Carinalli owes $150 million

<p>Clem Carinalli, a Santa Rosa financier and developer who borrowed millions to create the largest individual real estate empire in Sonoma County, owes about $150 million to creditors, his adviser said Wednesday.</p><p>About $100 million of that was borrowed from institutional investors, such as North Valley Bank, Wells Fargo Bank and the Sonoma State University Foundation, said Steve Huntley, a debt restructuring consultant hired by Carinalli to negotiate with creditors.</p><p>Carinalli owes about $50 million to individuals who lent him money, Huntley said, laying out for the first time the scope of Carinalli’s financial problems.</p><p>During a June 30 meeting in Santa Rosa, Carinalli told his lenders that he would present further details of his repayment plan within the next 45days and they could expect to hear from him or Huntley.</p><p>As that Friday deadline approaches, many people who loaned him relatively small amounts — hundreds of thousands of dollars versus millions of dollars — say they still haven’t heard back from him on how he plans to repay them.</p><p>In response, Huntley said the process of sorting out Carinalli’s real estate holdings has taken longer than expected because of the size and complexity of Carinalli’s real estate debt.</p><p>Carinalli is attempting to craft a repayment plan that will be acceptable to his creditors, which number about 50. To start, he has focused on working with his largest creditors, such as banks.</p><p>“The big guys first, and then we keep working down the chain,” Huntley said. “There is no point in working out the small guys and then discovering you can’t work it out with the big guys. That’s pointless.”</p><p>Agreements to restructure debt with institutional investors are well under way, Huntley said. He and Carinalli plans to spend the next month talking with smaller creditors, he said.</p><p>They plan to hold about 35 meetings in August and ask creditors to release Carinalli from any personal guarantees he made to lenders that would give them a legal claim to his personal estate. In return, creditors will be repaid in three to four years from a pool of about 200 properties that Carinalli will sell when the real estate market improves.</p><p>“Everybody needs to be taken care of,” Carinalli said Wednesday. “I’m going to talk to everybody. I take 30 to 40 calls every day.”</p><p>He stressed the need for people and banks to work with him so he can avoid bankruptcy and maintain possession of the properties he plans to sell.</p><p>“If I can’t keep the properties alive, I can’t pay anyone back,” he said.</p><p>Some of Carinalli’s creditors are retirees who loaned him relatively small sums. They are wondering when they’ll hear from Carinalli.</p><p>“Now it’s been three payments he has missed,” said Bob Huppert, 79, who invested all of his retirement money with Carinalli. “I’ve got to get some money somehow.”</p><p>During the June meeting, Carinalli told his creditors that he might be able to repay them in three to four years.</p><p>Huppert said he can’t wait that long, and he has put his house on the market and plans to move into a mobile home park in Santa Rosa. After the meeting, he came down with a monthlong case of shingles. He believes the painful rash was likely related to stress.</p><p>He invested all of his retirement savings — about $200,000 — with Carinalli. In return, he received 11 percent annual interest, or about $1,800 a month. Without the payments, he is now trying to live just on Social Security payments of about $1,100 a month.</p><p>Huppert’s loan was not secured with property, but like other lenders he received a personal guarantee from Carinalli.</p><p>That guarantee gives Huppert the ability to lay claim to Carinalli’s personal assets if he is not repaid. But with so many personal guarantees made by Carinalli, Huppert and others worry there is nothing to lay claim to.</p><p>The repayment plan Carinalli announced in the June meeting included about 200 of his properties that he said would eventually be sold when the market improves in order to pay back lenders such as Huppert. But for Huppert and others to be part of that plan, they must agree to rescind Carinalli’s personal guarantee. In return, they are guaranteed the assets from those 200 properties, Huntley said.</p><p>Now people are waiting to hear from Carinalli or Huntley directly.</p><p>“I haven’t heard anything. I’d like to see things get resolved,” said Robert Barbieri, a longtime lender to Carinalli and founder of Redwood Coast Petroleum in Santa Rosa. “Hopefully something positive will happen.”</p><p>Carinalli and Huntley said they are now focusing on working with private lenders such as Huppert, Barbieri and others.</p><p>“Our goal is to do that all the month of August and evaluate where we are at,” Huntley said. “It’s just a question of how many days it takes to have 30 to 40 meetings.”</p><p>Carinalli hopes to avoid bankruptcy court by getting his lenders to agree to forgo his interest and principal payments until the real estate market recovers and he can sell off land at a better price, according to Huntley.</p><p>One of Carinalli’s lenders, North Valley Bank in Redding, earlier this month reported $19.3 million in unpaid loans to a single unidentified borrower in Sonoma County.</p><p>While Huntley did not comment on specific amounts that Carinalli owes to the bank, he said Carinalli hopes to reach a debt restructuring agreement with the bank within two months. The bank has set aside $4.4 million in reserves to cover potential losses on the loans, according to a regulatory filing earlier this month.</p><p>Sonoma State University officials and Carinalli announced in July that they were working out a plan to resolve a $1.25 million loan he received from the university’s foundation, which manages scholarships and grants for campus activities. As part of the plan, the foundation agreed to take possession of an undeveloped, 10-acre property in Windsor he owned.</p><p>Carinalli also gave the foundation $232,500 to repay a second loan he had received, according to SSU officials.</p><p>Without a reliable cash flow to make payments, Carinalli continues to borrow money even as he repays some lenders. In July, he mortgaged some other properties to receive a $232,500 loan from a private lender.</p><p>Carinalli has said he plans to continue repaying some of the about $100 million in loans held by institutional lenders, such as Exchange Bank. He continued paying these lenders because their loans were backed with property that was still making money, Huntley said.</p><p>It is because some of these properties are still profitable that Carinalli is able to stave off bankruptcy and wait for the real estate market to improve, Huntley said.</p><p>Others wonder when, if ever, they will be repaid.</p><p>One creditor, Marian Wick, is owed $117,900 for her share of a 2003 land deal in southeast Santa Rosa. Carinalli never repaid that loan and by June had stopped making the 4.25 percent annual interest payment, according to Greg Wick, Marian’s son.</p><p>Marian Wick has Alzheimer’s disease and requires 24-hour medical care. The mounting bills have forced Greg Wick to mortgage her home. He hopes Carinalli can find a way to repay his mother quickly.</p><p>“It would be a huge, huge help. Mainly for the care-giving, which is very costly for us,” he said. “We need some monetary help.”</p><p>You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@</p><p>pressdemocrat.com.</p>