San Diego's biggest apartment builder Ray Huffman faces creditors

The muffled roar

Huffman inside Essex St. building. North Park contains so many of his apartments that the entire area is occasionally referred to as “a monument to Ray Huffman.”
  • Huffman inside Essex St. building. North Park contains so many of his apartments that the entire area is occasionally referred to as “a monument to Ray Huffman.”
  • Image by Jim Coit

When the preliminary bankruptcy hearing for the Ray L. Huffman Construction Company was held last month, extra chairs had to be carried into the courtroom to accommodate the crowd of creditors, attorneys, former associates, and reporters who showed up.

Conversation pit at Huffman's headquarters

Conversation pit at Huffman's headquarters

Some of the people wound up leaning against the walls anyway for lack of space, and others stood in the hall outside, straining to hear the proceedings through the open courtroom doors on the fifth floor of the federal bankruptcy court in downtown San Diego.

Huffman, who has been in the construction and real estate business in San Diego for more than twenty years, owes a lot of people a lot of money. But he has numerous friends, too, and many people at the hearing had come not only to listen to what Huffman had to say but to express support for him.

The full-size stuffed animal Huffman shot in 1980 while on safari in Botswana.

The full-size stuffed animal Huffman shot in 1980 while on safari in Botswana.

Technically, it was a preliminary bankruptcy hearing, but it took on the tone of a “Ray Huffman testimonial,” as one of Huffman’s former associates later put it.

Huffman surrounded by photos of his projects

Huffman surrounded by photos of his projects

The crowd heard one creditor, a middle-aged woman, offer to reduce the interest rate on her loan to Huffman from twenty-two percent to thirteen percent, if that would help him meet his debts.

4525 Texas Street. "We stayed away from marginal areas, low-income areas."

4525 Texas Street. "We stayed away from marginal areas, low-income areas."

They heard the attorney for another creditor say that ninety-eight percent of the people present supported Ray Huffman (this figure was quickly amended to “more like 99.9 percent” by the next man to speak). And they heard Huffman’s attorney, Theodore Graham of Luce, Forward, Hamilton and Scripps, describe his client as “the premier apartment builder in this town, and probably for all time.”

4417 Idaho Street. "It's like driving a read nice car, or having a good-looking woman on your elbow."

4417 Idaho Street. "It's like driving a read nice car, or having a good-looking woman on your elbow."

Hyperbole aside, Graham’s claim is almost certainly true. At least 14,000 San Diegans live in apartments built by Ray Huffman. Since 1962 his construction company has built some 600 apartment projects in San Diego with a total of more than 7000 units, far more than any other builder here.

1707 Essex Street. "If Huffman's that hip about the black community, he should have kept his mouth shut."

1707 Essex Street. "If Huffman's that hip about the black community, he should have kept his mouth shut."

North Park, where Huffman concentrated much of his early building, contains so many of his apartments that the entire area is occasionally referred to as “a monument to Ray Huffman”; but Huffman apartments can be found in quantity in Pacific Beach, Ocean Beach, El Cajon, Chula Vista, and other cities and neighborhoods around the San Diego area. Simple boxlike structures with decorative facades, designed for maximum efficiency and relatively low rents, most of the buildings are, like asphalt or ice plant, an integral part of the city's landscape.

Huffman concentrated almost exclusively on building apartments at a time when most other developers here, citing low demand and low profitability for apartments, were blanketing San Diego’s canyons and hills with single-family homes. He gained a reputation in the construction business as a maverick, a guy who could fly in the face of conventional wisdom on his way to the bank. It was a reputation enhanced by Huffman's outspokenness, lion-size ego, and personal eccentricities. Known in the business world almost as well for his flashy clothes and gold jewelry as he is for his apartments, Huffman claims to sleep only three or four hours a night in order to squeeze as much activity as possible into his life. Associates tell stories of playing golf with him while he is listening to novels being read to him over headphones. He is a deeply religious man, a scuba diver and big-game hunter, and his personal office as well as his sprawling Mount Helix home are virtual museums full of animals he has killed in Africa and elsewhere.

At the preliminary hearing Huffman wore a tan sport coat and a black shirt open at the collar. A gold pendant hung around his neck. He seemed relaxed and confident; shortly before the hearing began at 10:30 in the morning, he and his wife Carolyn were smiling as they chatted with some of the people present, as if to assure them that no one need be concerned on their account. Huffman had not filed for true bankruptcy but for protection under Chapter 11 of the federal bankruptcy laws; under Chapter 11, he remains in possession of his property, and the debts of his construction company are frozen while he attempts to reorganize his business and pay off his creditors. "You are the most important people in this proceeding," attorney Graham told the creditors. "We have duties to you.” After explaining that

Huffman’s private plane and charter sportfishing boat would soon be put up for sale, "along with other things that the Huffmans could afford in better days," Graham noted that the support Huffman received from his creditors was “very, very unusual" in a bankruptcy proceeding.

At 10:55 Huffman himself look the witness stand, and. after being sworn in. told the hushed courtroom, "This is an embarrassment, a difficult period for my wife and I. We are committed to doing what's right by you. ... It may not look like it, but this is the only way we can do it.” Huffman blamed his troubles on the economy and the current dismal market for new housing. Two big construction projects, one in San Bernardino County and one in La Mesa — houses, it turned out, not apartments — had soured on him, and “were very harmful to our operation,” he said. He promised that all his creditors would be paid in full.

Under bankruptcy law, Huffman has until about mid-October to submit to his creditors a plan for payment. But in spite of the outpouring of support at the preliminary hearing, not all of his creditors support him one hundred percent. At least one lawsuit related to Huffman's financial troubles has been filed by some of his partners in a real estate deal, who allege Huffman illegally used property which he only partly owned to secure a bank loan. And while most of his creditors seem to think he will be able to steer his company out of Chapter 11 and back into business, a few are convinced he won’t. But Huffman’s story — the story of a self-made millionaire who accrued his fortune in real estate in the last twenty years and must now struggle to avoid the collapse of his business — is a classic of contemporary Southern California.

The lion’s almond-shaped eyes are narrowed. and its teeth are bared in a snarl. Backed by a mural of the African veldt, the full-size stuffed animal, which Huffman shot in 1980 while on safari in Botswana, stands in a comer of his cavernous office. The office — on the second floor of Huffman’s North Park headquarters, on the corner of Adams Avenue and Oregon Street — also contains an eight-foot-long aquarium, a fireplace, and an oval-shaped, sunken “conversation pit” lined with tan couches beneath an arching skylight. There are pillows on the couches made from the skin of zebras Huffman shot in Africa. There is a desk in the office, too, but it is the lion that dominates the room, in a way, symbolically: Huffman readily admits that his career as a developer is less important to him than his recreational pursuits.

“Life is so exciting, if you had all the lives in the world to live, you would not even start to be able to do all there is to do,” he told me when I met him in his office one morning not long ago. He was dressed in a wine-colored jogging suit. At the age of forty-seven, Huffman has straw-colored hair, a great tan, and boyish good looks. He talks rapidly, sometimes throwing phrases and whole sentences together in a verbal shorthand that mirrors his rush to experience a wide variety of activities in daily life. “I have strange sleep habits,” he said. “I sleep three hours a night. I get up at 2:00 a.m.. and I have three to four fifteen-minute naps during the day. If you just think, most people get eight or nine hours sleep, and you can work yourself down to three; why, that’s four or five hours a day you now have to do all the things that you'd like to do, that you never do, that you always make excuses you don’t have time to do. . . .

“I have six priorities in my life that I try to watch very carefully. The first one’s religion. I happen to believe the Christian way is the way, so I have to think this life is a testing place, and you better do what’s necessary to see that when you finally go, you know where that’s going to be and you do the right things to get there. Second one’s my health; you don’t feel good, it doesn't make any difference about anything else. I work at it. I eat health things. I run four miles a day five times a week, in a little under thirty-two minutes. I try to play tennis a couple, three times a week. I don’t always get that much in, but I practice an hour, hour and a half a day with a ball machine. [Third priority) is my wife; fourth one’s my children; fifth one's my avocations; and my sixth is my vocations.”

Huffman’s vocation might be sixth tin his list, but it happens to be the thing that made him rich. Born in Iowa and raised in a middle-class family in Pasadena, he dropped out of Pasadena City College after one semester and transferred briefly to Bob Jones University, a fundamentalist religious college in Greenville, South Carolina. “I was considering the ministry, but I was smart enough to know that I really didn’t know what I wanted to do,” he remembered. Quitting college for good at the end of his first year, Huffman returned to Pasadena and drifted into the carpentry trade, married his high-school sweetheart, and began raising a family. Although he was eligible for the draft during the Korean War, he was never called upon, and went to work for the J.H. Hedrick Construction Company. In 1957, after four years with the company, Hedrick sent him to San Diego to open a field office, and for the next five years Huffman learned the ins and outs of building apartments. the Hedrick company’s specialty in this area. By 1962 he was part-owner of three small lots, and, supplementing $2000 in savings with a few thousand more borrowed from his brother-in-law, Huffman and his wife started building apartments themselves. Huffman handled the construction itself: his wife Carolyn, by several accounts a very sharp businesswoman. did the accounting and helped decide when and for how much the buildings would be sold. Their office was the patio of their Clairemont home, which Huffman had converted to an extra room. He was twenty-seven at the time.

Huffman claims that the market for apartments in San Diego wasn’t at all promising in 1962, ’63, and ’64. The boom of the late Fifties had faded, he says, and the apartment vacancy rate was hovering near ten percent. “I didn’t really pick a good time to go into business, but we built a better product, a different mousetrap, if you will, and we attracted those people who were willing to try something a little different, pay a little bit more. . . . [Other builders] were doing exactly the opposite; they were taking things out of their units to try to make them cheaper.” The innovations Huffman put to use in apartments included wall and ceiling insulation (for soundproofing), kitchen windows, heavy-duty front door locks, “little things that the women noted. That’s who we build for. If you please the female, you'll alw ays please the male.” In time Huffman would survey his growing number of apartment tenants (he retained part-ownership of many of the buildings he built) to find out which features they wanted, and which they would pay extra for. The surveys would lead him to install fold-down bathroom scales, stainless-steel kitchen sinks, microwave ovens, trash compactors, and the like.

One reason for Huffman’s early success was the sales team of Harry Robinson and Robert Casale. Robinson and Casale were top commercial property salesmen for Art Leitch Realty when Huffman met them in 1964. “Ray didn’t really like real estate brokers,” remembered Robinson, who is now president of a real estate firm in Mission Valley. “It took me about two months to convince him all brokers weren’t bums or thieves.” Huffman finally agreed to let Robinson and Casale try to sell seven of his apartment buildings, and when they quickly closed deals on all of the buildings at a time when the market for apartment houses was slow, “they quickly made a convert out of me,” Huffman said. The three; along with Huffman’s wife Carolyn, soon became partners in C & R Realty, which was little more than a marketing division of the Ray L. Huffman Construction Company. “Our job was to find land for him to build on. acquire it. and sell his commodity when it was finished,” Robinson explained.

In an interview late last year with Donald Harrison of the San Diego Business Journal, Huffman credited cold weather in the eastern half of the United States, and the huge defense contracts awarded to San Diego firms, for providing him with a steady stream of new arrivals who rented his apartments. More recently, he noted, “When we started out we were aiming for the blue collar, the secretary [for tenants]. The J.C. Penney, or Montgomery Ward, or Sears shopper, and I say that respectfully. We tried to house the mass, and from 1962 to the late 1960s. we did a pretty good job of it.” It was a boom era for apartments, and Huffman put them up almost as fast as he could find lots to hold them. But while he was building for "the mass,” he made sure it was a mass that could afford to pay rent. “We stayed away from the marginal areas, basically low-income areas,” he said. “We just tried to stay out of those areas and into areas that were aesthetically more desirable, with houses and streets and shopping centers that were better quality. . . . We did most of our building — I’m guessing maybe 400 buildings — in Pacific Beach, Ocean Beach, and North Park, as much as anything else because that was where the lion’s share of the areas zoned for high-density apartments were. Those places had certain-size lots that were repetitious: 50 feet by 125 feet, 50 by 133, 50 by 140. And so we had anywhere from fifteen to twenty different apartment packages [to fit the various size lots], with a front design that would fit on any of them. And we put up a lot of those buildings for many, many, years.”

The design of Huffman’s apartments during the 1960s was done exclusively by Phillips, Barnicoat and O’Grady, an architectural design firm in Encinitas. (Myron Phillips and Jim Barnicoat were former designers of J.H. Hedrick whom Huffman knew and respected.) “We tried to pick out themes of various architecture — French Provincial, Cape Cod, Spanish, Ranch — and build them with simple designs and economy,” Mort O’Grady, who helped with the design of Huffman’s early apartments, said recently. “The buildings had character. A typical package was eight or nine units on an alley. On your typical fifty-foot-wide lot, it was pretty much of a straight building with a small courtyard on the side. Two or three designs we used over and over and over. That was one thing that allowed Ray to keep his costs down — a lot of repetition.”

There were other reasons Huffman was able to hold his costs down: choosing areas where land costs were moderate, his ability to find subcontractors who were willing to work for a relatively low profit margin. The result was a profusion of similar-looking buildings which were often copied by other builders, vastly increasing Huffman’s impact on the physical appearance of San Diego’s neighborhoods. Many people are unenthusiastic about the design of Huffman’s early apartments, but he himself is proud of them. “When I went into business for myself, I wanted to make sure that all of our buildings were very attractive, and have what we call ‘curb appeal,’ ’’ he told me. “It’s just a pleasure to look at a building that looks really good. It’s like driving a real nice car, or having a good-looking woman on your elbow. It’s the same with apartments.” Sitting in his office, Huffman put his big hands up to his eyeballs and rubbed them forcefully for a moment, like a man badly in need of a fifteen-minute nap.

The first apartment ever built by Huffman’s construction company still stands. A nine-unit complex at 4525 Texas Street, three blocks north of El Cajon Boulevard in North Park, it has a kind of scalloped front that might have been considered “futuristic” looking back in the early Sixties. But like so many of Huffman’s later buildings, it also has four parking spaces in front (there are five more in the back), making it almost certain that the front of the building will be partially obscured by parked cars. The day Huffman showed it to me, he was wearing a gold lion’s head the size of a plum on a thick gold chain around his neck. Another lion’s head graced a huge gold ring on his left hand. On one wrist was a gold watch, on the other a tiny calculator with a massive gold band. “Ray’s learned to dress himself,” Harry Robinson had told me a few days earlier. In the early days of their partnership, Robinson recalled. Huffman wore a virtual “uniform” of short-sleeve shirts and cardigan sweaters. The day we drove around North Park, he was wearing (in addition to the gold) a long-sleeve, square-tailed shirt made of silvery fabric, brown slacks, and dark brown leather shoes. As we drove down one street after another, Huffman would point to apartment buildings and say, “I built that one; I own that; I built that one for a guy named Miller back in ’76,” and so on.

At 4417 Idaho Street, a couple of blocks north of El Cajon, we pulled up in front of a solid, square, aged-looking building which Huffman built but no longer owns. The building’s front was decorated with synthetic gray stone, and its yellow paint was faded. “This is the ’69 model,” Huffman said, only half jokingly; another nine-unit complex with four parking spaces in front and five in back, it was a typical “package” of his which San Diego’s real estate investors often bought, sold, and traded over the years like used cars. We looked around the complex for a moment, but there was nothing much to see: holes in front door screens, peeling paint, a few toys scattered on the sidewalk. “Needs some maintenance,” Huffman commented, eyeing the building the way an artist or a tailor might examine something he had made long ago. Upstairs, a door banged shut; a child, half hidden by curtains, stood in a window and stared at us.

We visited 1707 Essex Street next, a fifty-one unit, two-story complex Huffman built in mid-1979 just south of University Avenue near Park Boulevard. Leading the way into the interior courtyard, he explained the building is still owned and managed by his property management company, and he was obviously proud of its tidy Spanish-style architecture and luxuriant landscaping. Unlocking an empty two-bedroom unit, he pointed out its heavy-duty front door and lock, peephole, fireplace, dining-room chandelier, dishwasher, and microwave oven. “Always have a light right over the sink, always have a window right over the sink,” he said, waving his hand at feature after feature like a salesman selling a car. The bathroom even had a hosiery bar in the shower so that women can hang wet underwear and nylons where they won’t drip on the floor. “It’s no big deal, but if you’re a husband, it pisses you off,” Huffman said with a shrug.

With its swimming pool, private entrances, air conditioning, and underground parking, the building on Essex Street is clearly intended for a different kind of tenant than the complex we had just seen on Idaho. It is no coincidence, either. Huffman explained the two buildings illustrate the marked change that Southern California’s building industry underwent in the Seventies in response to rising building costs and inflation. Forced to spend more money on their buildings — and selling or renting them at correspondingly higher prices — developers found they had to attract more affluent buyers and renters. “We had to abandon the Sears shopper, and go into the middle-income market,” said Huffman. “With the continuation of inflation and so forth, it became mandatory that we had to abandon even the middle-income market. And now we’re talking about one-bedroom apartments starting at $500 a month, two bedroom with two baths at $650 to $700 a month.” (Roughly the price range of the Essex Street complex.) “And that’s the market we have to go to.”

Although he places much of the blame on inflation and rising costs, Huffman also claims the changes were due partly to a shift in the city’s attitude toward off-street parking. In the early Seventies, “the city made us add the equivalent of one and a half spaces per apartment unit, disallowed street parking in front of the buildings, and [imposed] many other requirements and restrictions,” he complained. “It made construction more expensive, and the justification for putting apartment houses on that land less economically sound. It was devastating to the apartment industry, but forget about the industry itself, it was devastating to the tenants, because very few apartment houses were built in the Seventies compared to what was built in the Fifties and Sixties.”

Huffman claimed that rather than trying to accommodate more cars in the densely populated, apartment-rich areas of the city, government should have restricted cars in those areas, and provided the residents with better mass transit. Such an arrangement would have solved the parking problem, increased ridership on an underutilized bus system, as well as allowed developers to build apartments that were less costly, Huffman insisted. “The politicians did a lot of brainless things, to be very truthful with you,” he continued.

"But that always happens when politicians get involved in land-use policies. They’re subject to political pressure from local planning groups and other elements like that, that create smokescreens and obfuscate the issues and never really address what the real problem is, which is how to handle the influx of population in San Diego County. . . . And then supply transportation for them. But all this was either too cosmic for [the city council] or too gargantuan a problem for them, because they just lifted the rug up and dusted it underneath and said it would go away. The answer, of course, is that it didn’t.” Government regulations like the ones on off-street parking soon became Huffman’s favorite whipping boy, but they never seriously slowed down his profits. Moving the focus of his operation out of the inner city, he bought larger lots in El Cajon and the South Bay, built larger complexes on them (thirty or forty units instead of eight or nine), and charged higher prices for the completed product. He retained part ownership of an increasing number of the projects he built. It was profitable to build apartments, but Huffman had discovered it was even more profitable to own them, at least for a while. In the interview with Harrison for the San Diego Business Journal, Huffman described how inflation made money for him and his investors, and made it fast. He would construct, say, a thirty-unit complex for one million dollars, using $500,000 from investors or his own reserves and $500,000 from a bank loan. “If the building goes up fifteen percent in value, it is worth $1.15 million in one year, and in two years, uncompounded, it is worth $1.3 million — so in two years it is worth $300,000 more. At that point, we ask to refinance the [bank] loan, making the loan $800,000, and meaning that, of the original investment, we now have only $200,000 of our own capital left in there. In another year the building is worth $ 1.45 million, in another year $1.6 million. You refinance again, get another $300,000 back, and now, instead of having your capital in it, you are ahead $100,000. ...” When the building was sold, the investors received a pro rata share of the sale price (depending on the amount of their original investment), thereby realizing even more money.

It was a perfect system as long as buyers for apartment buildings could be found, and during the real estate boom of the Seventies, finding buyers for property in Southern California was almost as easy as hammering nails, or skimming through the financial transactions listed daily in the San Diego Union. Which is what Harry Robinson used to do for Huffman. Robinson would call on people who had just sold their home, often at twice the price they’d paid for them, and try to convince them they should use some of their new-found profits to become one of eight or ten partners who owned a Ray Huffman apartment building. “How could you go wrong?” one investor said not long ago. “At the time, he was the best investment in town — better than the stock market, better than T-bills, better than trust deeds. ...” Huffman seemed to know what to do with his own profits, too. As the former associate noted, “Ray never had any trouble spending money.” In the early Seventies he learned to fly, and bought and sold several small planes before settling on a twin-engine Piper Navaho. The plane enabled Huffman to explore Baja California, where he has long loved to scuba dive. “I like exciting things,” he once observed. “That’s why I enjoy scuba diving. I think to dive to sixty or one hundred feel down in hundred-foot-visibility water and be around sharks and manta rays and killer whales and tuna and wahoo is exciting. There’s danger in it. . . . It has to rank right up there as an all-time experience.” He also bought a sportfishing yacht, and several other boats ranging in size from fourteen to sixty-five feet. He filled his huge house on the slopes of Mount Helix with expensive sound equipment and other electronic gadgetry. including a video recorder and a home computer. For his investors, there was a forty-foot recreational vehicle to ferry them to apartment projects located on the edge of town or in Riverside and San Bernardino counties. The vehicle is equipped with a bar and video cassette machine on which guests can view some 400 movies. (Huffman claims none of the selections are X-rated; his own favorites include Casablanca and several John Wayne films, he says.) And he began publishing a newsletter, distributed to his business partners and associates. The newsletter contained such things as advice to his apartment managers and information on new investment opportunities, but in time it began to be filled with political commentary and observations on the places he’d traveled to, as well. Eventually, some of those observations got him in trouble.

In 1978 Huffman was appointed to Governor Jerry Brown’s housing task force, a group whose mission was to study and propose solutions for the state’s future housing needs. But in January of 1979, after returning from a visit to South Africa, Huffman wrote in his newsletter that the United States was hypocritical to protest South Africa’s apartheid policies because it was a similar policy — slavery — that had “made America great.” He noted, “Generally, it is very difficult to keep the black man working. The more you give him, the more he relaxes and the less he is inspired to do for himself. . . . It’s just a fundamental truth that the black man in Africa by and large will do whatever he can to get away from work. ...” Huffman’s comments provoked an outcry from local black leaders, and he resigned from the housing task force under pressure. He claimed that his comments had been taken out of context; he was not condoning slavery, he said, but merely noting that a system that employs it is bound to prosper. He also insisted that his comments about African blacks had nothing to do “with our black friends here in San Diego.” But as Clarence Pendleton, who was then the director of the San Diego Urban League and a member of the housing task force, replied at the time, ”lf he’s that hip about the black community, he should have kept his mouth shut.” (Although he is still defensive about the newsletter flap, Huffman seems to have found a humorous side to it, too; he once issued a one-sentence press release through his public relations man. Jack Canaan, which read. “Ray Huffman said today he is against slavery.”)

The visit to South Africa was only one of eight visits to Africa Huffman made between 1978 and 1982, mostly to hunt and fish. On a number of those trips he took along a personal photographer to film his experiences. “It’s a great continent — it’s big, it’s wild, it’s exciting to be out there in the bush and see those animals in their own habitat,” he told me. “It’s something that might well stop in our lifetime, because of the population encroachments, the poaching, the pollution. . . Acknowledging that many people think hunters are helping to speed that process along, Huffman, a member of the Safari Club International, claimed that as a conservation-oriented hunter, he is actually contributing to the health of wild animals rather than their demise. “You don’t just get a rifle and a license and go shooting up the countryside,” he said. When the dominant male, or trophy male, of a group of animals is killed, it allows the younger males to mate with the females, and actually increases the number of offspring, he said. Of course, the resulting increase in animal populations also provides opportunities for the hunter. “Sometimes you can get too much game, and you go in sometimes and shoot some females and even some fawns, because all of a sudden they overpopulate. . . . It’s just like too many people can’t live on one piece of property,” Huffman explained. A moment later he added. “God put us on this earth to be hunters. The Bible is full of hunters. People today think you’re a beast if you do it yourself, but those same people would think nothing of ordering a New York steak someplace, or a filet of sole. ... If they really knew all there is to hunting, they’d see that it’s a man’s way of increasing the population of a herd.”

In 1980 Carolyn Huffman went into semiretirement. She had been a key factor in the success of Huffman Construction, handling financial statements and other accounting matters, and taking responsibility for color-coordinating and designing landscaping for many of her husband’s projects. She had also helped in raising their five children (Philip, 25; Mark, 24; David. 19; Steven, 17; and Christine. 12). But as Huffman told Donald Harrison in an interview, it was now “time for her to be Caesar’s wife. When Caesar comes home, she takes Caesar’s armor, and brings him a glass of wine. . . .”

It was a time when Huffman was at the pinnacle of his achievements. But cracks were already appearing in the plaster. Inflation, which helped to finance Huffman’s opulent lifestyle, and which he admits made millions of dollars in profits for his companies, was in reality a kind of double-edged sword. In 1979 it had begun to cut the other way. There were so many bank loans out on apartment buildings and other property that money for new loans was in short supply, particularly in Southern California. Interest rates began to creep upward as a result, and in the building industry, the rising rates had an immediate and dramatic effect. Housing sales slowed as people realized they could no longer afford to make payments on home loans. And with less money coming in from sales, developers had trouble repaying their own bank loans. New projects went undeveloped or ground to a halt. How slow did things get? In the late 1960s, Huffman once had seventy apartment projects under construction at the same time. In 1980, he had only ten. An article that year in the San Diego Union noted that he had gone from San Diego’s premier apartment builder to San Diego’s only apartment builder. When the slowdown continued, a few builders went bankrupt, and others decided to withdraw temporarily from the business. But Huffman was among those who decided against the latter course; he was convinced that the people who could no longer afford homes or condos were going to have to live somewhere, and that somewhere would be apartments. “Why do that?” he asked impatiently when I questioned why he hadn’t cut back his operation in 1979. “No reason to stop building; the market was there. Just build to [suit] the market.”

Building to suit the market meant building high-priced apartments for the small percentage of people who could afford them. It meant finding foreign investors to replace the cash-short American banks, particularly Mexicans eager to convert their relatively unstable pesos into relatively stable dollars. Telegraph Canyon Villas, an $18 million, 183-unit project in Chula Vista that Huffman put on the market in late 1981, was reportedly built mainly with money from Mexican investors. At a reception the day the complex opened, in September of 1981, Huffman “wore more gold than you’ll make in your lifetime,” a former associate of Huffman’s told me. The same former associate remembered that Huffman’s wife Carolyn wore a stunning blue suede outfit, a mariachi band played, and a film on Huffman’s approach to building and selling apartments played over and over on a video cassette machine. Notables in attendance included Chula Vista Mayor Will Hyde and Assemblyman Wadie P. Deddeh (D-Eightieth District).

Telegraph Canyon Villas was a successful apartment project (at the time of the opening reception, it was seventy-five percent rented), but Huffman was already beginning to feel the effects of a cash-flow crunch. A project consisting of 109 houses in Rialto (in San Bernardino County), which he had first become involved in in 1978, was costing him a great deal of money. After a number of delays, the original builder had gone out of business, and Huffman, who was not actively involved in construction of the project but had guaranteed the bank loan, found himself legally and financially responsible for finishing the houses. He did finish sixty of them, but he had to borrow bank money to do it. The houses eventually sold, but Huffman claims that because of the depressed market. they sold for less than it had cost to build them. When his bank loans came due, he had to borrow several million dollars at high interest rates from other banks to pay them off. (Recently, Huffman estimated he lost $1.5 million on the Rialto project. At the same time, an eighteen-unit condominium project in La Mesa cost him about $700,000 for similar reasons, he said.)

Two of those recent bank loans are at the center of a lawsuit against Huffman filed by Contreras Brothers Construction of Lemon Grove. Gilbert and Salvador Contreras contend that to obtain a loan from Imperial Bank of Los Angeles (as well as another loan from Sumitomo Bank of San Francisco), Huffman used as security a lot which he only half owned. Among the other owners were the Contreras brothers, who were unaware the property had been used as security for the loans and that the banks had thereby gained legal claims to it. When they did find out, in May of this year, they filed a ten-million-dollar lawsuit against Huffman, his wife Carolyn, his construction company, and the banks themselves, charging them with, among other things, fraud and breach of contract.

James Granby, the Contreras’s lawyer, explained that the property, located on Magnolia Avenue in El Cajon, was to have been the site of an apartment house built by Huffman. “Our people supplied the money [which was used to purchase the property], and Huffman was going to supply the know-how, in return for which he was given a fifty percent interest.” said Granby. "For convenience sake, the land was in Ray Huffman Construction Company’s name ... but it was not his property. Essentially, he mortgaged the property without telling us. It’s fraud to not disclose what you are doing to your partners. If he had disclosed what he was doing to us, we never would have permitted it.” Since the banks either knew or should have known that Huffman was not the sole owner of the property, they, too, should be held responsible, Granby said. He added that the ten million dollars is for punitive damages as well as money the Contrerases could lose because they currently cannot sell or develop the lot.

When I asked Huffman for his reaction to the Contreras lawsuit, he replied, “It wasn’t very smart of them, but that’s neither here nor there. The lender [Imperial Bank] was willing to back down to half the equity, but meanwhile, these guys filed suit. They [the Contrerases] shoot from the hip . . . but they own half the property, and no one’s going to try to beat them out of it.”

Granby, however, insisted that he hadn't heard of the bank’s offer to "back down to half the equity” (in other words, to secure the loan with only Huffman’s share of the property). “I’ve spoken to Imperial Bank, and they have not indicated that to us at all,” he said. Asked why he thought Huffman had used the property to secure the bank loans, Granby replied, ”I don’t really know. My guess is he did it because he was on the verge of bankruptcy and wanted to get money any way he could.”

At least one other partner of Huffman’s could soon file suit over an apartment building which was similarly used as security for a loan, and insiders say other suits could follow. But whether or not that happens, it’s certainly true that many of Huffman’s partners became nervous about continuing to invest with him as the current recession continued. Some decided that rather than becoming part-owners of a Huffman building, they would prefer simply to loan him cash; that way they theo-tetically could get their money back sooner if they wanted or needed it, and meanwhile, Huffman would have to pay them high interest rates. But the interest rates Huffman paid on these private loans — some were as high as twenty-two percent — contributed to his worsening cash flow. In early May he spent lavishly for a dinner for some 600 investors at the Masonic Temple in Mission Valley. The dinner was ostensibly to thank his many partners and to assure them that his business was still strong, but one investor who attended called it ’’kind of a last, desperate gasp for cash — one last flashy number.” Huffman provided steak dinners for the crowd and leather key rings with the name of his company embossed in gold. “It was nothing crass, but the underlying theme seemed to be, ‘I’m all right. I’ve made you a lot of money, don’t forget I’m still open for investments,’ ” the investor said.

Six weeks later, on June 14, 1982, Huffman sought court protection from his creditors. Things had gotten so bad he could not even pay the full $8500 monthly rent for his company’s headquarters in North Park. Documents filed with the federal bankruptcy court showed he owed nearly $800,000 to private investors, twenty of whom are owed at least $15,000. Among the lesser debts were bills from Barnicoat and O’Grady, the architectural designers, and from Four Square Productions, a local firm that had processed Huffman’s films of himself in Africa. Also included among those who are owed less than $15,000 are such varied names as Aircraft Management Services in El Cajon, Ranch & Coast Publishing Company, San Diego Trophy Shop, Allen’s Flowers & Plants, and the Diving Locker.

Since then, Huffman has listed his total assets as $40 million and his total liabilities as only $23 million. On the surface, the difference between the two figures seemed to indicate there was no reason to file for Chapter 11 in the first place, but as Huffman explained later, it was a lack of cash that caused him to seek court protection. It became patently clear [it was necessary to file], especially if you had the belief, which I did, that the economy was not going to turn around in the short term,” he told me not long ago. Noting he had only three projects currently under construction, he went on, ‘‘We are doing everything possible to make things happen as far as bringing investors in the front door, making as much money as we could. . . . But the fact is, investors were slowing down. They had the money, but they were sitting on it, going into money markets, things other than real estate. . . . [Meanwhile] the banking industry had secured its loans to us with liens on a lot of our apartments, and when those loans became due, they wanted their cash. What they were going to do is force the sale of those apartment projects to pay off those loans. And in this depressed real estate market, to sell those apartment projects was not the smart thing to do.” Huffman claimed that to sell his property under current conditions would have meant receiving only about twenty-five cents for every dollar he had on paper.

Huffman’s action took nearly everyone in the local financial community by surprise. It also surprised most of his creditors and employees. “He’d always been a little slow with his payments, but he had a good reputation,” said an employee of Four Square Productions. “Then we read in the paper he had filed for bankruptcy, and we knew we were in trouble.” Cynthia Sucov, Huffman’s investment director, found herself out of a job immediately, along with about a dozen other employees. Sucov had invested in five of her employer’s apartment buildings over the years, and at the time she was dismissed, had about $25,(XX) on deposit with the company to be applied to an upcoming project. But once Huffman filed for Chapter II, this money was temporarily “frozen.” along with similar funds contributed by about fifty other people. (Under federal bankruptcy law, no money can be removed and no new money can be accepted by Huffman’s construction company until he comes up with a plan to pay his creditors.) “It’s a difficult situation for many of us,” Sucov said. “I’m not getting a tax writeoff or depreciation on that money, and I might not get any interest. You can’t go forward and you can’t go back.” She blames her frustration on the policies of the bankruptcy court, however, not on Huffman. “It’s a stupid Catch 22,” she said. “The structure of the company is very sound. There are many, many investors who would like to go forward with Huffman projects. But if he can’t get funds, how is he supposed to pay off his creditors? It’s ironic, know what I mean?” Huffman himself told me he will have to sell some of his assets to pay off his debts. Until he presents a detailed plan of payment to the court, however, none of his creditors can be certain when or how much they will receive. (Huffman’s attorney, Theodore Graham, said that no date has been set yet to present the plan of payment, but it will be filed with the court by mid-October.) But Huffman vowed in court to pay everyone in full, and he later insisted he will soon be back in business. “There’s only four to five million dollars of outstanding debt that has to be paid off [immediately] and there’s many times more than that of assets to cover it,” he pointed out. “You can’t be in Chapter II if you don’t have assets.” But Huffman’s assets, while ample, are said to be tied up mainly in apartment buildings, and some observers think he will have a hard time liquidating them under current market conditions. As one local bankruptcy expert put it, “With the real estate market as soft as it is, sometimes it is very hard to say what a property is worth.” Attorneys’ fees and administrative court costs are also extremely high in a bankruptcy proceeding, the expert noted, and disputes over payment can increase those costs by stretching a case out for years.

The same expert estimated that less than fifteen percent of all companies that enter Chapter 11 successfully reorganize and go back into business. Assuming Huffman’s company is one of those able to survive, it will undoubtedly emerge as a different and somewhat smaller operation. Huffman conceded that high interest rates will continue to hamper his ability to build apartments in the near future, but he thinks that in the long run, apartments will be big sellers once again. “The need is there,” he told me. “The single-family house is literally gone. It's absolutely a dinosaur. People do not have enough money to go in and buy a house or a condo any more. . . . The builders who are still building singlefamily homes in ’82-’83 will be building to a diminishing market. Fortunately, there’s not going to be that many builders around. But we’ll be back.”

Having gotten away from direct supervision of his construction projects in recent years, Huffman is currently serving as onsite supervisor of a $16 million, 178-unit apartment complex he is building in'River-side. “There’s nothing like the old pro rolling up his shirtsleeves and going back out to take control of his business,” he told the crowd at the preliminary bankruptcy hearing for his company. Huffman said this with a confident smile, but a few weeks later, sitting in his North Park office, he admitted that filing for Chapter II had been "an agonizing decision. We have a high profile in the industry, and a lot of people thought it could never happen to us. And it didn’t happen because of apartment houses, that’s the irony of the whole thing. . . .

"We knew full well that if we filed, it would mean a certain stigma for a certain period of time, a feeling that you’ve failed a mission. So, painful, but my religion tells me you’re not supposed to be proud about all those things anyway. You get a little bruised, but if you have a good self-image, you’ll get over it. The people who know us well know it’s a sign of the times as much as anything else.” Several sources in the construction and banking industry here agreed with Huffman’s assessment. It was the deteriorating economy that led to his problems, they said, not the way his business was run. And as Cynthia Sucov noted, “He made a lot of people a lot of money. Better companies than Huffman’s have had this trouble.” But the former Huffman associate, who insisted on anonymity, offered a different opinion. Huffman made a tremendous amount of money from inflation, the former associate pointed out, at a time when the real estate market in Southern California was booming. But when the market slowed and buyers became scarce, Huffman continued to build. “He thought it would never end,” the former associate said. “He stayed too long at the fair.”

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