Clem Carinalli, Sonoma County?s largest individual real estate investor, has stopped paying some of his lenders and is attempting to restructure his debts.
Carinalli, a Sonoma County native who became one of its most influential deal makers, has notified some lenders that he cannot currently pay them. He is asking lenders to reduce or waive his monthly charges while he develops a plan to resume payments.
He has hired a prominent Roseville firm that specializes in helping companies and wealthy individuals negotiate with lenders to reduce loan payments and avoid bankruptcy court.
?I expect all my lenders to be paid back,? Carinalli said in a brief phone interview Monday.
His financial woes are the latest indication that the credit crisis and real estate meltdown continue to shake the core of the county?s economy during one of the most severe downturns since the Great Depression.
Carinalli, 63, rose from his modest upbringing on a dairy farm on the outskirts of Santa Rosa to become one of the most connected businessmen in the county.
The portion of his real estate empire owned under his name with his wife, Ann Marie, was valued at $65 million last year by county tax officials. It excludes property owned by Carinalli under other names, including businesses and partnerships.
His holdings are scattered across the county, encompassing ranchland, vineyards, subdivisions and downtown buildings. He is both a developer and a lender to people trying to build up their own real estate holdings.
Details of the proposed restructuring plan are being presented to his creditors this month, said Steve Huntley, a partner in Huntley, Mullaney, Spargo & Sullivan, a debt restructuring firm that is representing Carinalli in the talks.
Working directly with investors to restructure loans is an alternative to declaring bankruptcy and helps a borrower retain as much of his wealth as possible, Huntley said. It is cheaper and quicker than getting bogged down in court, said Huntley, whose firm has advised Sears, Blockbuster, Delco Homes and many other well-known companies.
?You do all the same things,? he said. ?But the costs associated with a bankruptcy are so much more.?
How deeply Carinalli?s financial misfortunes affect the larger community is difficult to determine. Huntley and Carinalli declined to discuss how much debt will be renegotiated or how many creditors are affected.
Carinalli and his family are deeply ingrained in the economic and social scene of Sonoma County.
He co-founded Sonoma National Bank in 1985 and is a partner in North Bay Corp., which controls most of the garbage business in Sonoma County.
His family has donated large sums of money to nonprofits, such as the Santa Rosa Junior College Foundation. The reading room at the new SRJC library is named for him and his wife.
Together with North Bay Corp. partners Dennis Hunter and James Ratto, he formed an investment group that acquired farmland outside Rohnert Park for $11.4 million and sold almost all of it in 2005 for $100 million to a Graton Indian tribe seeking to build a casino.
He loaned millions to Santa Rosa developer Raj Gulati, who left behind a mountain of debt when he died of a heart attack in 2006 at age 39.
In the business world, many aspiring and established real estate developers, winery owners and other entrepreneurs turn to Carinalli for his expertise and access to funding.
?He?s sought out as a real estate investor and consul,? said Al Coppin, owner of Keegan & Coppin, the area?s largest commercial real estate broker. ?He?s a very smart real estate person.?
Money problems
In a letter sent to creditors, Carinalli said he no longer can make scheduled interest payments on some loans. A large number of real estate loans made by Carinalli have gone bad, he said in the letter. As a result, he no longer has enough cash coming in to make payments and is stuck with property he cannot currently sell, he told creditors.
Between 2004 and 2008, Carinalli made 138 loans totaling more than $70 million, securing deeds to his borrowers? properties as collateral, according to county records.
Much like a bank, Carinalli told investors, he has suffered as borrowers stop making payments to him and default on their loans. He has had to repossess properties as a result but is finding it difficult to sell the holdings, he told investors.
Carinalli hopes to ?weather the storm? by asking some lenders to temporarily reduce his monthly interest payments until the economy improves, Huntley said.
?He?ll need some additional time,? Huntley said. ?If everyone is willing to work with him, I believe we will be able to do so.?
Carinalli continues to make regular payments to some creditors, Huntley said. He is attempting to restructure debt payments on projects that are not generating enough cash to pay his lenders, Huntley said.
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