Gearhart properties to be auctioned
September 30, 2013
By KAREN VELIE
Three of former north county developer Kelly Gearhart’s properties will be sold at auction in October including the Paso Robles golf course property known as Vista del Hombre.
A New York firm will hold the auction on Oct. 16 at the Courtyard by Marriot in Paso Robles at 11 a.m. for Gearhart’s 250 acre Vista del Hombre property. In addition, two Atascadero development sites, each approved for 11 homes, will be sold free and clear to the highest bidder.
The funds from the auction will be used to pay property taxes and other property obligations before being divvied out to Gearhart’s creditors.
In the wake of an FBI investigation into fraud and organized crime, Kelly Gearhart and wife Tamara Lowe moved to Wadsworth, Ohio in 2008. Federal investigators were looking into allegations, first reported by CalCoastNews, that the couple helped defraud more than 1,200 investors out of more than $100 million in an alleged Ponzi scheme.
In 2009, Gearhart filed for bankruptcy in Ohio claiming $6.5 million in estimated assets and $45.1 million in estimated debts.
In 2012, while the bankruptcy court was attempting to liquidate assets, the San Luis Obispo County tax collector’s office announced plans to auction several of Gearhart’s tax-defaulted properties. The Ohio court trustee responded by filing a motion which halted the proposed sales.
Located six miles east of downtown Paso Robles, the Vista del Hombre property includes the Links golf course and a well access agreement. The area is currently under an urgency ordinance that prohibits new development and the planting of crops unless proposed projects save as much water as they use.
Nevertheless, the Visa del Hombre property could likely be converted to vineyards because golf courses require substantially more water than vineyards and the conversion would lower water usage.
The Links golf course is a flat, dust-blown, tree-bereft expanse of land situated a stone’s throw from the airport. Vista del Hombre begins with a blacktop road winding through the existing golf course, which was opened in 1996. The narrow road terminates at a group of drab, temporary buildings featuring Porta-potties and a small trailer which houses both a pro shop and a cafeteria.
The property is currently assessed at $2,235,009.
What is remarkable, though, is that hundreds of locals invested approximately $28 million in this Gearhart project through hard money lender Hurst Financial. At the time, Gearhart and Hurst Financial owner Jay Miller claimed the property was worth as much as $100 million.
Hard money lenders specialize in short term, high interest construction loans that are often used as bridges to help a developer finish a project. Loans are based on the value of the underlying asset rather than the borrower’s credit rating.
Gearhart got his first loan for Vista del Hombre’s purchase and initial infrastructure construction in May 2006 from Miller in the amount of $15 million. That initial loan was slated to mature in late 2006, but Hurst has not reimbursed investors and ceased providing interest payments.
But by then, Hurst had already lent Gearhart another $11,850,000 for the Vista del Hombre development – escalating Gearhart’s annual interest payments to $4 million. That pact was inked on June 22, 2007, after Hurst attracted more than 100 investors with the same loan-to-value promise. These investors received interest payments for only six months before the payments abruptly ceased.
In the summer of 2011, Hurst Financial President Jay Miller agreed to plead guilty to charges of fraud and money laundering as part of a plea agreement the court then filed under seal.
In August 2012, Gearhart pleaded not guilty to 16 charges of mail fraud, wire fraud and money laundering at a federal court in Los Angeles. He faces up to 300 years in federal prison if convicted on all charges. His trial is set for Nov. 12.
Both men remain out of jail on bail.