Hailed just a few years ago as the first major new ski resort to open in the U.S. in decades, Tamarack Resort in central Idaho will be shuttered on March 4, victim of the real estate meltdown and the profligate lending and spending that’s brought a number of big Western resort projects to their knees.
Tamarack has been in receivership since last year, when the ownership group led by Jean-Pierre Boespflug ran out of money and defaulted on a $250 million loan from a Credit Suisse-led consortium. The lender group agreed to provide interim funding to get Tamarack through the winter season and hopefully find a long-term solution, but with the continued deterioration of the economy and a weaker-than-expected ski season, Credit Suisse and its partners have agreed to provide only a very small amount of new funds to assure security and limited maintenance on the property.
All recreation and hospitality services will be shut down indefinitely on March 4, with about 200 people losing their jobs and a skeleton staff of 16 remaining on site. Foreclosure proceedings will continue, and the Credit Suisse lender group will likely end up owning most of the property and attempting to find a buyer for it.
The Yellowstone Club in Montana and Promontory Club in Utah also got in trouble after taking big loans from Credit Suisse in 2005, and both of those properties are now operating under Chapter 11 bankruptcy protection. In those cases, the federal bankruptcy court and other key players were persuaded that the long-term value of the property depended on keeping them open, but that argument did not prevail at Tamarack. Unlike the others, the Tamarack case is not technically a bankruptcy but rather a foreclosure proceeding that’s governed by state law, which may be a factor in why it played out differently.
Tamarack, located a little over two hours north of Boise near the town of McCall, was on a roll just a few years ago, with a spanking new ski hill, a championship golf course, lake frontage for watersports, lots of trails for cross-country skiing and hiking, and the promise of a fancy new hotel from tennis stars Andre Agassi and Stefi Graf. Like other new resort projects, the economics depended on the sale of expensive real estate and condominiums, and initial sales were very strong.
But cost overruns, weak operational management and slowing lot sales began to catch up with Boespflug and Tamarack by late 2007, and the emerging credit crisis scotched a planned refinancing of the Credit Suisse debt in early 2008. Tamarack was unable to complete the crucial “village” project – essentially the base area for the ski resort, with shops and restaurants and condos – and quickly slipped into insolvency. The partnerships that owned the resort filed bankruptcy protection early last year, though those cases were later thrown out and foreclosure proceedings were launched in state court.
The best-case scenario would be for a buyer to emerge and take over the property at a steep discount; the Credit Suisse lender group would lose most of its money, and Boespflug and his main partner, Mexican businessman Alfredo Miguel Afif, would be wiped out entirely, but the resort would be able to operate, employees would have jobs, property owners would have their amenities, and at least some of the many creditors would get paid off.
In a worst-case scenario, the resort could literally be taken apart, with the chairlifts re-possessed and all equipment and real estate liquidated in a fire-sale.
While Tamarack was in many ways a boon for an area that had been in an economic tailspin since the closure of a big lumber mill, it was also controversial in some quarters. A previous effort to develop a resort in the same location had failed, and critics said it was just another case of beautiful Western spaces being developed and privatized for the benefit of the rich.
These questions aside, Tamarack’s location always presented business challenges. It’s far from a major airport, and even the Boise airport lacks good connections to the East Coast and major international cities; that made it a challenging sell as a global destination resort. As a regional resort, meanwhile, it lacks large nearby population centers and faces lots of competion for Boise skiers and golfers.
With so much infrastructure already in place, Tamarack could be appealing to a long-term buyer. But in light of the severe recession and the rapidly shrinking number of people able and willing to spend seven figures for a mountain vacation property, it’s not at all clear that such a buyer will be found anytime soon.