Malibu Associates put together a plan to build state-of-the-art educational and meeting facilities that could support conferences and corporate retreats.
Renovation plans also called for an upgraded clubhouse with new resort-style fitness and wellness facilities as well as a restaurant. To top it off, Malibu Associates planned to build 40 bungalows that would include 160 rooms available to universities and companies.
“The existing golf course is nearly 40 years old and functionally obsolete,” Tom Hix, managing partner of Malibu Associates, told the Los Angeles County Board of Supervisors in 2014. “It currently operates with annual deficits that exceed $1 million per year.”
Hix and his partners, who did not respond to multiple requests for comment on this story, received all the necessary government approvals to move forward with the project by March of last year.
But it was too late.
Money problems
Malibu Associates hit its first major road block in the wake of the Great Recession, which Fuld is sometimes accused of helping to cause because of his role at Lehman Brothers.
California National Bank, which loaned Malibu Associates $40 million to help fund the entitlement process and land acquisition in 2006, contacted the investors in 2009, asking Fuld to submit updated financial statements, according to court records. A day after he turned them in, CalNational doubled the interest rate and froze Malibu Associates’ credit line.
The bank then attempted to foreclose on the property, which forced Malibu Associates into its first bankruptcy in 2009.
Meantime, CalNational was facing its own financial troubles. The lender was closed down by regulators in 2009 and its assets were transferred to U.S. Bank.
Fuld and his partners eventually struck a deal with their new lender in 2011, agreeing to consolidate the existing debt and push back the maturity date.
But, again, there was a catch: Malibu Associates had to obtain all the necessary approvals and permits by October 2014.
Shortly after that deadline passed – and the investors were still in need of their last approval from the California Coastal Commission – U.S. Bank moved to foreclose on the property, according to court documents. Again, Malibu Associates declared bankruptcy.
What’s next
The good news for the investors is that the commission eventually approved their application, and their project is now fully entitled. The bad news is that it was too late.
U.S. Bank did, however, agree to give Malibu Associates another chance to find a new partner or sell the golf course.
In fact, court records indicate the investors struck a deal with San Diego’s Brixton Capital. But the sale never closed.
A status conference hearing is scheduled for Feb. 16 in Los Angeles Superior Court, which should provide an update on the foreclosure process.
Until then, Hoffman, the court-appointed receiver, said he will be busy preparing.
“Receivers are appointed by the judge to server solely as an agent of the court,” he said, “in this case, to take possession of the property and sell it.”
