Glacier Horse Ranch Files For Bankruptcy, Reorganizes

By Robert Struckman, 5-22-08

Tough times continue for high-end amenity developments in the Rockies.

The 170-acre Glacier Horse Ranch near Kalispell filed an involuntary bankruptcy petition in February. The largest creditor is First Interstate Bank, which is owed about $6.2 million, and contractors are owed about $1.7 million.

“We’re in the process of working out a rescue plan,” said Scott Farnam of Arizona-based Shiloh Development. “It’s a reorganization, a recapitalization opportunity,” he said.

The financial problems for the Glacier Horse Ranch began, ironically enough, with a high-tech, environmentally sensitive waste treatment facility, Farnam said. The developers expected the environmental review on the facility from the Montana Department of Environmental Quality to take three months. It took 27 months, Farnam said.

“We probably have the highest treatment level, as far as nitrogen removal, of any private development in Montana,” Farnam said. “The long and short of it is we came out of a lengthy approval process into a soft housing market and a tight credit market.”

“We feel like we got punished for doing the right thing. I’m taking a project and getting it back on its feet,” said Ken Madden, a partner in the Glacier Horse Ranch project.

(A spokeswoman for the DEQ said an environmental review on a project as complicated as the Glacier Horse Ranch is almost never done in three months and suggested that rejections and reapplications prolonged the review process.)

Meanwhile, unpaid contractors are prominent among the creditors. Those include Advanced Earthworks of Hamilton, which is owed more than $1.3 million and WGM Group of Missoula, which is owed about $38,000, according to bankruptcy documents filed in an Arizona court.

A First Interstate Bank spokeswoman declined to discuss the bankruptcy or the bank’s investment in land deals, but did respond to a general inquiry about the bank and its loan health: “First Interstate Bank is a $6 billion bank with over $490 million in capital. We have over $68 million set aside in our allowance for loan losses. We continually examine our loan portfolio and the quality of our portfolio is not a problem for us. We are extremely well capitalized and have not experienced the same level of loan problems that other banks around the country are experiencing.”

Shiloh Development has several other ongoing projects in Montana and in Arizona.

In 2008, a slate of other developments have fallen into tough financial straits, among them Tamarack Resort in Idaho and the Promontory Club in Utah, both of which owe hundreds of millions to international banker Credit Suisse. It’s hard to say whether these troubles will tug down the relatively strong economies in the region. Some big regional construction companies have said privately that some clients with ongoing projects have fallen behind in paying bills—and in some cases have stopped paying.

(Editor’s note: This story has been updated to correct numbers which were reported erroneously by the company in the initial bankruptcy filing.)