Desert Challenge facing financial, legal hurdles

Golf Course News, Nov 2002 by Overbeck, Andrew

Development's woes outline risks builders face in today's construction market

TOLEDO, Ohio - Financial resources have run dry for local developer Jack Sparagowski and his ambitious desert-themed golf course and housing development here in northwestern Ohio.

While a desert golf course in an area that gets more than 30 inches of rain a year may have been doomed to failure from the start, Sparagowski and architect Brian Huntley insist the design and concept were sound. The big problem for The Challenge at Desert Village was a lack of financial resources as major golf course lenders fled the golf course market, leaving Sparagowski high and dry (See related story on page 1).

Sparagowski, whose project has been deserted for the better part of a year, also faces substantial legal obstacles. Genoa Banking Co. filed suit in early September alleging that Sparagowski defaulted on a $200,000 loan issued in August 2001. Jacksonville, Fla.-based golf course builder MacCurrach Golf, who stopped work on the project in August 2000, filed suit in August 2001 against Sparagowski for failing to pay more than $779,404 for construction work and $108,178 in late fees.

ILL-PLANNED FINANCING

Sparagowski, who used to own a private investigation firm that catered to corporate clients, concedes that the financing plan for the course did not work out as he had hoped. To date he has put $3.2 million of his own money into the project.

"Right from the start, the banker that gave us the mortgage on the property said he would subordinate the golf course portion of the property to a golf course lender," said Sparagowski. "Well, that guy left and went to another bank and the new guy decided that they were not willing to subordinate the golf course property. Then the only way to do it was to find a lender who was going to do both the course and the development and we found there was no such anin-Lal other than the hardmoney lenders. There is not a heck of a lot of financing available right now."

According to Alan MacCurrach, Sparagowski's financial difficulties created significant cash flow difficulties for his firm.

"It was not debilitating in the long-term, but when it happened, we took a cash-flow hit because we had to overcome the substantial expenses in manpower, equipment and materials that we had put into the project," said MacCurrach.

Sparagowski said he refused to pay MacCurrach because he believed that he had been overbilled for the work.

"We surveyed the property and found that the amount of earth MacCurrach said he moved was not accurate," said Sparagowski. "We came up with a figure of $271,000 that was overbilled. They also caused $47,000 worth of damage to construction equipment from Nation's Rent. He wouldn't reduce his charges, so I terminated his contract."

MacCurrach's attorney, Sarah McHugh, refutes these allegations, and a common pleas court has ruled for MacCurrach in the case. Sparagowski's attorneys appealed to the appellate court, which upheld the lower court's decision. They are now appealing to the Ohio Supreme Court. McHugh expects the Supreme Court to reject the appeal and for the case to eventually go to trial.

After MacCurrach left the job, Sparagowski brought in local construction firm Bihn Excavating, but work stopped when the money ran out. The course is mostly rough shaped and nine holes are largely completed, though the turf has died on the holes that were grassed before the construction stopped.

"If he had the [financial] wherewithal, he would have completed that golf course by now," said MacCurrach. "If he really had a problem with MacCurrach, by God he would have moved beyond us by now. He hasn't paid us and he still can't make it work."

As for Sparagowski, he said he and a partner are close to putting a deal together to fund the first phase of 31 housing lots on the property. "That deal would generate half a million dollars, and that is all we need to finish nine holes. With that money in place we would be 60 days from having nine holes open."