Curse of Chapala One Not Over Yet

Litigation Continues to Engulf Previous Owner

<b>OUT OF THE WOODS?</b> Chapala One, once infamous, has been renamed “The Sevilla,” interior repairs have been made, and the condos are selling. But litigation still dogs the previous owner, and affordable units remain up for grabs.
Paul Wellman

The curse afflicting the Chapala One condominiums located at 401 Chapala Street is far from over despite the relatively recent arrival of a new owner — Michael Rosenfeld — a brand new name — “The Sevilla” — and actual sales of at least eight of the high-end condos with another six in escrow. Litigation continues to engulf the previous owner — Don Hughes — and his now bankrupt contractor Mark Melchiori — even though a jury ruled in Melchiori’s favor two years ago, finding that Hughes owed his contractor $6 million. An appeals court ruled that Judge Denise deBellefeuille acted improperly when she did not allow jurors to hear how Hughes vowed to put “that wop bastard” out of business when speaking of Melchiori, “wop” being an ethnic slur to describe Americans of Italian descent. The Court of Appeal found that the comment indicated a degree of personal animus, which, if admitted, would have allowed Melchiori to seek punitive damages against Hughes in addition to the $6 million the jurors said Melchiori was owed.

Curiously, the case has been assigned to Judge James Herman, who is the husband of Judge deBellefeuille whose ruling occasioned the appeal. The new proceeding is scheduled to begin in Herman’s court June 25, though when the actual trial begins remains up in the air.

Chapala One generated massive controversy during its construction six years ago, going millions of dollars over budget and taking much longer than estimated. Hughes and Melchiori — who has since filed for bankruptcy and been the subject of considerable litigation — blamed each other as the building sat idle. Its considerable size, bulk, and scale outraged Santa Barbara preservationists, who cited it frequently as justification for why voters should approve a ballot initiative in 2009 to lower the city’s maximum allowable ceiling height. That initiative lost, but not before fueling the most expensive election fight in Santa Barbara history. Los Angeles developer and real estate mogul Michael Rosenfeld — who has also bought the long festering La Entrada project on lower State Street — purchased Chapala One and had to sink millions into massive repairs because of faulty waterproofing. That work is now complete and sales have commenced on the condos, which range in price from $750,000 to $2.5 million.

Of the 46 condos approved by City Hall, 11 have been designated as “middle class” affordable. Translated, affordable studios — 450 square feet — sell for $167,000, and the one three-bedroom unit sells for $324,000. To qualify for the affordable units, studio buyers can make no more than $81,000 and the larger condo buyer no more than $125,000. Five years ago, City Hall conducted a lottery of 166 interested individuals for the affordable units, but only two remain eligible and interested. City housing planners intend to check with the remaining applicants on that list to see if they can muster 11 eligible buyers. Failing that, a new lottery would have to be conducted.

The Santa Barbara Independent has received several complaints that city planners are not allowing the affordable units to be occupied, but city planners say they’ve not been so apprised. They have, however, argued that a critical mass of market-rate units needed to be sold before the affordable units could be occupied. This way, they said, affordable buyers won’t find themselves saddled with the excessive financial burdens of shared condo costs. Likewise, they’ve suggested better financing terms could be obtained for the affordable purchasers if they could put together a package deal. However, the number of units sold and in escrow exceed the threshold established by city planners.


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