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Nick's Cove and Cottages in Marshall, buckling under $13 million in debt, has been a "complete disaster" for prominent Bay Area restaurant owner Pat Kuleto, as well as investors who will lose everything as the complex is acquired by new owners.

The Moana Hotel & Restaurant Group of Mill Valley is among two groups in talks to buy the complex. Moana owns 17 restaurants, including the Piatti chain, as well as Auberge Resorts, which include Auberge du Soleil in Napa Valley, Esperanza in Los Cabos, Mexico, and Solage Hotels & Resorts.

Heidi Darling, vice president of marketing for Moana, declined comment on the Nick's Cove negotiations, but Michele O'Hara, marketing manager of Pat Kuleto Restaurants, said acquisition talks are continuing. "The deal is not completed yet," O'Hara said.

Kuleto, expressing surprise that word of negotiations with Moana was public, said Friday he also is talking to another, equally qualified buyer. He declined to elaborate.

"I've put everything into that place," Kuleto said. "But the debt is so intense .. I have no other choice but to try to sell it."

In the meantime, the restaurant remains open for business as usual. "Nothing has changed at Nick's Cove," said operations chief Dena Grunt. "We are open for lunch and dinner, and breakfast on Saturday and Sunday."

She said that so much debt was mounted by Kuleto and a partner, executive chef Mark Franz of San Anselmo, after acquiring the dilapidated property in 1999 that the business "just could never work." Expenses spiraled during a seven-year ordeal with regulatory agencies to get permits to improve the Tomales Bay complex, including the restaurant, a dock and 11 overnight cottages. The complex opened in 2007, just before the recession.

News of the financial collapse came in a letter from Kuleto to shareholders. The confidential document, leaked to the Point Reyes Light by a disguntled investor, advised shareholders that the venture has been a "complete disaster," resulting in a "complete loss of your financial investment."

Rick Glanville of Sebastopol, owner of Redwood Empire Concrete, who invested $100,000 in the business, was initially hired to install one concrete piling, but ended up installing about 100 when it turned out much more rehabilitation work was needed.

"It's a sad thing," Glanville said. "It was a magical place for us," he said, noting two of his children spent their wedding nights there. "He tried as hard as he could to make it work, but it was a matter of the economy. He opened at the worst possible time."

Nick's Cove marks the first big failure for Kuleto, a successful restaurateur for four decades who has designed and helped develop more than 170 restaurants across the nation. He owns a half-dozen restaurants, including Boulevard, Farallon, Jardiniere, Waterbar and Epic Roasthouse in San Francisco.

Nick's Cove was developed in the 1930s but closed closed in 1992 in light of sewage and other problems. Due to more than $10 million in construction costs and miles of red tape imposed by agencies that regulate bay development, Kuleto described Nick's Cove shortly after it opened as "the biggest little restaurant project in the world."

"It's been an unbelievable ride, an unbelievable challenge," he said in 2007. "The reality is that we really did end up with something that is extra special, and we're ecstatic."

Kuleto's knack of making his restaurants look as if they've always been there shines at Nick's Cove, which is festooned with nautical memorabilia and appears as a stylized replica of a 1930's seafood roadhouse.

The restaurant, which seats 130, and the cottage accommodations, which rent from $225 to $795 a night, have drawn rave reviews from critics around the nation, including Bon Appetit, Sunset and Coastal Living magazines.

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