HEADS U WIN, TAILS I LOSE: The down-and-dirty showdown taking place at the bottom of State Street gives special urgency to that age-old philosophical dilemma — would you rather be eaten alive by a lion or a tiger? At issue are the 62 units of muy yupscale timeshare condos flying under the Ritz-Carlton banner slated to replace the once proudly destitute Californian Hotel — where it wasn’t uncommon for guests to be given bloodstained sheets — and the entire two blocks across from the hotel. The man most responsible for bringing us this glitzy dystopia is charming bad-boy wheeler-dealer Bill Levy, whose shenanigans throughout the years have kept half the attorneys in town working overtime. It appears Levy has finally been laid low by the laws of Karmic Comeuppance — just last week his hard-nosed bankers at Mountain Funding all but put locks on Levy’s doors. Mountain Funding filed uncontested legal papers, taking possession of Levy’s adding machines, telephones, copiers, faxes, and all the other accoutrements of commerce. In other words, Mountain Funding tossed Levy and his longtime co-conspirator Roy Millender overboard into the deep end of the ocean. To avoid the taint of bad publicity that comes with putting a borrower out of business, Mountain Funding generously offered Levy and Millender a couple of waterlogged life preservers. But even those will be repossessed on November 29 unless Levy can come up with the $42 million he borrowed plus a $115 million construction loan — neither of which exists within the realm of possibility.
For a lot of people — myself included — it’s inviting to stand up and cheer Levy’s misfortune no matter how utterly unbecoming such behavior is. Throughout the years, Levy has lived exceedingly high on the hog thanks to investors who were promised the sun, the moon, and the stars. But when these investors eventually asked for the returns that Levy and Millender “personally guaranteed,” what they got were excuses, stalls, dodges, arguments, and ultimately lengthy and expensive courthouse battles. It didn’t help Bill’s reputation that throughout the years he always seemed to emerge from various financial train wrecks virtually unbruised, while his investors were hauled off to the emergency room. According to Santa Barbara business lore, Levy’s father was a small-town developer famous for being a handshake kind of guy. For Jerome Levy, contracts were superfluous and ridiculous, his word being his bond. But with Bill, the acorn couldn’t have flown further from the tree; Bill’s word — as many an investor learned too late — has been only as good as one’s ability to finance protracted legal battles.
With all this in mind, it’s hard not to root for Mountain Funding. But two thoughts confuse my sympathies. The first is that when Mountain Funding finally takes control of the Ritz-Carlton project, all of Levy’s investors will be left high and dry. We met many of these investors when they testified — ad nauseum — before the Planning Commission and City Council about eight years ago, urging approval of Levy’s timeshare condo plan. Then, one by one, we met them again, this time as they filed their lawsuits demanding their money back. The other consideration is this: The longer Bill and Roy are in the picture, the less likely the Ritz-Carlton project will ever be built. That’s because Bill and Roy have amassed so much debt on the property — estimated in the neighborhood of $100 million — there’s no way the project can be built and make money. I have no beef with Ritz-Carlton per se, but I’d rather see them in other towns, like Carmel, than occupy such a defining and conspicuous swath of our own downtown. Santa Barbara’s already gotten way too snooty for our own good; we don’t need any more help in that direction. Once the Ritz comes in, it’ll be a matter of time before the City Council passes an ordinance banning women from walking around Pueblo Viejo wearing jeans costing less than $800. Personally, I’d prefer a combination water park/putt-putt golf/go-cart racetrack down there. And if they threw in a velodrome, I’d be in heaven.
Levy has now come within a whisker’s breadth of killing the project he fought nearly 30 years to get built. Even though Levy got the green light from City Hall seven years ago — after helping many councilmembers get elected and donating generously to the charities on whose boards they sat — his city permits will be dead in the water if he doesn’t begin construction by this December 12. Levy can’t get construction going because he couldn’t get a traditional lender, and that’s because of the huge debt he larded on the project by lavishly paying himself up front, rather than waiting until the project was completed. Levy also sought to mollify countless disgruntled investors from other projects by giving them a piece of The Beach rather than pay them what they were owed. When it came time for Levy to pull the Ritz rabbit out of his hat, the rabbit proved too fat and the hat too small. As a result, Levy was forced to go to Mountain Funding, which specializes in high-interest, short-term loans to developers in distress. Last year he borrowed about $30 million to secure the land for the deal. But when the bill came due this year — a whopping $42 million — Levy couldn’t pay. Mountain initiated default procedures and has tried to sell the project to other investors. But as long as Levy was in the picture, Mountain Funding couldn’t find a willing buyer. Now that Levy has been effectively exorcised from the deal he originated, nurtured, and perfected, Mountain reportedly has at least three qualified buyers, all of whom have allegedly done business with the Ritz in the past. And construction has just gotten underway. Should the deal go forward — and some still doubt that it will — it’s exceedingly unlikely that any of Levy’s much-abused investors will ever see a dime. If the Ritz really does get built, Levy’s investors will still get screwed and the rest of us will get stuck with an unwanted project sporting an outdated design. When that happens, we’ll no longer be able to choose to be eaten by the lion or the tiger. We’ll already have been devoured by both.
— Nick Welsh