Wednesday Nov 26 2008
Developer bombshell: Roseville-based Kobra Properties files for Chapter 11
By: Nathan Donato-Weinstein | firstname.lastname@example.org
In a pre-Thanksgiving Day bombshell, Roseville-based developer Kobra Properties announced late Wednesday it had filed for Chapter 11 bankruptcy protection, becoming the latest high-profile casualty of the economic downturn. The once high-flying Kobra, led by its charismatic founder, Abe Alizadeh, has been the force behind numerous major commercial building projects throughout the Sacramento region, with more than 3 million square feet of commercial real estate in its portfolio. Recently, it’s seen fortunes change as lenders demanded payment on notes and a slew of contractors filed mechanics liens against the company. Alizadeh was not available for comment late Wednesday. In a statement, he said: “Like families, governments and businesses everywhere in the Sacramento area, America and around the world, our company is facing difficult financial challenges. “In the face of these challenges, we're taking action so we can fairly honor our financial commitments, protect the thousands of jobs we provide and restructure Kobra Properties so we not only weather the storm, but emerge even stronger.” The filing affects Alizadeh-owned Kobra Properties, Kobra Preserve and Vernon Street Associates LLC, according to court documents. In a statement, the company said its restaurant operations would not be affected by the filing. Alizadeh-owned companies operate numerous Jack In The Box franchises, as well as the upscale Crush 29 restaurant in Roseville. Another restaurant venture, Cena Di Mare, has been under construction, and was reportedly to be the most expensive restaurant development ever undertaken in California. It was unclear what the status of that project was late Wednesday. Also unclear was the status of the company’s Civic Plaza Office Building, under construction since 2005 on Vernon Street in Downtown Roseville. The project has been called a lynchpin of efforts to redevelop the city’s historic business corridor, but work is far behind schedule. Workers disappeared for months earlier this summer, but lately crews have returned. The filing would appear to put the final nail in the coffin of a long-delayed joint venture with the city of Roseville to build a hotel and conference center near the Galleria mall. Under a deal approved in 2005, the city agreed to loan Kobra more than $10 million to help build a conference center adjacent to a 279-room full-service Embassy Suites the company intended to build. But the project never really got off the ground as development costs have escalated. But city spokeswoman Megan MacPherson, reached by phone late Wednesday, said the city faced zero exposure following the bankruptcy because the city never transferred the funds to Kobra. “We have that money set aside, and we’re not owed money by Kobra, either,” she said. MacPherson added that the city remains committed to building a conference center as part of its long-term plan to increase Roseville’s marketability as a destination for business and tourism. “The vision the city has still remains the same,” she said. “We’re still committed to a conference center. We know that the economy today is very tough and we’re planning for a city long into the future.” In filings made in federal bankruptcy court, Kobra says it owes its 20 largest creditors nearly $2.3 million in unsecured loans. In recent months, lenders have issued notices of default for loans and lines of credit. Last month, Wells Fargo said Kobra was in default on a $143 million line of credit used to finance eight properties, according to a Sacramento Business Journal report earlier this month. The company has also faced legal challenges from its subcontractors, who have filed scores of mechanic’s liens and lawsuits alleging nonpayment on services rendered. Liens filed this month included those by asphalt, equipment and electrical contractors, all claiming breach of contract over payment issues, according to records on file with the Placer County Clerk’s office. The contractors have occasionally been vocal. In one case earlier this year, a plumbing contractor staged a protest outside Crush 29, claiming numerous payments were past due. The contractor later resolved his differences with Alizadeh. The company statement issued late Wednesday blamed the filing on “the worsening economic recession, a depressed real estate market and the tightening and tumultuous credit industry, where the rules are changing almost daily.” The statement signaled Kobra’s intentions to emerge from bankruptcy protection following a reorganization. The bankruptcy is the third major filing by a high-profile local developer within the past twelve to 18 months. In May, Roseville developer and restaurateur Stephen Des Jardin’s Diamond Creek Partners also filed for bankruptcy protection. That followed Dunmore Homes’ stunning declaration in late 2007 that it was also bankrupt. The Granite Bay-based homebuilder was later liquidated. Reach the writer at email@example.com or 916-774-7969.