Top 10 stories of 2009: Housing collapse hits San Luis Obispo County developers

The three men once considered among San Luis Obispo County’s most prolific builders remain mired in debt, and appear unlikely to repay their creditors or return to their former prominence in 2010.

Paso Robles’ David Weyrich, San Luis Obispo’s Andy Fetyko and Atascadero’s Kelly Gearhart each gambled on the rising values of the real estate market.

However, after its sharp and rapid collapse, they are in deep debt — Weyrich owes more than $60 million, Fetyko $76.5 million, and Gearhart more than $110 million.

A former partner in a national billboard company business that sold for hundreds of millions of dollars, Weyrich, 55, is the only one of the three developers who has not filed for bankruptcy protection this year.

Both Fetyko and Gearhart were tied closely to local, bankrupted real estate lenders, also called “hard-money lenders,” which pooled investor money to give high-interest loans to builders.

David Weyrich

In the last 10 years, Weyrich invested in real estate, including residential subdivisions, hotels and wineries. He also bought a chain of community newspapers in San Luis Obispo County, called the Gazette, (which he eventually sold) and the North American Jet Charter Co.

He told The Tribune in 2002 that he wanted to invest in real estate rather than the stock market because it was something he had control over.

But with the collapse in the real estate and credit markets last year, Weyrich was unable to meet his debts.

Two large lenders, Wells Fargo Equipment Finance and Key Equipment Finance, last spring won a suit against Weyrich, claiming he owed them more than $22 million. He was forced to close his Paso Robles jet charter business — which had proved unprofitable — and the creditors foreclosed on the jets that they held as collateral.

An e-mail the Weyrich family sent The Tribune in February addressed their problems in general terms.

“These are troubling economic times that have impacted the value of most classes of assets, the bottom lines of most operating companies, and has been tough for many families across the economic spectrum,” the statement read. The family did not elaborate and in the last few months has not responded to The Tribune’s calls for comment.

Much of Weyrich’s prized North County real estate holdings are slated to be auctioned off in foreclosure proceedings, as early as January.

Those properties include the luxury hotel Villa Toscana, the Martin-Weyrich winery and vineyards, and York Mountain Winery and vineyards. He is also behind in loan payments on his 280-acre private estate, now for sale for $9.5 million, Atascadero’s Carlton hotel, a high-end housing subdivision called Santa Isabel Ranch, and more than 1,000 acres at Lake Nacimiento, according to his creditors.

Barney Ng, former principal of one of Weyrich’s key lenders, R.E. Loans, told The Tribune that Weyrich had begun to default on his loans more than a year ago. Weyrich had intended to repay his debts with the sale of his real estate subdivisions, Ng said.

R.E. Loans, a privately held company based in Lafayette, is considered a “hard-money lender,” because of its practice of providing developers with loans at a rate of interest typically much higher, in this case about 12 percent, than traditional bank rates.

“Mr. Weyrich unfortunately bit off more than he could chew,” Ng said.

Andy Fetyko

Fetyko, 42, was a major borrower of Paso Robles’ Estate Financial and Gearhart of Atascadero’s Hurst Financial. Both had numerous housing subdivisions in planning stages or partly finished in the county, but as the real estate market cooled over the last two years, they began to default on real estate loans.

This helped trigger the lending companies’ failure to pay back their investors and those companies’ eventual collapse into bankruptcy.

Fetyko filed for Chapter 7 bankruptcy at the end of October, more than a year after Estate Financial, his key lender, also went into Chapter 11 bankruptcy protection.

He owes Estate Financial and its investors — both independently and through his partnership with Estate Financial principal Karen Guth — about $70 million, according to Fetyko’s calculations as filed with the bankruptcy court.

Estate Financial’s total real estate holdings were valued at $314 million at the time of its collapse. Estate Financial bankruptcy trustees said they weren’t surprised that Fetyko declared insolvency and even expressed some relief that they would not have to go through the process of suing him for money he does not have the ability to pay.

Kelly Gearhart

Gearhart, a 48-year-old former prison guard at the California Men’s Colony, rose to become Atascadero’s Citizen of the Year in part from his efforts to redevelop the city.

He owes $110 million to creditors — the most of the three developers — and faces mounting allegations of fraud by civil litigators as well as the trustee of the Ohio bankruptcy court, where Gearhart filed for Chapter 7 bankruptcy in February.

Harold Corzin, the trustee for the court, and the attorneys working for him, Michael Morin and Ken Gibson, have aggressively pursued Gearhart’s assets on behalf of his creditors.

Most recently, Corzin filed a document asking the bankruptcy court to prevent Gearhart from wiping his debts clean, based on his alleged repeated attempts to hide millions of dollars worth of assets from creditors.

Although Gearhart has not been charged with a crime, he has been under the shadow of a continuing criminal investigation for at least a year, along with his key partner, Hurst Financial president Jay Hurst Miller, according to San Luis Obispo County Deputy District Attorney Steve von Dohlen.

Corzin’s alleged findings could be used to support a criminal case, but these types of offenses are typically investigated by a federal agency, such as the FBI, and are often prosecuted by the U.S. Attorney’s Office or the Department of Justice, according to bankruptcy experts.