Olivenhain group sues owner of Fortuna Ranch project

http://www.nctimes.com/articles/2004/08/28/news/coastal/23_20_318_27_04.txt

By: BEN FRUMIN - Staff Writer

ENCINITAS ---- Suzy Brown, owner and developer of a 15,000-square-foot house being built on Fortuna Ranch Road in Olivenhain, said Friday that a civil lawsuit accusing her of misrepresenting herself and her project is "malicious" and "incredibly frivolous."

The lawsuit, filed Tuesday by a 100-member residents group, alleges that Brown violated the state's Business and Professions Code by making contrary and misleading statements to different groups of people regarding the planned use of her in-progress home ---- which would be the largest single-family residence in the city.

The lawsuit alleges Brown committed "unfair, fraudulent and/or misleading acts" by representing the project as a single-family home to the city and neighbors and as an upscale rehabilitation center to investors.

In April, neighbors found a 33-page business plan online that outlined for the site a high-end "addiction-healing center" with "luxury accommodations for up to 41 guests" served by an "equal or greater number of staff."

Such a facility would violate city zoning laws. City officials have said if such a facility were opened, they would move aggressively to shut it down.

Brown said Friday she had briefly considered the possibility of a 41-bed facility, but abandoned the idea in March.

"Changing your plans, even as often as I do, is not defrauding," Brown said.

Brown maintained that the Fortuna Ranch structure would be used only as a home for herself, her extended family, and as a six-patient substance-abuse treatment center ---- a use officials have said is legal.

A provision in the state's Health and Safety Code mandates that a recovery or treatment facility that serves six or fewer people must be governed by the same rules and regulations as a single-family home.

Sue Loftin, an attorney representing the residents group, said her clients want construction on the house halted and profits or potential profits returned to those who invested in Brown's project.

"We do not want her to profit from past misrepresentations and thereby hurt the neighbors," Olivenhain activist Bruce Ehlers said.

Loftin said that if the value of homes surrounding Brown's property are hurt by this episode, her clients will seek compensation.

Loftin said Brown has 30 days after being served to answer the complaint. Loftin said the case could go to trial as soon as next summer.

Brown said she has appealed to her neighbors to rescind the lawsuit.

She said that if the group pursues the lawsuit, she will not hesitate to file "massive countersuits" against 30 residents who carried petitions opposing her project. Brown said the petitions defamed her character.

"Now they're getting dirty and so I'm going to have to get dirty," Brown said in a phone interview earlier this week.

Contact staff writer Ben Frumin at (760) 943-2313 or bfrumin@nctimes.com

A law suit was filed against Suzy Brown and Casa Simpatica on Aug 16, 04 for violating Business Practice codes §§ 17200, et seq.
Business and Professions Code §§ 17200, et seq., defines an Unfair Business Act or Practice as“any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.

All I know is that authorities don't like to be lied to (think Martha Stewart).
I don't see the city changing zoning codes and approving a business in a residential area with an approach like this.

Fortuna Ranch developer addresses Planning Commission



Interesting article in the NCTimes:

http://www.nctimes.com/articles/2004/07/02/news/coastal/encinitas/22_59_587_1_04.txt

By: BEN FRUMIN - Staff Writer

ENCINITAS ---- Suzy Brown, the owner and developer of a massive house at 3225 Fortuna Ranch Road in Olivenhain, made an unexpected appearance at an otherwise quiet meeting of the Planning Commission Thursday.

Brown, who said she has been out of the country, addressed the commission weeks after her neighbors flocked to city meetings en masse to voice concern over the plans for the house.

The in-progress structure on Brown's 1.24-acre property is expected to exceed 15,000 square feet.

"I'm building a house and I understand it's very large," Brown said.

The house would be the largest single-family residence in the city, according to Planning Department Director Pat Murphy.

Though many Olivenhain residences are stately homes on multi-acre lots, Brown's project dwarfs them all.

"I really want my neighbors to understand what I'm doing," Brown said. "But it's going to take time."

Many of Brown's neighbors aren't convinced her plans are just for a home ---- largely because of the discovery of a 33-page business plan on the Internet that outlined a 41-bed "addiction-healing center" on the property. Such a use would violate city zoning laws, and city officials have said if such a facility were opened, they would move aggressively to shut it down.

"I assure you that at no time in the past and at no time in the future will I be breaking any rules, any building codes," Brown told the commission, adding: "I do plan on sharing more information," Brown said, "but I'm still in a gathering state right now."

Because the item was not on the agenda, state law prevented the commissioners from responding to Brown or discussing the matter.

When asked after the meeting if the structure would be a single-family home, Brown answered, "I don't know."

When asked when her neighbors and city officials could expect more information about her intentions for the property, Brown said, "When I'm ready. When I know for sure."

Brown said that though "everyone thinks I'm being sneaky," she was trying "to be very sensitive to the neighbors."

The project was originally approved by the city's Planning Department in January. A revised set of plans has since been submitted, with the request to increase the structure's size to 16,394 square feet.

The new plans detail a 23-bedroom, 16-bathroom multi-wing structure connected by numerous corridors and courtyards.

A decision on the modified plans is expected from the Planning Department later this summer.

Residents opposed to the project have posted a Web site at www.nomonsterhouse.org.

Contact staff writer Ben Frumin at (760) 943-2313 or bfrumin@nctimes.com.

In this case scenario the true winner would be Suzy Brown. According to the Cap Table on page 26 the seed investors, which is Suzy Brown) would own 49% of the equity which she estmiates to be worth $5.76M upon completion. So no matter if the business plan will be approved or not she will turn her $850,000 investment into $2.82M.
The other investors will be the ones left holding the bag.

The good news is that in case the center will not get approved on such a large scale she can always convert these 24 rooms and seven living rooms into seven 3-4 room appartments.

Is the project running into financial trouble?

One of the contractors placed a lien on the property:
Amount owed: $21,696.57

http://www.nomonsterhouse.org/articles/thedaily_may25.html

What’s interesting is that Suzy Brown is making different statements to different groups of people. Investors got a rosy picture of a good investment in a 41 bed guest house facility, while as recently as April 17, the neighbors were told in a publicly posted letter this was a single family residency and she had no plans to convert it into a drug and rehab center

http://www.nomonsterhouse.org/Downloads/ChangeofPlan.pdf

Another question mark is the room/bathroom sharing. Casa Simpatica is targeting celebrities and wealthy individuals. According to the business plan 7 private rooms have to share a bathroom and 17 double occupancy rooms have share a bathroom also. This means for these 17 rooms that 4 people have to share one bathroom. I don’t know about celebrities but if I stay at a hotel I do not want to share a bathroom with anybody.

It looks like Casa Simpatica is facing serious opposition:

http://www.nomonsterhouse.org/

In case Casa Simpatica will not be able to have more than 6 guests chances are that the company will not become profitable.
According to the Investment Highlights of the business plan investors will not be able to liquidate some or all of their interest until the company becomes profitable.
Good luck to all.

Casa Simptica’s business plan is in deed very attractive at first sight but has some major flaws:
The owner applied for a building permit for a single family home and it is very likely that City of Encinitas will not grant her a business license for a drug and alcohol rehab center with 41 patients and 41 staff members. In that case Casa Simpatica would only be able to operate under state law code with not more than 6 guests. This would significantly limit revenues and diminish any hopes of exceptional high returns.

According to the city of Enicinitas zonig it looks like the buliding is in a residential area (Residential Rural 1).

Information on zoning in Encinitas is available at
http://ci.encinitas.ca.us

Any thoughts how can they will be able to set up such a big business in a residential area?

The first drug and rehabilitation center is currently being build at 3225 Fortuna Ranch, Encinitas, CA 92024

To download the business plan of Casa Simpatica go to:

www.casasimpatica.com/Prospectus.pdf