A company that helped build a 300-unit housing project for Naval Base Ventura County in Port Hueneme claims it’s owed more than $7 million by its long-time development partner.
Watt Properties, in addition to plaintiffs F.W. Parker and David Parker, filed a complaint March 3 in Ventura County Superior Court against Jesco Limited Partnership.
The complaint alleges that Watt’s 60 percent residual interest in the Pearl Court and Midway Estates project, which was sold to the Navy base last year, wasn’t properly valued and that Jesco refinanced the property twice, taking additional proceeds without telling representatives of Watt.
Watt alleges that John Sims, the only limited partner in Jesco, violated the original partnership agreement by refinancing the development in 2002 and again in 2006. In the complaint, Watt said it didn’t become aware of the refinancing until the summer of 2013.
Westlake Village-based Wheeler & Associates is representing Watt in the case. The firm did not respond to request for comment. Representatives for Jesco did not respond to a phone message.
In 1991, the complaint alleges, Sims acquired a ground lease to develop the 19-acre property in order to develop a housing project for the growing Navy base. Upon completion, the Navy would sublease back the property for about $3.2 million in annual rent.
In 1992, Sims and Watt-Parker Construction signed a contract forming Pacific Ventures Associates. The partners obtained a construction loan to build the project. When the project was finished, the two firms secured a permanent loan to replace the construction loan. According to an agreement cited in the case, Watt and Sims would split the front-end profits fifty-fifty and the title would be held by Sims. The agreement also stipulates that either when the loan matures or the property is sold or refinanced, the residual value would be divided between the partners with 60 percent going to Watt and 40 percent to Sims, according to the case.
Watt alleges that years later, Sims formed Pearl Court Corp. around September of 2002, subsequently forming Jesco with Pearl Court as the general partner and Sims himself as the only limited partner. That same year, Watt alleges, Sims transferred the interest in the ground lease to the development and the sublease with the Navy to Jesco. Watt claims the transfers were made without payment or consideration to its interest in the original partnership.
Also in 2002, Jesco obtained a new $23.2 million loan from Deutsche Bank and pre-paid the $22 million permanent loan previously secured with the General Retirement Fund of the city of Detroit, the case alleges. According to Watt’s filing, the new loan significantly reduced the debt service on the development, creating an additional monthly profit of $17,000 for Jesco.
In April 2006, Jesco again secured a new loan with Wells Fargo for $26 million. Watt alleges that Jesco used the proceeds of the new loan to pay off the 2002 loan and pocketed the remaining $1.3 million.
According to Watt’s complaint, it wasn’t until 2013 that it found out about the re-financings and the transfers. Around that same time, Watt also learned that Sims had died three years earlier in Eagle County, Colorado.
Watt originally filed a separate lawsuit against Jesco in 2013 and also petitioned the Colorado courts to reopen the probate of Sims’ estate.
In January of last year, Watt and trustees of John E. Sims Living Trust entered an interim mediation agreement and in addition to the previous lawsuit being thrown out, all parties would jointly negotiate with the Navy to settle any payment issues related to Watts’ interest in the development.
After months of negotiations, Watt, Sims Trust (acting for Jesco) and the Navy reached an agreement with the Navy purchasing the ground lease for a little more than $25.6 million. About $2.1 million in proceeds from the sale is hanging in an escrow account. However, Watt claims that if Sims, operating as Jesco, hadn’t wrongfully paid off the original Detroit loan in line with the previous partnership, Watt would have been entitled to roughly $6 million in residual value. Additionally, the increased net income Jesco received under the 2002 loan as well as the $1.3 million it took as part of the 2006 financing also entitles Watt to at least another $1 million, the suit claims.
It is unclear how Jesco plans to respond.
New partner at BFAS
Buynak, Fauver, Archbald & Spray recently announced Naomi Dewey was named a partner at the firm.
Dewey will continue to provide general counsel and litigation services for private clients, foundations, nonprofits and small business owners with a focus on employment law, construction, and real estate.
Dewey is the Santa Barbara County Bar President Association and past president of Santa Barbara Women Lawyers. She serves as an elected governor of San Luis Obispo, Ventura, Santa Barbara, Riverside and San Bernardino counties for California Women Lawyers, for whom she is also legal counsel. Dewey also volunteers as a judge for Santa Barbara County’s Teen Court and is recognized as a 2014 and 2015 Southern California Rising Star — an honor given to the top 2.5 percent of lawyers in the state.