Western Resort Woes
Promontory Club Bankruptcy Nears Resolution
Promontory in Utah is one of the many troubled fancy schmancy Western resorts to file for bankruptcy in the last year. Now, it could be the first to emerge.By Jonathan Weber, 2-24-09
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The Promontory Club near Park City, Utah, which like many of its luxury resort brethren fell into bankruptcy last year, will most likely be taken over by Credit Suisse and its loan partners under a reorganization plan that was agreed to earlier this month by all the key parties. If the plan is formally approved by creditors and the court, Promontory could emerge from bankruptcy as soon as March.
Promontory would the first of the troubled Western resort projects to emerge from Chapter 11 bankruptcy protection, which club managing director Rich Sonntag said could enable it to get a jump on any “pent-up demand” for luxury mountain resort properties. The Yellowstone Club in Montana, Tamarack Resort in Idaho, and Lake Las Vegas in the Nevada - all of which received large loans spearheaded by Credit Suisse - are among the resorts currently in bankruptcy or receivership.
Promontory, a 7,200 acre golf and equestrian property just outside of Park City, borrowed $350 million from two Credit Suisse-led groups in 2005. As in the case of several other similar loans, the loan proceeds went primarily to the developer rather than to the club itself, leaving Promontory strapped for cash when the real estate bust hit. Promontory was created by the Arizona-based real estate firm Pivotal Group, led by Francis Najafi, with a substantial stake owned by an Arizona public employee pension fund.
The proposed Promontory reorganization plan includes two possible outcomes. Under Plan A, the lenders represented by Credit Suisse will take ownership of the club and attempt to raise $70 million in new financing to pay back an interim loan and cover operating losses anticipated over the next few years. $275 million of the existing $350 million in debt would be converted to a $90 million debt, or perhaps eliminated altogether depending on market demand for the new loan. (Holders of a more junior $75 million loan would get warrants for equity in the reorganized company). If the new $70 million cannot be raised, a Plan B calls for the club to be sold at auction in April, a scenario which could also result in the Credit Suisse group owning the property via a so-called “credit bid.”.
The secured creditors - primarily the holders of the $350 million in debt - will receive no cash in the short term under Plan A and will be dependent on a future sale of the project to recover any money. The fact that Credit Suisse and the lenders are all-but-obliged to take ownership of the property - rather than find a buyer who can pay back the loans - illustrates the absence of investment capital for luxury resort projects in the current economy.
On a more positive note, the plan calls for most unsecured creditors to be paid. Anyone owed up to $1,000 will be paid automatically, and trade creditors and others with ongoing contracts will likely get most or all of their money, Sonntag said.
“Keeping faith with the local community is very important,” said Sonntag. “We all feel pretty good that this will be a good result.”
He was also hopeful that a “clean bill of economic health” would help to re-start lot sales. Promontory has sold 730 lots out of a total of 1,924, and the reorganization plan does not anticipate a true market recovery until 2012.
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Real Estate
Edra Blixseth Gets The Yellowstone Club
Kerry A. Dolan, 08.15.08, 1:46 PM ET
Burlingame, Calif. -
In the ongoing struggle between former billionaire timber baron Tim Blixseth and his estranged wife, Edra Blixseth, the operative word has been "delayed." As of this week, Edra has one less delay to worry about.
In early July, news broke that as part of a divorce settlement, Edra would take over Tim's 50% ownership in the Yellowstone Club, a ski and golf playground for the rich (whose members include Bill Gates) near Big Sky, Mont. At the time, Edra told The Wall Street Journal she expected the deal to close in about a week.
One week turned into five, as the deal to give Edra ownership of the Yellowstone Club took longer than expected. It finally closed on Wednesday this week. "The money market took a big hiccup, and that delayed me getting the financing," Edra explains. "It wasn't Tim's fault. A lot of people thought that."
The transfer of Yellowstone Club ownership also involved settling for $39 million a lawsuit brought by cycling champion Greg LeMond against Tim Blixseth. LeMond and his in-laws, minority shareholders in the Yellowstone Club, claimed that Tim had withheld financial information from them and tried to buy back their shares for far less than they were worth.
Tim Blixseth, reached via e-mail, refused to comment.
The divorce is still not final yet. This is the divorce, filed in December 2006, that was meant to be amicable and done without lawyers. It turned into the exact opposite: a much lawyered affair that has dragged on for more than a year and a half and racked up millions of dollars in legal fees. Edra says she expects the divorce to become final in a few days, once all the needed papers are signed and filed.
In an early June filing as part of the divorce trial, Edra claimed she was out of cash and had borrowed money from some of the 97 employees at her 240-acre estate in Rancho Mirage, Calif., just outside Palm Springs. The reason, she said, was that Tim hadn't granted her title to the estate, her most valuable asset.
Neither of the Blixseths have revealed the details of the deal that allowed Edra to take over ownership of the Yellowstone Club, citing a confidentiality agreement. Edra acknowledges that she bought out Tim's share of the club, but won't say for how much.
Edra did say in an e-mail that as part of the settlement she gets two of the properties that Tim bought to start a global resort membership club called Yellowstone Club World. That club never got off the ground. Edra took the Château de Farcheville outside of Paris and land near the famous St. Andrews golf course in Scotland. "I intend on monetizing them for the benefit of the Yellowstone Club members," said Edra. In other words, she plans to sell the properties.
Tim joined the ranks of the Forbes 400 richest Americans in 2005, largely due to his ownership of the Yellowstone Club. His net worth in 2007 was an estimated $1.3 billion. But both he and Edra spent extravagantly, flew around in Gulfstream jets and drove a fleet of fancy cars that included a $440,000 Rolls-Royce Drophead Coupé.
As part of the settlement, Edra inherits the obligation to repay a $375 million loan from Credit Suisse that Tim took out and used to buy some of his Yellowstone Club World properties. The loan is due in 2010, and Edra says she has a “really great plan” to repay it, but wouldn’t provide details. Logic would hold that she will have to sell some or all of the club to repay the loan.
New memberships dwindled at the Yellowstone Club as it became the centerpiece of the bitter divorce battle. Now that the first step of the settlement is complete, the club may regain some of the luster it lost. "I am very excited about how fast we feel we can get the Yellowstone Club back to the club it was," says Edra.
When Tim and Edra first decided to get divorced in December 2006, they told The Wall Street Journal that they sat down with a bottle of wine and a yellow legal pad--without lawyers present--to divide up their assets. Now, says Edra, the assets have been divided up "almost how we talked about it, yet we spent millions on legal fees. It's too bad and it's ironic. I would rather have donated the money to charity."