In Wall Street Crisis and Credit Crunch, Everlands Sees an Opening

By Robert Struckman, 9-30-08

	Caption: Lone Mountain Ranch

Everlands, the new luxury destination resort formed in part by the Lone Mountain Ranch near Big Sky, Montana, had used all but $14 million of a $55 million line of credit from Lehman Brothers, when the Wall Street investment firm fell into bankruptcy, said CEO Ken May.

Instead of lamenting his lost credit line, which he used to buy the highest of high-end small inns and lodges around the world for Everlands’ members, May says the situation looks just right.

Really?

The real estate bust and ensuing credit crunch has hammered resort developments throughout the Mountain West. Tamarack Resort in Idaho fell into bankruptcy early this year under about $300 million debt owed to international investment bank Credit Suisse, which also loaned hundreds of millions to the Yellowstone Club, also near Big Sky, and to the bankrupt Promontory in Utah. And those are just the most tony troubled projects with the highest price tags.

About two weeks ago, Moonlight Basin halted construction and sent workers home when its line of credit from Lehman Brothers went dry. Moonlight is just down the road from both the Yellowstone Club and Lone Mountain Ranch.

If you looked at the prospectuses of these developments—as well as those of reams of others across the region—you’d see sales projections based on ideas of an excess of well-heeled potential buyers longing to live part-time in a “unique” development of log homes designed for a Gilded Age that suddenly seems to be part of an already distant past. It was a boom that turned small town art gallery owners like Lee Poole of Moonlight Basin, into developers and millionaire CEOs.

It’s hard to say how a place like Moonlight—with its half-completed golf course—will turn out without millions of ready credit available from Wall Street. Poole says he has a plan. In an email last week, Poole said he’s confident he will find the investment he needs to complete construction. Contractors have expressed confidence in him. Still, they’re covering their bases. Three more contractors from Moonlight Basin filed liens against the property, joining the three from last week. The liens are worth a total of almost $225,000.

About the liens, Poole added, “We are working on plans to complete current construction projects, and make sure all contractors are paid.”

May, CEO of Everlands, says all this turmoil in the resort market will leave his 8-month-old club—which seems by his description to be a sort of top-quality timeshare—more desirable to the discerning millionaire.

“Now more than ever,” May said. “A lot of people are trying to get out of their very expensive 5,000- or 10,000-square-foot vacation homes. When times are tough, values are more important.”

May said he’s not looking to get another line of credit, while Wall Street is on the run. Rather, he’s looking toward his members.

“We’re looking at other opportunities, certain properties, on a distressed economic basis, with debt piled behind them. It’s good value. It’s the right strategy, to be on the offensive, looking for inns and lodges that are already operating. Ones that will provide their own revenue streams and potential (as part of the club’s network),” May said.

As for the $40 million debt to Lehman, May says his prognosis is quite positive.

Who knows? Everlands could be looking at a significant discount on its loan.

“We will look to whoever will own the Lehman debt, and we’ll make arrangements with them. This could be an opportunity for Lone Mountain,” May said.