Several months after capitalizing this project, the investor group discovered that a general partner had misappropriated project funds. He had falsified construction loan draws, diverting those funds to float other failing projects. The misappropriation was a default under the loan and might have caused the lender to act defensively and stop the project’s development.
Tasked with saving the project from ruin, one of our principals assumed full operational control. He outlined a plan to investors, and, with their support, had the resources to cover shortfalls. Together, they made full disclosure to the project’s construction lender, who quickly pledged its support.
The commingling among several partnerships threatened years of costly lawsuits. But a forensic accounting proved Montalvo Square was a net creditor to the other projects. It allowed us to negotiate prompt settlements and avoid any litigation.
With construction way behind schedule, there was material exposure to suspicious tenants. We opened a dialogue, worked through the issues, and restored confidence.
Achieving over 90% occupancy upon completion, we sold the shopping center to a motivated buyer. We don’t attribute this success to a single person. A team effort among our lender, investors, staff, and retained professionals made the difference. We led this team and resolved the more challenging issues personally.
