The national real estate pullback and the credit crunch, combined with several years of sky-high construction costs, have some luxury developments in the New West on the ropes. While bankruptcy is an imperfect prism through which to view the effects of the market slowdown, these cases offer rich glimpses into the operations and financing problems. More bankruptcies are undoubtedly on the way. The B-word has even been thrown around as a possibility at the vaunted Yellowstone Club, where the divorce of owners Tim and Edra Blixseth has compounded its woes.
Tamarack Resort, Idaho
File Date: February 15, 2008
Debt: $300 million
Somebody holler: “Timberrrrrr!” The upscale, four-season Tamarack Resort in west central Idaho, which fired up its chairlifts in 2004, got a loan for $250 million in 2006 from international banker Credit Suisse to ramp up development at the resort. But weaker-than-expected home sales and a lack of available credit from other sources forced the majority owners, CEO Jean-Pierre Boespflug and Mexican businessman Alfredo Miguel Afif, to file for Chapter 11 bankruptcy protection to stave off a takeover by Credit Suisse, which began foreclosure proceedings this March. The slowdown has affected more than the financing. The resort has announced the layoff of some of its 400-plus employees; it won’t say how many.
What’s next? Boespflug says Tamarack will weather the storm but may be forced to sell. He said in a March statement the bankruptcy proceedings will give the resort time to “either refinance, add a partner with additional financing or sell the resort to a suitable buyer capable of managing the asset with the continued interest of the community in mind.” Insiders remain confident in Tamarack’s long-term value, but some wonder whether Boespflug is the right man for the next phase.
Boise Place, Idaho
File Date: August 1, 2007
Debt: $12 million
Some people just call it the Big Hole, but developer Gary Rogers envisioned Boise Place as a $126 million, 31-story, mixed-use development in what he calls “the best location in downtown.” It would finally finish the failed Boise Tower project started in 2001. (The Boise Tower got only so far as digging that Big Hole.) But Rogers’ company, Charterhouse Boise Downtown Properties, defaulted on a $2.5 million loan, foreclosure proceedings ensued and bankruptcy papers were filed. The project buckled for three reasons, Rogers says: the instability of the credit markets, negative press and the size of the project — it was just too big for Boise. “The markets aren’t keeping up with the energy of ideas,” he says.
What’s next? A reorganization plan is awaiting approval in bankruptcy court. “We’ll go ahead and build something commensurate with market conditions,” Rogers says. “We’re not exactly sure what that something will be as of yet, but it will be significantly smaller.”
Promontory Club, Utah
File Date: March 31, 2008
Debt: $365 million
The Promontory Club is a posh, gated golf community near Park City where homes sell for as much as $5 million. The club received a huge chunk of change — $275 million — from international banker Credit Suisse (a familiar name) but couldn’t make the payments, supposedly because of stagnant home sales. Promontory had been negotiating to sell the club to Credit Suisse, but when the deal fell through, the club’s creditors pushed it into bankruptcy. Francis Najafi, CEO of Pivotal Group (the Promontory developer), says the bankruptcy was involuntary and “we will make every effort to utilize the venue to achieve our goal of protection of the interests of the members, employees and the community.” The court OK’d a $2 million loan so the club could make payroll and honor member deposits and club credits.
What’s next? This case could take several turns, says attorney Kenneth Cannon, but “everyone recognizes that it is critical to maintain stable and continuing operations.”
The Villages at Hayden, Colorado
File Date: January 23, 2008
Debt: $22 million
Plans for the Villages at Hayden call for 3,227 homes on 1,040 acres over the next decade, all about half an hour’s drive from Steamboat Springs. The development, which will cost a total of $1 billion, is another example of Colorado resort towns pushing growth — and affordability — down valley. In August 2007, disagreements among the developers, the primary contractor and a bank led to a lawsuit. Partner Roger Johnson said the Chapter 11 bankruptcy filing would help the developers reconfigure their financing. Market volatility wasn’t a factor, Johnson says, chalking it up instead to internal problems. “Most of the resort markets have a pent-up demand, especially in workforce housing,” he said. (Workforce housing? The average home price is $357,000.)
What’s Next? Because “the value of the enterprise far exceeds the debt,” Johnson says, the bankruptcy will slow but not stop the plans. By next spring, he says, the balance of construction at Lake Village, the first phase, should be complete.
Christensen Corp., Idaho
File Date: February 6, 2008
Debt: $4 million
Boise developer Gary Christensen turned a decrepit parking garage downtown into the award-winning, LEED-certified Banner Bank building, the city’s beacon of green design, but his next downtown redevelopment project has stuck in his craw. In February, foreclosure proceedings forced Christensen Realty Investment II to file for bankruptcy. The company was renovating the century-old Gem Noble Building into affordable condos. A construction company sued over unpaid bills, and Christensen defaulted on a $2.7 million loan.
What’s Next? The bank has asked the court to allow it to foreclose on the Gem Noble Building anyway, so it can sell the property. (And R. Grey Lofts, another Christensen project, is also on our bankruptcy radar.)
“Project Watch,” is a regular feature in The New West magazine. For more from the Spring 2008 issue of The New West magazine, and for information on how to subscribe visit www.newwest.net/magazine.