Bozeman News

Luxury Resorts in Crisis

Moonlight Basin Faces Foreclosure by Lender

By Jonathan Weber , 8-05-09

Moonlight Basin. Photo by Kip Sikora.

Moonlight Basin, the ski-and-golf resort and real estate development near Big Sky, is facing foreclosure by its major lender, Lehman Bros., according to numerous sources with knowledge of the situation. A letter from Moonlight founder and owner Lee Poole to resort property owners said Lehman had “made the decision to begin foreclosure proceedings,” though the Madison County court clerk said no foreclosure notice had yet been received.

The letter said “It is Lehman’s intention to continue summer and winter operations at the resort.” A spokeswoman for Lehman Bros., which is in bankruptcy but continues to operate as it unwinds its many businesses, declined to comment.

Moonlight borrowed about $170 million from Lehman Bros. in 2007, and the funds were used to buy out Poole’s two partners and continue construction at the property. The investment bank collapsed last fall, and at around the same time Moonlight began to experience a severe cash squeeze due to the collapse of real estate sales. The resort did open for ski operations last winter, and the first nine holes of the spectacular Jack Nicklaus golf course have been completed. But it’s been clear since the fall that Moonlight would not be able to continue to operate without a sale or a major cash infusion.

Moonlight’s troubles are mirrored at high-end resorts across the West, including Tamarack in Idaho, which is now shut down, and the Yellowstone Club in Big Sky, which recently emerged from bankruptcy. The market for expensive vacation properties has all but collapsed over the past 18 months and there are no signs yet of any revival.

Moonlight opened in 2004, and features spectacular expert skiing on one face of Lone Peak and a relatively conservation-minded approach to development. The property borders magnificent backcountry near the Lee Metcalf wildnerness. Like all new ski resorts, the business model was based on the sale of real estate, and hundreds of houses and condos have been built. While the soaring main lodge and restaurant and many of the ski lifts are in place, other key pieces of infrastructure, including the main base lodge of the ski hill and additional lifts, are not yet built.

Poole, a one-time ranch hand from Ennis, and other executives have been aggressively shopping Moonlight for the past year, and Lehman has continued to provide some funding to keep the resort going. It’s not clear what triggered the decision to pursue foreclosure. Nor is it clear exactly what will happen from here; a bankruptcy filing could be a part of the restructuring.

In a foreclosure, a lender takes possession of the property in lieu of repayment of a loan, though if the property is worth less than the loan it can also pursue collection of the difference. In many loans of this type there is also a personal guarantee, and if that were the case at Moonlight, Lehman could potentially pursue Poole’s personal assets.

Lehman, as the new owner of the property, would likely bring in an operating company to run the recreation activities, or could partner with neighboring Big Sky Resort for the skiing and manage the real estate separately. Moonlight has an agreement with Big Sky enabling skiers to use both areas on one ticket, and the two resorts have been promoting the combination as “The Biggest Skiing in America.” But that agreement expires after next year.

Employees were told in a meeting last week that Lehman intended to keep the team in place, though they might be fired and and then rehired, sources said.

In the letter to homeowners, Poole said Lehman had recently “green lighted and funded several projects at the resort in preparation for this coming winter and next summer season and our team is hard at work on these projects.”

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