With liabilities mounting against almost completely depleted assets, California’s Poway Property, LP filed for Chapter 11 bankruptcy on September 13, 2021, while seeking to restructure its business operations following legal issues in recent months.
The company owns the mixed-use space Outpost in Poway, California, a development that boasts the allure of “multifamily being built alongside [retail],” with apartments built next to food and commercial spaces.
According to the bankruptcy filing, the company owes at least $22,990,360 to 11 separate creditors — with the monetary amount of an additional twelfth claim currently unknown. This number stands in sharp contrast to the company’s available funds, as it lists its estimated assets as being less than $50,000.
Chapter 11 bankruptcy allows for a company to offer a plan to reorganize and restructure its debts while continuing business operations, so there is hope for Poway Property to be able to solve its legal problems and move forward.
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A number of construction creditors are owed a significant amount as part of the bankruptcy:
- $26,486 to Bay City Electric
- $218,315 to Cemex Construction Materials Pacific
- $250,000 to Condon-Johnson & Associates
- $153,878 to K.D. Stahl Construction
- $578,226 to Pacific Steel Group
- $160,000 to Rand Engineering
- $379,600 to Sharp Construction
- $79,220 to Raymer Construction
- $39,744 to Dixieline Lumber
The most significant amount owed as part of the filing is $21,000,000 to UC Poway Post Holder, LLC.
The Outpost development is a significant project for the Poway area, with Poway Property receiving a $31.9 million loan in May 2019 to finance the development.
Paul Rahimian, CEO of lending company Parkview Financial, noted at the time that “The appeal of the property is the multifamily being built alongside the retail…The Poway Corridor is growing and this property will provide more food options for the area, as well as the new apartments being built.”
The lenders noted that the project was likely to be particularly financially viable for one important reason: location. According to Multi-Housing News, the development serves as the first new apartment project along the Poway Road corridor in two decades.
Rahimian said that this is a main part of what makes the property important.
“This will be a great asset for any buyer to purchase or future lender to lend on,” Rahimian said. “We always want to make sure the exit will be easy for us, and this is a good example of a real estate asset that will be easy to refinance or sell upon completion.”
It isn’t the only location of note in the area, either, which also makes its placement attractive — Rahimian adding at the time that “This new development will blend in beautifully with its surroundings and will be a popular location for food options.”
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Bankruptcy filing may be connected to July 2021 lawsuit, further legal disputes
The inclusion of K.D. Stahl Construction in the list of creditors in Poway’s bankruptcy filing is especially notable.
As prior Levelset reporting extensively covered, a July 29, 2021, dispute over unreturned concrete framework at the Outpost development site led to concrete formwork provider PERI Formwork Systems, Inc. filing a lawsuit against general contractor K.D. Stahl Construction Group, Inc., project owner Poway Property, LP, with PERI Formwork claiming a total of $408,153.20.
As per PERI Formwork’s original complaint, it delivered formwork to the Outpost development in March 2021, but was abruptly terminated from the project. At this point, PERI Formwork claimed that K.D. Stahl Construction and Poway Property would neither “enter into a lease to rent the Property from PERI, [return] the Property, [nor] allow PERI access to the Project to repossess its Property.”
In the filing, PERI Formwork claimed that “Poway and Capexco continue to use PERI’s Property, having converted it to their own use and benefit, without PERI’s permission, without a contract with PERI, and without compensation to PERI.”
As of September 2, 2021, the case was still pending. However, outside of this dispute, the company has still had to deal with a number of civil disputes — many of them with the contractors that are creditors for the company’s bankruptcy.
Poway Property currently faces civil cases from D&D Laser Screed Inc., Pacific Steel Group, Cemex Construction Materials Pacific LLC, K.D. Stahl Construction, Sharp Construction, Rand Engineering Inc., Raymer Construction Inc., Dixieline Lumber Co., Pure Effect Inc., and Condon-Johnson & Associates Inc.: A group that includes all but two of Poway Property’s bankruptcy creditors.
Major leaders in Poway are hoping that the project does get realized, making Poway Property’s path forward even more important. Poway Mayor Steve Vaus said in 2018 that “This project will be a catalyst for achieving” the city’s goal of having a traditional town center.
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