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Doubt Escalates on Future Development of $70 million Escondido Marriott
as Developer Gets Sued over $950,000 in Unpaid Business Loans

By David Garrick, North County Times, Escondido, Calif.McClatchy-Tribune Regional News

Jan. 12, 2011--The developer planning a seven-story Marriott in downtown Escondido has been sued for not repaying $950,000 in business loans, casting greater doubt on whether the $70 million hotel will be built.

Financing problems had already put the project in jeopardy and prompted the developer, Craig Clark of Rancho Santa Fe, to ask city officials for yet another postponement last month.

Last Friday, Pacific Western Bank filed two lawsuits against Clark and his family trust seeking $950,000 for failure to repay business loans Clark received in December 2008.

The timing of the suits puts the City Council in a difficult position, because council members were scheduled Wednesday evening to grant Clark a six-month financing extension.

In an interview Tuesday afternoon, Clark acknowledged that he failed to repay the loans. But he said the lawsuits had no connection to the Escondido hotel deal and shouldn't affect his extension request.

"The only thing this is connected to is me," Clark said, insisting that the loans were for development projects unrelated to the hotel, but declining to specify which projects.

Clark's company, C.W. Clark of La Jolla, has been involved with more than a dozen developments in recent years, including shopping plazas, hotels and movie theaters.

But Councilwoman Olga Diaz, the only council member to vote against the downtown Marriott when it was approved 4-1 last June, said city officials should make sure that Clark's financial problems were not the reason that the hotel's primary lender pulled out last fall.

Councilwoman Marie Waldron agreed, explaining that she asked City Attorney Jeff Epp to investigate possible connections to the Escondido Marriott when she learned of the lawsuits on Monday.

"This is something that could go into our decision," Waldron said.

However, she said it was also possible that the unpaid loans could be related to different business transactions.

Mayor Sam Abed said city officials should not allow the lawsuits to play a key role in the hotel decision.

"This is a personal matter between Mr. Clark and the bank," Abed said. "If we can secure our project with adequate means, this shouldn't matter."

Clark said Tuesday that he had recently secured a new venture capital firm to finance the Escondido hotel. A previous venture capital partner, Robert Bahen, had failed to come through with promised financing several times over the past 18 months, Clark said.

Clark blamed his failure to repay the loans on the economic downturn, contending that things have been particularly bad for developers.

He said the lawsuits were triggered in part by a 25 percent drop in the value of his Rancho Santa Fe home, which he used as collateral for an extension of the loans in July 2009.

"This happened because the house is no longer worth what we owe on the loans," he said.

Clark said he's been trying to lease or sell the home, and that he planned to repay the loans when the economy improves.

Waldron said the requested extension was less risky because it was nonexclusive, noting that the extension would allow other developers to step into the deal in April if they secure financing faster than Clark.

The deal approved last June includes a $10.7 million subsidy from the city. In addition, the city provided the developer land valued at $1.8 million and its conference facility, which has been appraised at $5.6 million.

Clark has missed several deadlines since he was chosen by the city to develop the hotel in 2004. The project was delayed in 2006 by a lawsuit, and again in 2009 by the city's budget crisis.

A flurry of recent hotel foreclosures in San Diego County has made hotel financing particularly difficult to secure, city officials have said.

The hotel would be built on a 75-space parking lot between City Hall and the California Center for the Arts, Escondido.

Supporters contend the hotel would help the city attract conventions, bolster the struggling arts center by making Escondido more of a tourist destination and help attract technology firms because big businesses prefer to have luxury hotels nearby.

Opponents say the subsidy is too large and that the hotel would be a failure because tourists have no reason to visit Escondido in significant numbers.

Call staff writer David Garrick at 760-740-5468.


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Copyright (c) 2011, North County Times, Escondido, Calif.

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