Estate Financial officials face investors

By Melanie Cleveland

Facing a crowd of investors and developers publicly for the first time Thursday, leaders of troubled Paso Robles lender Estate Financial were told that better communications would lead to better results than a court-sanctioned takeover.

Estate Financial President Karen Guth told investors that a borrower and developer’s plan to put the lender into receivership would put its entire $300 million real estate portfolio, not just his two projects, under court-appointed control.

Such an all-encompassing change would not be in the best interest of the majority of investors, she told the crowd of more than 250 investors and other observers at the Colony Park Community Center in Atascadero.

“We are determined not to let one borrower somehow sway the outcome of our business,” said Guth, who attended with son and Vice President Josh Yaguda. “Our duty is to all of our investors, and we are not going anywhere.”

The gathering was organized by Ron Cooper, a San Dimas developer who earlier this week told The Tribune he was hoping to garner investor support to ask a judge to put Estate Financial into receivership.

Under receivership, a judge appoints a lawyer or accountant to freeze a firm’s assets and halt actions of its directors while its affairs are sorted out.

Cooper, who has a number of lawsuits against Estate Financial over two of his projects in Southern California, said a receivership would force the company to open up its books to investors and help the company to finish its projects.

Estate Financial’s business is to gather investor money to make high-interest loans to developers. Some investors got fractional interests in deeds of trusts with property as collateral, while others had their money in a pooled fund.

The company fueled hundreds of millions of dollars’ worth of housing subdivisions, condominiums, hotels and winery projects throughout San Luis Obispo County.

The firm’s leaders have been trying to quell growing concern from hundreds of worried investors since the company disclosed in the fall that its real estate portfolio was in serious financial difficulty. At Thursday’s gathering, Guth continued to blame the real estate market downturn for the company’s problems.

From the outset, the majority of attendees appeared to be lukewarm to Cooper’s proposal, and — if their applause for Guth and Yaguda was any gauge — they seemed to support the company’s principals to steer itself through its cash-flow troubles.

By the end of the meeting, Cooper admitted that the receivership could prove to be extremely expensive and appeared willing to drop the issue if Estate Financial communicates better with its investors.

Cooper said he was pleased that Guth “came out and that she admitted she needed to deal with the investors in a different way,” but was not willing to concede his idea of a receivership entirely, adding that he has affidavits from 12 investors who support that move.

“That gives me what I need to proceed,” Cooper told The Tribune after the meeting. “I’m giving her two weeks to provide investors with all the names of the investors in all of the Estate Financial loans and a way to contact them all. If she does that, I’ll reconsider.”

While deferring a number of specifics, Guth and Yaguda also tried to answer questions about potential conflicts of interest, how much they were charging the investors for loan and servicing fees, why some investors were missing important documentation and their failure to get information to investors in a timely manner.

“They are here to answer questions, and I think that’s a good thing,” Cooper said of the pair’s unexpected appearance. “It’s for the investors to make those decisions.”

However, the overriding question on many investors’ minds is yet to be answered, he added. “And that question is,” he asked, “if the money is gone, where did that money go?”