Classing Over Park Venture -- For The Benaroyas, Boblo Island Amusement Park Was A Business Deal Gone Bad. For Michael Moonbaugh, It Was A Dream That Was Never Given A Chance.
Seattle Times Business Reporter
Spring had never been so promising for Michael Moodenbaugh, a young self-made entrepreneur from tiny Randle, Lewis County, as he stood on a podium surrounded by 1,000 excited employees two nights before their risky attempt to reopen a venerable but troubled amusement park.
Standing in the background watching Moodenbaugh rally the employees was Larry Benaroya. The scion of one of Seattle's wealthiest and most philanthropic families, Benaroya was bankrolling Moodenbaugh's dream to resurrect the Boblo Island Amusement Park near Detroit.
That was in 1993. But the partnership soon dissolved into a clash of wills that led to the collapse of the amusement park and a bitter lawsuit. The suit, filed by Moodenbaugh last month, describes the Benaroyas' moves to dissolve the company, dismantle the amusement park and sell off the assets after Moodenbaugh was in a near-fatal car accident late that summer.
Moodenbaugh alleges that Larry Benaroya and his father, Jack - prominent real-estate developers in the Puget Sound area - intentionally damaged, interfered with and fraudulently misrepresented Moodenbaugh's economic interests as he lay comatose and paralyzed from the crash.
According to the lawsuit, the Benaroyas spread defamatory rumors about Moodenbaugh and refused to give his family access to financial records to complete a refinancing deal that would have paid off the Benaroyas and kept the park open.
The Benaroyas deny the charges in the lawsuit. They said the business partnership was a mistake. They lost confidence in Moodenbaugh's ability to manage the park. They claim he was arrogant, headstrong and unwilling to listen to advice. And they didn't believe he could bail out the money-losing operation.
By the time the season closed in late September, Boblo Island had racked up $2 million in operating losses.
But why the Benaroyas moved so quickly to shut down Boblo Island after one season, when their partner clearly saw it as a long-term investment, remains a mystery.
They gave Moodenbaugh less than a year - roughly seven months from February to late September 1993 - to turn around Boblo Island.
The Benaroyas had another factor working in their favor: The value of the property and its hard assets far exceeded their $6.3 million investment, experts said.
Few mistakes in 40 years
The Benaroyas didn't build a real-estate fortune investing in money-losing ventures. Known as aggressive but fair businessmen, the Benaroyas have made few mistakes in nearly 40 years of developing commercial properties in the Puget Sound area and elsewhere.
For the Benaroyas, Boblo Island was a business deal that went bad, plain and simple.
"We had to stop the bleeding," said Jack Benaroya, 75, in a rare interview from his plush 47th-floor office suite in downtown Seattle. "No money was ever made from month to month."
But Moodenbaugh and former Boblo Island employees said that park attendance was improving, they were narrowing the monthly losses and had turned a profit in September.
Time would have proven them right, they contend.
From the day the park reopened in May 1993, former employees said, the partnership turned into a personal battle between Moodenbaugh and Larry Benaroya, a second-generation businessman who has lived in the shadow of his successful father.
Larry Benaroya, 45, who formed the Boblo Island partnership with Moodenbaugh, has been unavailable for comment.
Certainly Jack Benaroya, the patriarch of the Benaroya family, has built a sterling name for his family. The real-estate magnate has donated tens of millions of dollars to the arts and to various charities.
But the semi-retired developer dislikes the media attention that surrounds his charity contributions as well as his business deals. Even after he donated $15 million toward the construction of a new concert hall for the Seattle Symphony, Benaroya didn't want the attention.
Gerard Schwarz, Seattle Symphony music director, said Benaroya "is so private that it was some time before we could get him to agree to attribute the gift to him. It wasn't until before the announcement that he agreed to let us name the hall for his family foundation. That tells you a lot."
In the world of real-estate development, Benaroya is known as a visionary who sees a garden where others see a plot of dirt.
Benaroya is also noted for his long silences during negotiations. That tactic often draws out unsolicited information from rivals who break under the pressure, said those who have engaged in negotiations with him.
Benaroya began building his empire in 1956. Almost from the beginning, he was a step ahead of the market, observers said.
He first started building speculative industrial parks and later developed discount-retail-shopping complexes. Benaroya never looked back.
He owned office parks in Kent, Tukwila, Seattle, Bellevue and Portland, and developed the Pavilion Mall in Tukwila, before selling his real-estate empire in 1984 - near the height of the market - for a reported $315 million.
He is perhaps best known for building, in the early 1970s, Design Center Northwest, a Georgetown complex that grew to more than 100 designer showrooms. The Benaroyas have re-entered the real-estate market, most recently paying more than $80 million to purchase the twin-tower Metropolitan Park along Interstate 5 from Martin Selig, a local office-building developer.
Born in Montgomery, Ala., in 1921, Benaroya and his family moved to Vallejo, Calif., where his father ran a modest grocery and delicatessen. With business slow during the Depression, the family moved to Seattle in 1933. His father and older brother started a beer-wholesaling company.
Benaroya graduated from Garfield High School in 1939 and served in the Navy during World War II. He worked briefly in the beer business but opted for real estate. Without much formal training in the art of deal-making, he began his ascent with an ownership in one small building.
"The Benaroyas always distinguished themselves over the years by their strong sense of honor," said Jerry Mathews, chairman of Kidder, Mathews & Segner, one of Seattle's leading commercial real-estate firms. "They keep their word, they deal straight, they're not devious and they're fair in their dealings."
Golden boy of Federal Way
Perhaps the Boblo Island partnership was a mistake.
But in the beginning, the Benaroyas were impressed by the "golden boy" from Federal Way.
Moodenbaugh was an energetic, deal-making Wunderkind who earned his first million before he was 30 by doing exactly what Jack Benaroya did in the 1960s and '70s: making profits on properties where others saw losses.
"Michael was the guy who could turn around things," said Mark Huston, an Eastside real-estate financing specialist who has done business with Moodenbaugh. "He's the guy who could see the diamond in the hill when others saw coal - not unlike Jack Benaroya in his early years."
By 1985, Moodenbaugh teamed with former professional soccer player Jeffrey Stock to form Omni Properties in Federal Way. The two young men specialized in turning around distressed commercial properties. At one point, they owned eight office buildings in the South End that were fully leased.
"Michael was very successful in the beginning," said Phyllis Danforth, owner of Coldwell Banker Danforth in Federal Way, who gave Moodenbaugh his start. "He was almost like an instant success. He just formed his company, and overnight, he began buying distressed properties. He showed tremendous capability."
Moodenbaugh and Stock set their sights on the financially troubled Enchanted Village and Wild Waves amusement park in Federal Way. They bought it for $8 million. In a short time, they made it profitable.
Enchanted Village was a risky venture that conventional banks wouldn't touch. Moodenbaugh went to the Benaroyas, one of a handful of private lenders willing to loan significant money at high interest rates for risky real-estate ventures.
Larry Benaroya, who operates the Benaroya companies, lent Omni about $7.5 million at 25 percent interest plus a personal guarantee.
By going to the Benaroyas, it also meant that Moodenbaugh and Stock were entering the big league of local real-estate development.
That notion was not lost on Danforth, who knew the Benaroyas play to win.
"I wondered how successful that would be," she said. "But it obviously caught (Larry's) attention."
Moodenbaugh and Stock paid back the loan ahead of schedule.
Conflict grows worse
The Benaroyas must have liked Moodenbaugh's style, because when he approached Larry Benaroya about the Boblo Island project, Larry not only agreed to lend money but wanted to become partners.
Moodenbaugh and Benaroya purchased the 202-acre Boblo Island at an auction in February 1993 for $3.7 million. Moodenbaugh was to move to the Detroit area and manage it.
Boblo Island had a history of financial trouble, going through five owners since 1979. But it also had valuable assets and community support. One of the last companies to own Boblo Island sold it for $22 million.
Moodenbaugh saw tremendous opportunity in the rundown amusement park.
But he had three months to hire a staff of 1,000 and add improvements before the park reopened May 22, 1993.
Almost from the beginning, Moodenbaugh and Larry Benaroya clashed. The conflict grew worse when revenue fell short of expectations.
"Larry and I didn't see eye to eye at all," Moodenbaugh said. "He expected me to jump when he said jump. You can't buy time, and that's what we needed."
The Benaroyas became concerned in June when Moodenbaugh "continued to ask for money, couldn't break even and pay the interest," Jack Benaroya said.
They got upset at Moodenbaugh's promotional events and music concerts. He booked the Beach Boys and other music performers, but the shows failed to generate profits.
Moodenbaugh handed out free tickets, promoted the park on the radio and in newspapers and was negotiating with the Canadian government to bring gambling to the island.
"We had to overcome the negative publicity to turn the tide, to get the goodwill back," said Moodenbaugh.
All of these efforts, said former employees, were drawing Ontario and Detroit residents back to their beloved park. But it wasn't turning a profit, and that frustrated the Benaroyas.
Concerned by the losses, the Benaroyas told Moodenbaugh they wanted out and set mid-August for Moodenbaugh to find new partners.
The Benaroyas said Moodenbaugh never met those deadlines and never offered them a credible investor.
But at least one private banker confirms that he was willing to invest in the island.
"I gave a verbal commitment to help Michael," said lender Robert Jarvis, who lives in Lake Oswego, Ore., and has done business with Moodenbaugh. "I had a lot of faith in him, and if he hadn't gotten hurt, I'd probably own the thing and we'd be running it together.
"In a turnaround situation, you have to be prepared for losses in the first couple years. Why didn't they give him a chance to run it? What were their expectations? (Larry) never gave Michael a chance to make a move."
Moodenbaugh alleges that the Benaroyas continued to interfere with the daily operations of the company and that they tried to undermine his authority by stirring up trouble with disgruntled employees and spreading false rumors.
The Benaroyas dismiss those allegations. They said Moodenbaugh was becoming difficult and unmanageable.
Differences boiled over in an early September meeting between Jack Benaroya and Moodenbaugh.
"Jack pokes his finger at me and says, `I'm tired of you writing checks out of my checkbook,' and I said, `Jack, you don't know jack . . . about the amusement park,' " recalled Moodenbaugh, who said he stormed out when he realized nothing would be accomplished.
Jack Benaroya said he met with Moodenbaugh because "we were having difficulty agreeing on anything. I went back to see if I could lend some help. I didn't feel we got any satisfaction dealing with him."
Three weeks later on Sept. 24, Moodenbaugh was involved in a near-fatal automobile accident in Toledo, where he was promoting Boblo Island, and lay comatose.
Within 12 hours, the Benaroyas and associates flew to Detroit. They shut down the park Sept. 26 and later fired 1,000 people, sold the amusement rides at bargain prices and sold the island to a developer.
Moodenbaugh said the Benaroyas refused to give his family copies of the park's financial records so they could complete the refinancing with another investor and keep the park open.
The Benaroyas said the financial records were a mess and they were unwilling to be held responsible for faulty information.
"We had no accurate numbers and would not give inaccurate information to others," Benaroya said.
They also said the ongoing expenses of maintaining the park were substantial. They had only three months, beginning in February, to sell off the rides and games for the next summer season. So they had to act swiftly.
"The Benaroyas just did not want that deal to happen," said Moodenbaugh, who now uses a wheelchair and lives at his father's house in Tacoma. "All they had to do was give them the paperwork, so my family could finish the deal. They would have gotten their money and Boblo Island Amusement Park would still be open."
The Benaroyas wish the summer of '93 would go away. Moodenbaugh wishes he could have it back.
A jury will have to sort out the facts from the allegations, something that neither Moodenbaugh nor Larry Benaroya apparently could achieve during their short and stormy partnership. A trial is scheduled for December 1997.
In the Boblo Island suit, Moodenbaugh also is suing his former business partner, Stock, for breach of contract over the buyout of the Boblo Island partnership. He also is suing Stock over differences stemming from prior business dealings. Stock denies the allegations and sides with the Benaroyas.
Immediately after Moodenbaugh's accident, Jack Benaroya said he shared some observations with Michael's father.
"I told him I felt very badly that Michael had an accident, and I told him I felt very badly that our two sons had differences," Benaroya said. "They could not agree. That was the source of the problem."
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