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Tim and Edra in better days.
Tim and Edra in better days.

Tim Blixseth Absent from Yellowstone Club Debacle – For Now

It’s an odd twist of fate that the Blixseth who was sitting in the witness chair in a Missoula federal courthouse Wednesday was named Edra. Sure, Edra Blixseth is nominally the owner of the Yellowstone Club, the uber-exclusive resort near Big Sky that’s now mired in bankruptcy. She thus bears much of the responsibility for trying to sort out the mess, even though her equity in the club is almost certainly worthless and lender Credit Suisse effectively controls the property. She’s been involved with the venture from the beginning, and is certainly no business neophyte.

Yet as everyone familiar with the situation knows all too well, the Blixseth who built the Yellowstone Club, the person who persuaded the likes of Bill Gates to join up, the person whose non-stop, on-the-edge deal-making both made the club possible and created its current predicament, is named Tim. His sudden absence from the scene is strange; dozens of lawyers, thousands of pages of legal filings, a financial fiasco of major proportions — and hardly a word about Tim.

Tim Blixseth is out of the picture, at least for the moment, because he agreed to give up his stake in the club as part of the divorce settlement with his wife. Edra testified in court Wednesday that CrossHarbor Capital, a hedge fund that’s angling to get control of the property, actually lent her $35 million, in part to buy out Tim’s interest in the club. The couple had plenty of assets – a giant home in Palm Springs with a private 18-hole golf course, among other things, which Edra got and then put up as collateral for the CrossHarbor loan – but if Edra actually paid Tim cash for his stake in Yellowstone Club, it looks like the one-time timber trader once again came out very much on the long end of the deal.

Tim Blixseth assembled the property for the Yellowstone Club through a shrewd land swap with the U.S. government, and he built the concept in part by persuading some high-profile celebrities to sign on early. In the real estate boom times of the late 1990s and early 2000s, it all seemed to make sense: a private ski club for people who wanted privacy and could afford it, with the exclusivity — not just anyone can join! — adding to the allure. Once he got the ball rolling, bankers like Credit Suisse were all-to-eager to get behind it with hundreds of millions of dollars in loans.

But it turned out that even in the boom years, the number of people eager to plunk down millions of dollars for a big house on a small lot at 8,000 feet was limited; the club has sold only 360 of its 864 memberships. Construction costs in Big Sky at the peak of the mountain real estate bubble turned out to be astronomical. And Tim Blixseth, ever the trader, couldn’t resist two things that have played a huge part in the club’s undoing. One was playing it fast and loose with former cycling great Greg LeMond, an early buyer who felt he was conned and filed what turned out to be a highly damaging lawsuit. The club not only had to settle with LeMond for $38 million (the final installment was supposed to be paid this Friday), but the bad publicity came at the worst possible time. The second was developing the Yellowstone Club World concept, which involved buying hugely expensive properties around the world for a type of super-luxury time-share — properties that are now both unrentable and unsaleable.

Lurking behind the blizzard of bankruptcy documents is a basic question: where did all the money go? Surely the $375 million loan from Credit Suisse should have been enough to finish the clubhouse and the golf course and all the other infrastructure, and still leave some in the bank in the event of a real estate downturn. The club’s revenues, after all, depend mainly on the sale of lots and memberships, and you didn’t have to be a seer to understand that the real estate frenzy might not last forever. But the checking account was down to $40,000 by last week.

Tim Blixseth grew up dirt poor, and the only way you go from the bottom of the financial food chain to the top is to bet the house at every opportunity. He’s gone bankrupt once before, and taking big risks is not only not a crime, it earns you respect in some business circles. Man, that guy has a pair! And no one begrudges you all the hugely expensive toys — until, that is, the other peoples’ money that you were responsible for is suddenly all gone.

Even people who expected a real estate downturn weren’t ready for the financial tsunami that’s now sweeping the globe. No one — not Tim or Edra, not Credit Suisse, not CrossHarbor Capital, not the club’s billionaire members — expected to find themselves in a situation where there’s a serious risk that the club will simply go out of business.

That probably won’t happen. But once the dust settles, my bet is the many powerful parties involved will be turning their attention back to the question of how the club got itself into such a mess. And one way or another, Tim Blixseth will have his turn in the witness chair.

Editor’s Note: This story has been updated to correct the reference to the status of the Blixseth’s Palm Springs residence.

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14 comments

  1. Dear New West

    Tim did not get the house in Palm Springs. Edra Blixseth did and Sam loaned 35 million to her against this property. Tim did not get the house. Check the records in California.

  2. THIS IS WORTH READING AS TIM BLIXSETH CAN BUY THE CLUB GIVEN THIS PRESS RELEASE HE ISSUED IN AUGUST.

    LeMond’s Yellowstone Club lawsuit settled for $39.5 million
    By MATTHEW BROWN – Associated Press – 08/16/08
    BILLINGS — Former cycling star Greg LeMond has reached a $39.5 million settlement with the owners of the exclusive Yellowstone Club, as control of the mountain retreat for the super rich shifts from founder Tim Blixseth to his estranged wife.

    The settlement resolves a two-year legal dispute in which LeMond accused Blixseth of trying to buy out his minority stake in the club for less than its true value.

    Meanwhile, the rise of Edra Blixseth to club owner and chief executive — part of a related settlement in the couple’s divorce case — ends a bitter struggle for control of the enterprise.

    Edra Blixseth agreed to pay the three-time Tour de France champion and his co-plaintiffs after Tim Blixseth ended his bid to retain ownership.

    Court approval of the divorce is not expected until next week. But the two sides already have traded assets related to the settlement, said Edra Blixseth spokesman Bill Keegan.

    ‘‘She in fact has a new management team in place and lots of ambitious plans,’’ Keegan said Friday. ‘‘It’s a new chapter in her life and she’s anxious to put her stamp on the club.’’

    The settlement in the LeMond case was completed Wednesday. A Minneapolis-based attorney for the cycling star said he will maintain his residence at the club.

    ‘‘None of my clients ever wished anyone ill,’’ said the attorney, Bruce Manning. ‘‘They have merely wanted to be paid what they were owed, and for the club to be on the financial footing it is now on.’’

    The plaintiffs in that case — among Yellowstone Club’s original members — relinquished their 4 percent stake in the enterprise as part of the settlement.

    In a recent e-mail to club members, Tim Blixseth said he had sold his stake in the Montana club to ‘‘stop the distractions’’ caused by the couple’s high-profile divorce proceedings.

    ‘‘I went to Edra with a simple plan to settle this for all of us. That was either I buy her out, or she buy me out, and she got to pick. She chose to buy me out,’’ he wrote. Tim Blixseth confirmed Friday that he was the author of the message.

    Tim and Edra Blixseth opened the millionaires-only club in 1999. Members have access to a private ski hill on its 13,400 acres in southwest Montana’s Gallatin Mountains — property Tim Blixseth acquired through a land-swap with the U.S. Forest Service.

    Building lots within the gated community have sold for millions of dollars, with homes selling for as much as $20 million. Bill Gates and former Vice President Dan Quayle are among its 340 members.

    However, the tony club ran into financial trouble when Tim Blixseth sought to expand even as the real estate market turned south.

    Its problems grew after the Blixseths allegedly diverted money meant for the club to their own use, according to court documents. At roughly the same time, Tim Blixseth went on a property-buying spree in a bid to take the club concept global, with an enterprise called Yellowstone Club World.

    After the Montana club secured a $375 million loan from Credit Suisse in 2005, Blixseth persuaded the club to pass $209 million directly to him and his corporate alter-ego, Blixseth Group, Inc.

    Among his subsequent purchases were a chateau in France, a golf resort in Scotland, a villa in Mexico and an estate in the Caribbean.

    Under the divorce settlement, Edra Blixseth gains control of the Yellowstone Club World entity and also the properties in Scotland and the Caribbean, Keegan said.

    She plans to sell the properties. Yellowstone Club World — which had attracted only a handful of members willing to pay its $1.5 million buy-in fee — is no longer operational, Keegan said.

    Tim Blixseth declined to comment directly on his divorce or the LeMond settlement on Friday.

    But he told The Associated Press in a series of e-mail exchanges that he is moving on to a new venture, building on his experience turning forest lands into high-value real estate. He said the newly initiated Blixseth Opportunity Fund is raising $2 billion ‘‘to buy distressed assets in the real estate field as well as in the timber business.’’

    ‘‘The fund was just set up and will be looking for assets all over the U.S.,’’ he wrote.

    The settlement in the LeMond case came 10 months after the club first agreed to pay $38 million to LeMond, in-laws David and Sacia Morris and associate Jorge Jasson.

    Blixseth paid $18 million at the time, but did not follow through on a pledge to pay the balance in January.

    The LeMond lawsuit, before state District Court Judge Loren Tucker in Madison County, was further complicated when Edra Blixseth asked Tucker to give her control of the club.

    Tucker declined. However, Edra ultimately got her wish through the settlement in the divorce case, which was heard in California.

    Tim Blixseth continues to own a home at the club but will no longer have a hand in its management.

    ‘‘While this would not have been my choice, things needed to be settled,’’ Blixseth wrote in the e-mail to club members.

  3. Priivatepowder, I am double-checking on the question of the Palm Springs home and will correct the story if necessary, thanks for the heads-up.

  4. Is it just me, or does Mr. Blixseth look a lot like Tom Arnold….

  5. One thing is for sure…when the dust settles, none of the principals will be sleeping under any bridges.

  6. Is your spellcheck function “invisable” too?

  7. Editor’s Note: This thread has been edited to remove personal attacks, in accordance with our comment policy.

  8. Private Powder: Are you seriously trying to write in the English language? I think you are full of sh*t, aren’t a member and have no basis for your very personal assaults on Crossharbor. You should do your homework, bro. You sound like a very angry sub to me.

  9. I’m curious what the unpaid subs are doing to get paid other then the dance of a thousand lawyers. Are you pulling your windows out and peeling rock off foundations yet?

  10. Editor,

    You must have received some pressure based my previous comments. Names and personal connections are important! Why do you feel they are not?! You obviously are missing facts which I have continually brought up for you to research. However, you choose to ignore what is important! The fraud at YC is criminal and should not go unnoticed. How much pressure have you received from the players mentioned!? Wake up mister CEO, Founder and tell the real truth!

  11. Sharkbait,

    Give our friend the editor and owner a break. Besides, press today can be purchased and clearly this press is getting heat from Cross Harbor and Tim blixseth. Why would New West still claim Tim Blixseth owns Porcupine Creek and then fail to inform the readers Sam Byrne / Cross Harbor loaned 35 million to Edra Blixseth on a one month basis only to force her into a Foreclosure. This was to squeeze here to fold and him to take over the club. Unless you blog with respect for Cross Harbor and Tim, New West simply wants to do the ‘Fox News’ style of fair and balanced approached of writing what they are paid to write.

  12. Natacha, whoever you are, if you’d bother to read instead of being so eager to trash me you’d see I did change the reference regarding the Palms Springs home, I was wrong about that. I have no information that I can confirm regarding the term of the loan, let alone the motives of the players in that transaction. We actually have to source our information and confirm it before publishing it. Imagine that! If you can help with that, please do.

    I remain mystified as to why people who seem to care so much about all this would spend their time taking cheap shots at me rather than provide useable, credible information. We are reporting the story the best we can and appreciate any help, but anonymous accusations about the motives of the players is NOT HELPFUL, and we will continue to delete anonymous postings that make unsupported/ unverified accusations.

    It’s kinda funny to be accused of bowing to intimidation by people who hide under rocks. We’ll have to shut down the comment thread if people can’t act like adults, which would be a shame.

  13. Many thanks for the reply Mr. Editor. My name is actually Natacha so forgive me if this was not clear.

    I respect your position and was the only reason to report to you the loan agreement now in default with regards to Porcupine Creek. Please research the Rancho Mirage area of filings and you will see the notice given on the 35 million note from Cross Harbor to Edra Blixseth. The note went into default October 2, 2008. I am more than happy to post on this blog page if you can not find the official recording of that foreclosure? Is this legal to do? It plays a vital role in the change of control the Yellowstone Club will undergo in the coming weeks. Why is this important? It goes to show the length some investment groups will do to take over a club for personal reasons. Why is this important? Because Tim Blixseth is still very much part of Sunrise Ridge, the condo development owned by Cross Harbor. This can be verified in the Montana records of property owners. Now why is this important? Because Edra was placed into this position which appears to be (Maybe wrong here but doubt it) a victim of Tim Blixseth and Cross Harbor strategy to allow her to win the club and force her hand financially. Make a few calls to American Bank in the area, speak to the President of the Bank, he has a lot of questions which should be posed to him, such as 1 – how much money did he loan Tim Blixseth over the last 6 months? What loans are in default with his bank today? Did he finance part of the Overlook lots? What is American Banks’ relationship to Edra Blixseth and Tim Blixseth via Cross Harbor?

    Finally, lets pose a logical question. What is the club worth today given the chapter 11 filing? The press and you state the debt is somewhere between 343 -399m correct? What is the equity remaining given the current financial crisis? Lets assume no more than what Cross Harbor offer in January 2008 which was 450m. Clearly this value was 9 months ago correct? So lets factor in some more bad press and lack of lot sales. Can we assume the value is then around 435m? Now that would mean the equity of the club is 35m. Lets see, that appears to be the amount under default against Porcupine Creek correct? Was this a quick handed tactic? Now who really cares who owns the club unless your a member or employee or contractor correct? Big Question here: Does Cross Harbor plan on paying off Greg Lemond, the back salaries, the payment to Mike Snow, refund the world club members, pay off all the suppliers, finish the club as promised to the current members, promise the employees job security, inject required money into the club and if so where is this money coming from? Food for thought but its just that. Its like a puzzle but if you add up the parts its a story correct? Now, ask yourself this, Did Tim Blixseth and Cross Harbor plan it this way given that Edra Blixseth was opposing them cooperating in January 2008? who knows but again these facts are there for you to research if you want to do investigative reporting.

  14. Is the Blixseth divorse final? Was it filed in Riverside Co. California? Can anyone confirm?
    thanks.