Everlands Meltdown Leaves Montana’s Lone Mountain Ranch in Limbo

By Guest Writer, 8-26-09

	Caption: This video story depicts Lone Mountain Ranch's rich history from the early 1900's to the present, and includes an interviews with previous owners Bob and Vivian Schaap, current LMR employees, and historical photos. Video by Rita Rieffenberger and Jenea Zaharko.

In 2007, with the mountain real estate boom still in full swing, Bob and Vivian Schaap, the long-time owners of the iconic Lone Mountain Ranch in Big Sky, Mont., decided it was time to sell. After vetting several prospective buyers, they reached a deal with a nascent luxury vacation club called Everlands, which promised to keep the historic property intact even as they transformed it into a mostly members-only resort.

But the ink was barely dry on the $16.5 million deal when the real estate market went south, taking Everlands and virtually the entire luxury vacation club industry along with it. Today, the Lone Mountain Ranch is open for business as usual. But its owner, saddled with at least $40 million in debt, is all but out of business, and the future of Lone Mountain Ranch and four other Everlands properties is by no means assured.

“We were trying to build a portfolio of properties with a strong conservation process,” said Everlands founder Bob Burch. “Our goal with the Lone Mountain Ranch was to put it in strong hands.”

The Everlands idea was a high-end club in which members would pay an initiation fee of $585,000 and then keep up yearly dues of $40,000 in order to have access to a variety of unique, conservation-oriented properties around the world.

The company envisioned dozens of properties, but had acquired just five before pulling the plug: in addition to Lone Mountain Ranch, there was the Blueberry Hill Inn on Martha’s Vineyard (bought for $5 million); the Oasis at Castle Hot Springs in Arizona ($11.7 million); Bristol Bay Lodge in Alaska ($5.2 million); and Lake Rotoroa Lodge in Nelson, New Zealand, ($3.5 million).

According to Julian Hutton, manager of operations for Everands, the club sold 42 memberships before calling off the program last February. He said Everlands is working on an agreement with another club to take over the memberships, but nothing has yet been finalized.

The club is also trying to work out a deal with its lender, now-bankrupt Lehman Bros., which had extended a $56 million credit facility. That loan, like the ones that financed the Yellowstone Club, Moonlight Basin, Tamarack Resort and many other mountain real estate projects at the height of the boom, now promises a massive loss for the lenders.

According to documents obtained by this reporter, Lehman Bros. was trying to sell the debt last year at a steep discount. Offering documents pegged the price at 25 cents to 50 cents on the dollar – meaning that the loan was worth only one-quarter to one-half of its original value – but even at that price there were apparently no takers.

Earlier this year, Burch was also attempting to establish a $100 million investment fund that would buy distressed real estate debt and assets – including Everlands – on the cheap, according to letters Burch sent to Everlands members and other documents. But Burch confirmed in a phone interview that the so-called Point Fund had not gotten off the ground.

Although Burch would not comment on exactly what is taking place between the Lehman Bros. bankruptcy estate and Everlands, both he and Hutton said that they are working toward an agreement. Burch said they did try to buy the debt from Lehman at distressed pricing, but nothing was ever agreed upon.

For now, Burch said they are attempting to do everything they can to take care of members and those involved with Everlands.

“We’re being very stretched,” Hutton said, “and are having to renegotiate loans to keep our heads above water.”

The luxury vacation club business, in which people pay membership fees and can use a variety of exotic properties, was in vogue briefly during the real estate boom. But ventures such as Yellowstone Club World, Everlands and the ILX Premiere Vacation Club have all failed.

“In September, the demand for products like this just stopped,” said Hutton. “People just stopped making any big purchases.”

Burch, a graduate of Denison University in Ohio, has an eclectic business background and currently runs Red Badge Inc., a real estate, venture capital and investment company based in New Jersey. Burch achieved brief notoriety during the dot-com bubble as one of the founders of Internet Capital Group, a business-to-business Internet holding company.

Burch is also a member of the Yellowstone Club, and he hired the Eric Ladd, the top Yellowstone Club broker, to run sales for Everlands. Burch said the original plans with Lone Mountain Ranch and other properties were to make sure that they kept running. Small, seasonal inns can be a tough business, and a property like the Lone Mountain Ranch could potentially be worth more as a subdivision.

“We bought the ranch because it’s an outstanding property,” Hutton said. “We wouldn’t want to see it cut up into ranchettes. It’s a great asset to Big Sky.”

Under the Schaaps, Lone Mountain Ranch acquired a loyal following of regular customers, who were attracted by the historic feel of the place, the friendly atmosphere and the world-class cross-country skiing. Under Everlands, it was only open to members at certain times, but it will now once again be fully open to the public.

The Inn at Blueberry Hill, however, is closed for this season.

“We made the decision that it would cost money to open it right now,” Hutton said, adding that Martha’s Vineyard has a short season and was hit hard by the economy.

Hutton said Lone Mountain Ranch has “pretty much reverted to what they were before Everlands bought them…we have excellent general managers and excellent staff that run day to day.”

“LMR has not changed very much at all,” said general manager Ennion Williams, who has been a part of the staff since he was 18 years old. “We run the same program we have been, continuing as it has for the last 30 years.”

The Schaaps hope that, whatever happens to Everlands, that will continue to be the case.

“You built something and you’d like to see it go on forever,” said Bob. “We’d like to maintain that current history.”