An ownership dispute over Sand City’s ‘eco-resort’ property drags on as debts keep mounting.

It’s been more than 50 years since Sand City’s leaders have sought to develop the city’s coastline. In 1970, the City Council approved the first proposed development on the coast, a 178-unit apartment complex called “The Dunes.” Every attempt has been swept away by a sea of regulation and financing challenges but one: Monterey Bay Shores, a 368-unit “eco-resort” north of Scribble Hill on a 39-acre site, 28 acres of which would be graded and transformed.

And now, even that project has been thrown into question, as an ongoing court fight continues over who controls the property, all while a mountain of debt grows ever larger.

The California Coastal Commission twice denied the project – first in 2000 and then 2009 – but developer Ed Ghandour, through his company Security National Guaranty (SNG), sued both times and won. The courts more or less forced the agency to approve the project in April 2014, pending a slew of conditions that had to be met before a permit was granted that would allow construction.

But within months, court documents reflect, cracks were starting to appear. By January 2015, the property was encumbered with $27 million in senior debt and $50 million in junior debt, and a senior debt holder threatened foreclosure by September. In July 2015, Ghandour was introduced to real estate investor Mahender Makhijani, and over the next two months, Ghandour urged him to loan money to the property for a stake in the project, the permit for which Ghandour described as “imminent.”

Makhijani and a group of other investors formed Evariste Group LLC, which reached an agreement with SNG in September 2015 to loan $27 million to the property for a stake in the project. SNG – Ghandour – would retain control over management of the property pursuant to agreement.

In that agreement, however, Ghandour made a number of promises that courts found he violated, and in May 2016, a Sonoma County Superior Court judge granted Evariste’s motion to remove Ghandour as manager.

(Neither Ghandour nor Evariste or Nano Banc representatives responded to requests for comment; this account is drawn from court papers.)

Among those broken promises: Ghandour had said the property would be clear of all other debt with Evariste’s loan, and that he wouldn’t spend more than $25,000 per month on the project without approval from Evariste’s investors.

The Coastal Commission finally granted a coastal development permit in November 2015, and by that time Ghandour told Evariste he’d already spent about $250,000 of working capital on the project less than two months after the loan. Evariste also learned that two of SNG’s attorneys had not been paid, and were threatening to assert liens on the property.

The court granted Evariste control of the property in May 2016 and Ghandour lost his appeal of that decision in October 2017.

Meanwhile, the Coastal Commission finally gave the green light for grading to commence on the site in February 2018, and grading did, for a short time. Litigation between the two parties was ongoing – each was accusing the other of fraud – and in 2022, the court ruled in favor of Evariste, ultimately awarding the company over $2 million in attorneys’ fees and $650,000 in damages.

SNG appealed again, and in March of this year, the Court of Appeal upheld the trial court’s decision.

But there’s still more litigation pending. SNG sued Evariste and others in September 2023 in Orange County Superior Court over a $37 million loan they took out against the property the month prior, without SNG’s knowledge or consent. In January of this year, the court denied SNG’s attempt to take back control of the property pending the litigation, determining that there were no damages; court documents reflect SNG never made any loan payments, and by August 2023 owed Evariste $76 million. The new loan – at a 5-percent interest rate – went to pay down the old one, which was accruing at a 20-percent interest rate.

That case goes to trial Aug. 1.

Meanwhile, Makhijani and another Evariste principal – as well as Nano Banc, which floated the $37 million loan – are on the losing side of a more than $100 million real estate fraud case in Orange County involving the historic Hotel Laguna, and a bankruptcy court judge is now sifting through the wreckage to decide how to mitigate the damage for defrauded investors.

What about the fate of the so-called “eco-resort”? The project’s permit remains active indefinitely, but the world has changed dramatically in recent years, and costs keep climbing. Will another investor ever swoop in and spend the money to build a luxury resort on the shore of an ever-rising sea? Is there profit in that?

The answers are as clear as the churning tide.

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Editor's Note: This story has been updated from the print version to reflect that grading at the project site occurred in 2018, not 2017.