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The Modesto Bee I Mountain Hse project put on back burner • Page 1 of 2 MOUNTAIN HOUSE--A key element of Mountain House that would have brought jobs to the new town in San Joaquin County is on hold amid a foreclosure and bankruptcy that were unleashed,at least in part,by the global credit squeeze. The financial woes have torpedoed plans to develop a retail,industrial and office project along Interstate 580 on the south side of Mountain House, near the borders of Alameda County and Contra Costa County.The project was to have been built by an affiliate of Pleasanton-based Pegasus Development,which is headed by Michael Clevenger. The developers had touted the 14o-acre project as a way to create jobs and potentially reduce the number of people who would have to commute from and to the emerging community. "I'm disappointed this happened,"San Joaquin County Supervisor Leroy Ornellas said. "The foreclosure will set that project back for a period of time." The backers of Mountain House were hoping that the development would ensure that the town would be more than merely another bedroom community. "What Mountain House is concerned with is that we have local jobs so people don't have to commute to the Bay Area,or Stockton,or Tracy,"said Morgan Groover,development manager for the Mountain House Community Services District,the government agency for the new town. Now,however,the project will remain as vacant land for the foreseeable future. In a prepared release in October 2005, Pegasus executive Clevenger outlined what he saw as the importance of the project: "We are providing services to residents so they won't have to leave to find gas,groceries,pharmacies, restaurants and health care.And we are creating a distinctive gateway to the whole Mountain House community." The land was bought for $11.9 million in July 2004 by Pegasus MH Ventures I LLC,an affiliate of Pegasus Development. At the time of the transaction,the sellers of the property,Tracy residents Charles Spatafore and his wife,Margaret,provided Pegasus with$6.7 million in financing. But in August, after a default notice on the loan,the Spatafores took back the property through a foreclosure of the loan,San Joaquin County records show. Before the foreclosure,the Pegasus MH Ventures affiliate filed for a Chapter ii bankruptcy to reorganize the finances of the stalled development. Neither of the Spatafores nor Clevenger returned telephone calls seeking their comment about the situation. Richard Bowles,a Walnut Creek attorney who is representing Clevenger,said his client believes a lender failed to fulfill an agreement it had with Pegasus. The big problems for the project,according to Bowles,materialized when La Jolla-based Scripps Investments&Loans did not come through with long-term financing that would have enabled the project to get under way.That was in 2007.A representative for Scripps Investments did not respond to a request for a comment. Pegasus was negotiating with multiple lenders but eventually chose Scripps,Bowles said.When Scripps did not come through,the credit markets had begun to deteriorate. Despite the setback,local officials are convinced that Mountain House,which has about 8,000 residents,will get the jobs from the project. "Whenever the economy or the market turns around,this project is ready to go,"Supervisor Ornellas said. "The 8,000 people living there are clamoring for the amenities that other communities have." http://www.modbee.com/local/story/476689.html 10/28/2008