News Analysis

Moonlight Bankruptcy: is it Yellowstone Club, or is it Tamarack?

For U.S. Bankruptcy Court Judge Ralph B. Kirscher, the opening hearing in the Moonlight Basin bankruptcy case, scheduled for this Tuesday in Butte, promises more than a little bit of deja vu: it was just a year ago that some of the same lawyers appeared in the same courtroom to begin arguments in the Yellowstone Club bankruptcy case, and there are certainly plenty of parallels in the two situations.

Like the Yellowstone Club, Moonlight is a new ski-and-golf resort in Big Sky that got caught out with an unsustainable debt load when the mountain real estate market crashed. Like the Yellowstone Club, Moonlight is an important economic engine for Big Sky and greater Bozeman, and the outcome of the bankruptcy will have a big impact on the community. And as in the Yellowstone Club case, the opening chapter of the bankruptcy will likely feature a battle between management and a Wall Street lender over who controls the property while a broader solution is found.

Unfortunately for Big Sky, though, the closer analogy is the case of Tamarack Resort in Idaho. Like Moonlight, Tamarack was conceived by a charismatic businessman as a public four-season resort with high-end real estate sales at the heart of the business model. Like Moonlight, Tamarack found itself in the position of relying on an angry lender to continue funding the operation after the meltdown hit. Like Moonlight, Tamarack has been unable to find a new owner to save the day, with many questioning whether the resort is fundamentally viable. Tamarack is now closed, with a foreclosure trial scheduled for February.

Resort Bankruptcies

Moonlight Basin Files for Bankruptcy Protection

Moonlight Basin, the troubled Big Sky, Montana ski resort, filed for Chapter 11 bankruptcy protection on Wednesday, just a day before a foreclosure hearing that could have put the property in the hands of its primary lender, Lehman Bros. Moonlight took a loan of $100 million from Lehman Bros. in the fall of 2007 with the intention of quickly selling the resort, but the real estate meltdown scotched that plan, and the bankruptcy of Lehman Bros. itself in the fall of 2008 has left the six-year-old resort in limbo.

In the bankruptcy filing, Moonlight seeks permission to obtain $21 million in interim financing from Trilogy Capital, a Connecticut based hedge fund, which would enable Moonlight to remain open and have a ski season as planned. Lehman Bros. indicated in the foreclosure case that it also intended to keep the resort open, but the investment bank wanted to gain full control and appoint a receiver in the place of current management before it provided the funds needed to continue operations. The foreclosure proceeding, which is a state court action, is automatically put on hold by the bankruptcy filing.

Boom and Bust

Commercial Real Estate Outlook Darkens

Like the residential real estate bubble, the commercial real estate boom of 2003-2007 was fed by cheap money and lax lending standards. Institutional investors such as hedge funds and insurance companies - strangely blind to the possibility that real estate values could decline - had an insatiable appetite for any loan that had a decent interest rate and was backed by real estate. When the rosy projections on cash-flow for apartment complexes, office buildings, shopping malls and resort hotels were revealed to be pipe-dreams when the market turned, the carnage began - and it’s likely to continue for a while, according to a recent report from the Urban Land Institute and PricewaterhouseCoopers.

From the Panhandle With Cate Huisman

Timber Falls, But Manufacturing Rises in the Panhandle

What stands out from the “first annual” Economic Outlook Forum that was held in Sandpoint Thursday is the extent to which the panhandle continues to grow away from its roots in the timber industry. This process has been going on for decades, but the current recession and concomitant implosion of the real estate market have hastened the transition. While logging and milling employed over 1100 local people in January of 2006, that number had fallen to less than 500 by January of 2009.

For a while, mills laid off workers, cut shifts, or shut down for a few weeks at a time. But in October 2008, JD Lumber permanently closed its mill in Priest River, and Idaho Forest Group ceased production at its mill in Laclede two months later.

Book Review

Stay or Go? The Quandary of the Rural Brain Drain

A coworker once quipped that a good study is one where the researcher’s stand on the issue  is hard to determine. This coworker then offered up Kristin Luker’s Abortion and the Politics of Motherhood, an especially even-handed study of activist supporters and opponents of abortion, as a good example. An analogous measure of quality, I think, might be whether a researcher with little personal experience of the subject under study can observe and describe that topic sensitively and well.

Take the new book Hollowing Out the Middle: The Rural Brain Drain and What It Means for America by sociologists Patrick Carr and Maria Kefalas. Admitted urbanites whose original research agenda didn’t include a detour through the country, Carr and Kefalas undertook an ethnographic study of youth pathways to adulthood in a pseudonymous small Iowa town, “Ellis.” But if you didn’t read their confession about not being rural residents themselves, you probably wouldn’t be able to guess it.

News Nugget

Touted as Utah’s ‘Yellowstone Club,’ Elk Meadows Also Goes on the Auction Block

Once hailed as the Utah version of the posh Yellowstone Club, the Elk Meadows development near Beaver has followed a similar fate and is now on the auction block.

As the Salt Lake Tribune reported earlier this week, the development near Beaver, which was supposed to have all the amenities of the high-end resort market of earlier this decade: Jack Nicklaus golf course, private ski runs and extravagant second homes, was once worth $3.5 billion, but is now in an online auction with a suggested value of $5.15 million. But, the starting bid is $1 million. As Jodi Peterson notes on the High Country News Goat blog, (HCN, by the way, did a good story on the resort in 2008, which you can read here) in May, the Yellowstone Club was sold for $115 million.

The original developers, the Mount Holly Partners, filed for bankruptcy this summer, but in the face of objections from one of the resort’s investors, MHU Holdings of New York City, the bankruptcy was rejected and Mount Holly turned the property over in foreclosure proceedings.

Montana Property Taxes

Reappraisal Process Works, But Will Ire Catch Fire?

In late summer and early fall, many Montanans were unpleasantly surprised to receive notices telling them their property values had skyrocketed. The reappraisals, due every six years from the state Department of Revenue, meant their property taxes would take a big leap forward, too. In areas like Gallatin and Flathead counties, where the 2002-2008 period saw a dramatic real estate boom—followed by a bust—some property values increased 300 percent or more.

But there was hope for people feeling the pain. First, property owners could seek relief by appealing their appraisals, either by asking for informal reviews from the Department of Revenue (DOR) or by appealing directly to their County Tax Appeal Board. Second, local governments could decrease their mill levies, the formulas that actually determine how much property tax residents pay.

Here’s a look at what’s happened on those and other fronts, according to the DOR.

News Nugget

LEED for Weeds: New Program Will Rate Green Landscapes

A coalition formed by the American Society of Landscape Architects, the Lady Bird Johnson Wildflower Center and the United States Botanic Garden has created the nations first rating system for environmentally sensitive landscapes.

As LEED has done for buildings and Energy Star has done for appliances, the Sustainable Sites Initiatives will do for outside spaces. The groups describe the program like this: “Voluntary national guidelines and performance benchmarks for sustainable land design, construction and maintenance practices.”

Nancy Somerville, Executive Vice President and CEO of ASLA said in a press release on the project, “While carbon-neutral performance remains the holy grail for green buildings, sustainable landscapes move beyond a do-no-harm approach. Landscapes sequester carbon, clean the air and water, increase energy efficiency, restore habitats and ultimately give back through significant economic, social and environmental benefits never fully measured until now.”

According to a USA Today story, “The rating will measure several criteria. They may include planting trees in a parking lot or paving with permeable materials to minimize heat and storm-water runoff. Or landscaping with native plants to reduce maintenance, irrigation and use of pesticides.”

Click here for that story and here for more information from the program itself.

Land Use

As Millions of Acres Come Out of Conservation Reserve Program, What’s Next?

More than 3 million acres of farmland in the country is ready to be broken again this season, freed up from contracts from the Conservation Reserve Program (CRP), a little-known farm program that has large implications for land-use in the West and Midwest.

Roxana Hegeman of the Associated Press details the changes afoot with the program in a story today. The basics are these: CRP was created in 1985 in the thick of the farm crisis. The program pays landowners to take their land out of production and let it “rest” in native grasses for a specified period of time. Contracts range from 10-20 years. In September of this year, 33.47 million acres were enrolled in the program. But, the 2008 Farm Bill, passed last fall, capped the total acreage at 32 million, so as contracts expire, more and more land is coming out of CRP.

According to Hegeman’s story, more than 3.4 million acres were taken out of the program in September—most of them in Texas, Colorado and Kansas, but “hundreds of thousands” of acres are also going back into production in Montana and the Dakotas. In September of 2008, more than 2 million acres were taken out of CRP nationwide compared to September the previous year.

The USDA has boasted CRP as the largest private-public conservation effort in the country and indeed, studies from the agency show great benefits to water, erosion and habitat since its introduction. But, in the last five years it has come under fire for a number of things, the largest being the criticism that it takes farmers off of the land and thus contributes to the depopulation of rural America. It’s also been panned for being a “retirement plan” for farmers, driving up land prices by making cropland attractive to amenity ranch buyers who are looking for places to hunt and fish while getting income from the land.