Biz Buzz: Red-letter day for Atascadero builder Kelly Gearhart

Lending firm, facing lawsuit by investors, issues default notices to developer Kelly Gearhart

North County lender Hurst Financial Corp. has sent notices of default to Atascadero developer Kelly Gearhart this week as a result of his failure to pay back money he borrowed from the firm, its loan officer has confirmed.

“We are doing this as a way to protect our investors,” Hurst loan officer Courtney Brard said.

Such notices are a precursor to foreclosure, warning that if money owed is not paid in a given amount of time, the lender may choose to foreclose on the borrower’s property.

While Brard declined to say how many Gearhart properties were involved, she did say the notices did not include the proposed Vista del Hombre, a $27 million, 14-acre, 150,000 square-foot business park project that includes The Links golf course.

Hurst’s notices did, however, include the El Camino Real property in Atascadero that was referenced in an investor lawsuit.

Investors Murray Powell of Templeton and David Rios of Santa Clara County have sued Gearhart, as well as Brard and Hurst President James Hurst Miller, for $2 million, asking that a court order the sale of the El Camino Real property—valued about $425,000—and render a judgment to collect the remainder of the money.

Lenders such as Hurst Financial have fueled millions of dollars worth of real estate development in San Luis Obispo County over the years. But like 21st Century Mortgage and Estate Financial Inc., Hurst has fallen into serious financial distress.

Regulated by the state Department of Corporations and the Department of Real Estate, Hurst Financial sells and manages loans funded primarily by pooling investor money into commercial and residential real estate.

A licensed broker since 1981, Hurst had approximately $95 million worth of active real-estate secured loans and more than 1,200 investors in 2007, according to documents filed with the Department of Corporations.

Powell said Hurst’s notices of default are “too little too late.”

“That’s like closing the barn door when the horses are already gone,” he said. “What we want to know now is where the money’s gone.”

Calls to Miller and Gearhart were not returned.

Powell and Rios said they invested about $500,000 in October 2006 to construct a commercial building on a vacant lot at 5730 El Camino Real.

The investors expected the building to be completed by the time the Hurst Financial loan was due in April, Powell said.

Meanwhile, the company recently stopped making interest and principal payments to its investors, blaming the real estate market slowdown and drastically reduced profits for reducing its cash flow.

Murray alleges that misallocation of funds, not the real estate market downturn, is at the core of Hurst Financial’s cash-flow problems.

“After two years, I’m still waiting for them to explain to me why they haven’t stuck one stick up to build the project,” Powell said. “A construction loan means it’s for construction.”

—Melanie Cleveland

New Times is finalist for AltWeekly Awards

San Luis Obispo-based weekly New Times is a finalist for two 2008 AltWeekly Awards by the Association of Alternative Weeklies and the Medill School of Journalism.

New Times is a finalist in the arts features category for weeklies with circulations under 55,000 for “Faire Play,” a story by Executive Editor Ryan Miller about the Central Coast Renaissance Festival.

It’s also a finalist in the columns category for weeklies with circulations under 55,000 for three Shredder features: “Gone to Pot,” “Pop a Local Wheelie” and “I’m All Ears.”

Winners of the 13th annual awards will be announced at the 31st annual Association of Alternative Newsweeklies Convention, which will be held June 5-7 in Philadelphia.

—Antonio A. Prado

Paso is getting ready to welcome visitors

Paso Robles businesses are being pushed to do spring cleaning prior to Saturday’s annual wine festival and the Memorial Day weekend.

The Downtown Paso Robles Main Street Association urges business owners to spruce up plants in barrel planters, wash windows, paint their front doors, sweep and clean outside and remove weeds and litter.

Businesses that need new planter barrels can call the association at 238-4103. Olive trees are a suggested planting option.

—Leah Etling