Girls Inc. of Greater Santa Barbara was the victim of a real estate bait-and-switch, a new lawsuit alleges, in which a development firm purchased the nonprofit’s Ortega Street property with a promise to lease it back to Girls Inc., only to flip it to another buyer who then forced the organization out.
“This is hard for us,” said Girls Inc. CEO Jen Faust, of litigating the dispute after talks between the parties failed. “But at this point, we feel it is the best way to stand up for our rights.” The suit, which alleges misrepresentation, breach of contract, and other civil violations, seeks to rescind both sales and also asks for damages.
Robert Forouzandeh, an attorney representing the development company, Presidio Capital Partners, called the lawsuit “frivolous” with “absolutely no basis in fact.” The buyer, Providence School, also said the complaint had no merit. “[W]e are vigorously defending against the action as we take all appropriate legal steps to protect the school,” said Head of School Soo Chang.
The saga began in July 2021 when Girls Inc., grappling with pandemic-related losses in revenue and looking to reduce overhead, decided to sell the Eastside property it had occupied for 65 years and use the proceeds to support a new and nimbler way of serving the community through on-site partnerships with schools, community centers, and other youth programs. The nonprofit decided it would look for a buyer who would allow Girls Inc. to remain at the property for at least a year, and up to two and a half years, as it gradually wound down operations with as few disruptions as possible.
The property was listed that September, and by October, Girls Inc. had received an offer of $7.75 million from Providence, a private Christian school that planned on building a new campus for its middle and high school students. Girls Inc. declined the offer, however, when it learned Providence would not be able to abide by the extended leaseback requirement, the lawsuit states.
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Shortly thereafter, Girls Inc. received a second offer, this time from Presidio Capital Partners, who offered $7.5 million. But unlike Providence, the complaint continues, Presidio said it was willing to give Girls Inc. the time it needed to relocate and reorganize, as the company expected it would take at least two years to secure the necessary city approvals to construct the new housing it was planning for the site. Based on that representation — which Girls Inc. says was made multiple times to multiple boardmembers in numerous emails and conversations — the nonprofit agreed to sell to Presidio. Escrow closed February 11, 2022.
Just five days later, the lawsuit claims, Presidio sold to Providence in an all-cash transaction for $8 million, representing a quick $500,000 profit. Negotiations between Presidio and Providence had apparently been taking place throughout the escrow period, the lawsuit states, with Girls Inc. intentionally kept in the dark. “Girls Inc. was stunned to learn the faith and confidence it had placed in Presidio was broken,” the complaint says. “In addition to Presidio’s broken promises, Providence, knowing the reason that Girls Inc. decided against accepting its offer, decided to then circumvent Girls Inc.”
On April 8, Providence gave Girls Inc. 90 days to vacate the property. The quick and unexpected notice wreaked havoc on the organization, Faust said. Programs had to be suddenly shut down and curriculums modified, she explained, with clients and their families blindsided by the news. “These are vital services that help girls stand up for themselves and navigate the world,” she said. The nonprofit’s staff of 50 was also left in the lurch, Faust said.
“So much has been taken away from so many people,” Faust went on, noting the Eastside organization serves more than 1,200 Santa Barbara County residents every year. “The resources that should be going to support girls and teens are instead being diverted to this really unfortunate situation. It’s more than disappointing for us — it’s heartbreaking.”
The case is being heard by Judge Colleen Sterne. The next hearing is scheduled for October 10.
Listen to Ep. 60 of The Indy podcast, where we sat down with Faust to discuss the future of Girls Inc.’s community programs as well as to clear up any confusion about the recent closure of their Eastside center.