Court appoints receiver to take over Campus at Horton in downtown San Diego

A third-party expert in distressed real estate will take control of The Campus at Horton project in downtown San Diego as developer Stockdale Capital Partners seeks to hash out a resolution with its lender over hundreds of millions of dollars in unpaid debt.

On Thursday, San Diego Superior Court Judge Michael Smyth ordered the appointment of Matthew Mason, senior vice president of Hilco Real Estate, as receiver to take possession of The Campus at Horton project and the adjacent Horton Plaza Park. The judge also granted a temporary restraining order forcing Stockdale to turn over all necessary records and documents, and barring the real estate investment firm and its partners or affiliates from interfering with the receiver’s work.

The order was sought by Stockdale’s construction lender, Luxembourg-based investment management firm AllianceBernstein. AllianceBernstein last week filed a civil suit requesting the court-appointed receiver. The receiver, the firm said in court filings, is necessary to protect the asset during the foreclosure process.

Stockdale framed the appointment as in the best interest of both parties as they negotiate a solution to their financial dispute. The developer has no funds to continue work on the project and the receivership will provide time for the parties to attempt to agree to a long-term resolution, Stockdale Managing Partner Dan Michaels said in a declaration filed with the court.

The Campus at Horton is the reincarnation of Horton Plaza, the 1980s-era, post-modern mall famous for helping to revitalize downtown. The 10-acre property consists of seven blocks between First and Fourth avenues, starting with the city-owned Horton Plaza Park along Broadway to the north and cascading south to G Street.

In August 2018, Stockdale purchased the retail center for $175 million. The following year it was granted approval to convert the mall into a mixed-use campus with office and retail space. In March 2020, Stockdale took out a $328.5 million construction loan from AllianceBernstein to fund the mall-to-office conversion project. The loan amount was later increased to $398.5 million with a balance due date of July 10, 2024, according to a February notice of default recorded against the property.

In December 2022, Stockdale signed a 25-year lease for the city-owned, urban park property at 900 Fourth Ave.

In February, AllianceBernstein, which is currently owed $365.7 million plus interest, initiated a nonjudicial foreclosure process. The property is currently scheduled for public auction on July 7, but the date will likely be postponed in light of the latest court decision.

Meanwhile, the campus property has remained in an unfinished state with the lender unwilling to release additional funds to Stockdale. In March, AllianceBernstein’s construction consultant observed insufficient waterproofing measures for the property’s Lyceum Theatre, as well as water intrusion throughout the property due to partially finished planter boxes. The consultant also documented a leak into a primary electrical conduit pathway that presents a significant safety hazard, according to court documents.

Mason, the receiver and Hilco executive, will take possession of the property as soon as he files his receiver’s oath and $50,000 bond. The documents can be filed within hours and are a standard part of receivership cases, said commercial real estate attorney Gordon Gerson. Gerson’s firm, Gerson Law, represents lenders in foreclosure and bankruptcy proceedings.

Mason has served as a court-appointed receiver for more than 200 retail, office, multi-family, industrial and mixed-use projects, according to court filings. Mason can charge $850 an hour for his time, although most of the work will be done by staff members whose rates range from $275 an hour to $850 an hour.

The receiver must also hire Stockdale’s management company for property management work for 65 days, the order states. The stipulation, which Gerson said is atypical, suggests that the developer and its lender have agreed to work toward a resolution over the 65-day period.

At the same time, Mason’s newly granted authority is sweeping, with “all powers, duties and authorities as are provided by law to use, operate, manage and control” the entirety of the property, the order states.

“This receivership order has an unusual twist, only because Stockdale Management is going to be employed by the receiver,” Gerson said. “Other than that, the receiver is basically … in total control and management of the property to the exclusion of the owner.”

Thursday’s order followed a brief morning hearing in which the parties appeared remotely and asked the judge to appoint the receiver.

Lawyers representing Turner Construction Company and JB Pacific Inc. also appeared remotely. The construction companies, which are not parties to the receivership case, were hired as project contractors and have separately recorded mechanics liens against the property and filed their own civil suits to recover millions in unpaid work. Luke Eaton, who represents Turner, said his client is owed $10.8 million and is concerned that construction loan funds will be used to pay the receiver and Stockdale Management even though Turner has filed a stop payment notice to freeze funds held in the loan.