53 replies to this topic

[fun in the sun]

this real estate failure is just the tip of the iceberg at ski resorts. They have been using real estate money to finance daily ops --- so look closely at your resort to see where they are cutting expenses and watch this turn bad and ugly.

You can only sell a few lifts tickets and a couple of hamburgers before the bottom falls out ---

[lift_electrical]

kstrange3, on Nov 14 2008, 10:45 PM, said:

Well we're still makin snow so thats a good sign!

Hey K,

What do you do at the club? PM me if you would like.

[kstrange3]

No news to report. The meeting was not very informative. Snowmaking temps are kickin arse though!

[Peter]

Rich feel the pinch at Mont. mountain playground

By MATTHEW BROWN – 7 hours ago

BILLINGS, Mont. (AP) — Running out of money may seem unlikely for a private resort whose members includes billionaire Bill Gates and Los Angeles Dodgers owner Frank McCourt, but that's the fate that will befall the ultra-exclusive Yellowstone Club this week unless it can line up another loan.

Less than two years ago the club's owners were pursuing ambitious plans that they said included the world's most expensive home, a $155 million, 53,000-square-foot behemoth complete with heated driveway. That project was never built. Now the Yellowstone Club is one of at least four high-end resorts that have sought bankruptcy protection in recent months.

Like the others, the Yellowstone Club was heavily leveraged, meaning huge loans were taken out to develop the ski hill, golf course and multimillion dollar mountainside condominiums on 13,600 acres near Yellowstone National Park.

When the credit crisis hit, the money dried up. A $4.5 million interim loan recently arranged through Credit Suisse was only enough to keep the club going for three weeks, leaving members clamoring and hundreds of creditors owed at least $399 million jockeying to get their money back.

The descent into financial turmoil offers a stark example of how the nation's financial crisis has reached the playgrounds of the very rich — tripping them up in their own excess.

The Yellowstone Club was founded by billionaire Tim Blixseth and his former wife, Edra. She now controls it as part of their recent divorce settlement.

On Tuesday, Blixseth and her attorneys are scheduled to appear again in court before U.S. Bankruptcy Judge Ralph Kirscher. She's seeking a court order that would ward off the club's almost 700 creditors for at least 90 days, to restructure the massive debt and figure out how to stay open. The club has only enough cash to operate through Friday.

"We're working feverishly to restructure and come up with financing," said Edra Blixseth's spokesman, Bill Keegan.

Much of the club's real estate holdings have been mortgaged and the operation has multiple liens against it. Even before filing for bankruptcy protection on Nov. 10, Blixseth sought a $35 million loan to keep the operation afloat.

Blixseth also faces pressure from a two-year-old lawsuit filed by former club members, including cycling star Greg LeMond. The club still owes $13 million out of $39.5 million to settle charges that LeMond and others were shortchanged in a business deal. Last week, LeMond's attorneys asked a state judge to order payment — a bid to get to the front of the long line of creditors.

Documents filed in the bankruptcy proceedings reveal the degree of extravagance sunk into the resort. Dozens of pages detailing club assets list hundreds of millions of dollars in real estate, luxury cars and other accouterments of the very rich. They range from a $32 million Mexican estate, to $306,508 in imported rugs and $70,036 worth of Christmas decorations.

At a Nov. 13 bankruptcy hearing, Judge Kirscher commented that there was "probably adequate wealth" for a bailout among the club's estimated 340 members. He may have underestimated the level of animosity among some who have accused the Blixseths of diverting club funds for their own jet-setting lifestyle.

Both Blixseths now deny treating the club's riches as a personal fortune, although Edra made similar accusations during their divorce.

Now members are reviving questions over whether a $375 million Credit Suisse loan taken out in 2005 actually went to the club. Court testimony earlier this year in the LeMond suit showed $209 million of that loan was later signed over to BGI, Inc., a corporate entity then under control of Tim Blixseth.

Concerns over the money trail have stoked a rebellion in the club membership. A group calling itself the Ad Hoc Committee of Yellowstone Club Members opposes Edra Blixseth's efforts to arrange new financing.

To join the club, each member put down a $250,000 deposit and bought a piece of property. Earlier this year, the asking prices for Yellowstone Club building lots were up to $10 million apiece.

"As each day goes by with more uncertainty and decreasing member support, the considerable risk of the loss (of) value of the estates continues to grow," Ad Hoc Committee attorneys wrote in court documents filed Friday.

Meanwhile, at least three other high-end resorts that received loans through Credit Suisse also are battling bankruptcy. Those are the Promontory Ranch Club near Park City, Utah; Idaho's Tamarack Resort; and Nevada's Lake Las Vegas golf resort.

Credit Suisse spokesman Duncan King said that's not because of poor loan decisions at the firm, but because of broader economic problems.

"You have plenty of other areas (of the economy) that are losing money, but this one is particularly hard-hit," King said.

The pain already is trickling down in the Yellowstone region. Court filings show the club owes back wages and months worth of payments to hundreds of local employees and to contractors from across Montana.

In the community of Laurel near Billings, Ace Electric owner Dwight Fischer said he laid off six of his 60 or so employees and stopped work on the resort's lodge when its bill topped $335,000.

"The last six months have been pretty tough," Fischer said. "The lifestyle these people are accustomed to, the money is all relative. But they can't afford to let it go completely to hell."

[Peter]

Good news for the employees:

BUTTE, Mont. (AP) - A bankruptcy judge has approved short-term financing that will allow the exclusive Yellowstone Club to keep its doors open through the busy ski season.

U.S. Bankruptcy Judge Ralph Kirscher said Wednesday he will let the club borrow money from another lender, even though current loan agent Credit Suisse opposed the plan.

CrossHarbor Capital of Boston, Mass., will lend the club $20 million at 15 percent interest to allow it to pay hundreds of employees who run the lavish club's operations.

The Montana resort caters to the extraordinarily rich and features a private ski hill, multimillion dollar homes and members such as Microsoft tycoon Bill Gates and Los Angeles Dodgers owner Frank McCourt.

Club members paid substantial sums for the privilege of building expensive homes in the gated resort.

[Peter]

Some pretty crazy news coming out of Big Sky:

Judge oks property seizure from Yellowstone Club
http://www.abcmontan...e/40345477.html

Arrest Warrant Approved for Edra Blixseth
http://www.bozemandailychronicle.com/artic...news/10edra.txt

Judge rejects Yellowstone Club auction terms
http://www.montanasnewsstation.com/Global/...y.asp?S=9873784

Is the place still operating?

[Lift Kid]

I can't imagine that they are still open.

[ccslider]

Lift Kid, on Feb 28 2009, 03:13 PM, said:

I can't imagine that they are still open.

From across the valley yesterday, it appeared that the lifts were turning (not many passengers) and there were fresh tracks on the trails.

This post has been edited by ccslider: 28 February 2009 - 07:26 PM

[skierdude9450]

She's in way over her head. That's all I can say.

There's in article in this month's Skiing Magazine about the Yellowstone Club. I'll see if I can pull it up.

[kstrange3]

Still open..... ridin the rollercoaster. YEEHAW!!!

[Peter]

New Showdown Looms in Yellowstone Club Bankruptcy
As lawyers flock to Butte again Wednesday, lawsuits are flying and no resolution is yet in sight.

By Jonathan Weber, 3-03-09



From the very beginning, the Yellowstone Club bankruptcy case has been exceptionally contentious, with international bank Credit Suisse fighting an all-out court battle to block a proposal by CrossHarbor Capital Partners to buy the property out of bankruptcy. Now, as deadlines loom for the club to gain approval for a reorganization plan, the legal war shows no signs of abating, and may lead to trial in what could prove to be a landmark lawsuit over a $375 million Credit Suisse-led loan to the club.

The loan is at the heart of the case, because Credit Suisse and its loan syndicate are still owed $310 million and hold liens on much of the property. The bank contends that CrossHarbor, which provided about $25 million in interim funding to the club after Credit Suisse was unable to raise the cash for its own interim funding plan, is manipulating club owner Edra Blixseth and the bankruptcy process to buy the club on the cheap and leave the lenders out in the cold.

But the committee representing the club’s unsecured creditors on Tuesday filed a much-anticipated lawsuit alleging that the loan was a “fraudulent transfer,” because most the cash went directly into the pockets of then-owners Tim and Edra Blixseth and thus rendered the club insolvent. The lawsuit also alleges that Credit Suisse aided and abetted the Blixseths in the breach of their fiduciary duties to the club, and Tim Blixseth and others may ultimately be named in the lawsuit as well.

Even before that lawsuit was formally filed, Credit Suisse fired back with its own lawsuit against the creditors committee - an action that attorneys say is virtually unprecedented in a bankruptcy proceeding.

The stakes are high indeed: if the creditors committee were to prevail, the loan would be null and void, and in fact the lenders could even be forced to pay back almost $100 million in principal and interest payments they have already received. Such an outcome would invalidate most of Credit Suisse’s bankruptcy claims and liens, and likely clear the way for the CrossHarbor transaction.

Furthermore, such a legal defeat could set an extremely dangerous precedent for Credit Suisse, which made numerous similar loans in which the owners of resort projects were permitted to pocket most or all of the loan proceeds. Such loans were central to the bankruptcies at Promontory in Utah, Tamarack in Idaho, and Lake Las Vegas in Nevada.

On the other hand, the creditors committee case is not be an easy one, since it will have to show that the loan rendered the club insolvent at the time (as opposed to the club being rendered insolvent by subsequent actions of management and/or the real estate market meltdown). If Credit Suisse prevailed in the lawsuit, it would at a minimum complicate any short-term sale of the club, and quite possibly result in Credit Suisse and its loan partners emerging with ownership of the property.

While corporate litigation of this nature normally takes years to play out, bankruptcy judge Ralph B. Kirscher has indicated that he’s ready to set a trial date for as early as late March.

Also this week, the so-called Class B shareholders who own a minority stake in the club filed their own lawsuit, alleging a range of abuses by the Blixseth’s and seeking punitive damages. The allegations parallel in many respects those made by B shareholder Greg LeMond and his associates in state court actions going back several years; LeMond settled for $40 million, about half of which has been paid.

Meanwhile, the U.S. Trustee’s office has asked that a Trustee be appointed to oversee the club’s current operations, on the grounds that Edra Blixseth is hopelessly conflicted (in large part because CrossHarbor lent her $35 million last summer) and should not be permitted to steer the company through the bankruptcy.

And, fighting continues over the proposed procedures for an auction of the club, a key part of the proposed reorganization plan. CrossHarbor, with its offer of $100 milllion in cash and debt and a promise to invest another $75 million in operations and pay off almost all the creditors (except Credit Suisse), would be the so-called “stalking horse bidder” in the auction. But Credit Suisse and others claim that the auction rules are skewed in CrossHarbor’s favor.

All of that is overshadowing what would normally be the main focus of the bankruptcy - the proposed plan of reorganization and disclosure statement, which has also drawn objections form numerous parties.

If all of that sounds convoluted, it is - and attorneys on all sides are girding for a long day in Butte on March 4.



New West has set up an entire section of their website devoted to the Yellowstone Club drama:
http://www.newwest.n...c/sub/C589/L35/

[Peter]

The Battle at Big Sky
Yellowstone Club Dispute Roils Enclave for the Ultrawealthy

By ROBERT FRANK
The Wall Street Journal

The battle to control the genteel Yellowstone Club is turning nasty.

During the next several weeks, a variety of billionaires and investors are likely to place bids to acquire the Yellowstone Club, the 13,500-acre, private ski and golf club nestled in the Montana Rockies that counts Bill Gates and Dan Quayle as members.

But a flurry of lawsuits and dueling accusations is threatening to complicate any sale and divide the club's more than 340 wealthy members.

The fights cap two years of controversy at Yellowstone, which filed for bankruptcy-court protection in November following the real-estate downturn and the divorce of founders Tim and Edra Blixseth. Once a refuge of privacy and exclusivity for the ultrawealthy, Yellowstone now is a battle zone of disputes.

The 125,000-square-foot Yellowstone Club lodge features lavish trappings. The club has a golf course, more than 60 private ski runs and sits on 13,500 acres in Montana.

At the center of the troubles is a $375 million loan made to Yellowstone by Credit Suisse Group in 2005. While the club was used as collateral, the Blixseths spent the bulk of the money on a failed global expansion and other personal investments and expenses, leaving Yellowstone with a pile of debt.

On Tuesday, a group of founding members who hold equity in the club filed a lawsuit against the Blixseths in U.S. Bankruptcy Court in Montana, accusing them of breaching their fiduciary duty in how they used the loan proceeds.

A lawyer for Mr. Blixseth said the loan was approved by "an army of lawyers, accountants and bond-rating experts," adding that the Blixseths used the proceeds in accordance with the loan. A spokeswoman for Ms. Blixseth also rejects the claims, saying that a "significant portion" of the money was used for the club.

In a separate suit filed this week, a group of unsecured creditors that includes construction firms, utilities and other companies that did work for Yellowstone alleged that Credit Suisse aided the Blixseths in their fiduciary breach. The loan "enriched the Blixseths (who took most of the proceeds) and Credit Suisse (which earned a seven-figure fee, plus interest)," the lawsuit alleges. The loan "saddled the Yellowstone Club with an enormous burden -- a debt for which it received no benefit."

A spokesman for Credit Suisse said the claims are without merit. The firm doesn't hold the Yellowstone loan, which was sold to hedge funds and other investors, but continues to act as agent for the loan holders.

The planned sale of the club, located about 45 miles southwest of Bozeman, Mont., also is becoming a lightning rod. Bids aren't due until May, yet CrossHarbor Capital Partners LLC, a Boston private-equity firm led by turnaround specialist and Yellowstone member Sam Byrne, has made an opening offer of $100 million as well as the assumption of other liabilities and commitments.

That price is far below the $470 million that CrossHarbor offered for the club in 2008. That deal fell apart. Some Yellowstone members are cheering CrossHarbor's latest bid, saying it will bring stability, expert management and capital to the club. Members also are open to higher bids.

But Credit Suisse is crying foul over the CrossHarbor offer, claiming in court filings that CrossHarbor is "conspiring" with Ms. Blixseth to buy Yellowstone on the cheap. If the bid is successful, holders would receive a fraction of the $309 million left on the loan.

Credit Suisse points to a $35 million loan CrossHarbor made last fall to one of Ms. Blixseth's private companies. Ms. Blixseth used the funds to buy out her husband's interest in the club and pay off other obligations.

Credit Suisse said the $35 million loan, backed mostly by Ms. Blixseth's 240-acre estate in Palm Springs, Calif., represents a conflict because Ms. Blixseth will favor CrossHarbor in the sale. Ms. Blixseth is "effectively dominated by CrossHarbor," Credit Suisse said in a court filing.

Ms. Blixseth, through a spokesman, rejected the claim, saying she has "always worked in the best interests of the club and its members." CrossHarbor, through a spokeswoman, said it made the loan to "protect the interests of the club's members, trade creditors and other stakeholders and to prevent any further adverse impact on these parties."

With other bidders likely to emerge, the tangle to control Yellowstone could get more complicated. Perched next to Big Sky Mountain, Yellowstone has a private golf course, a lavish 125,000-square-foot base lodge and more than 60 private ski runs.

In 2005, near the peak of the real-estate boom, Yellowstone was appraised at $1.16 billion, although the club has sold some of its land since then.

CB Richard Ellis Group Inc., which is marketing the club as part of the bankruptcy proceeding, has sent out 18,000 emails to prospective buyers, and more than 60 have signed nondisclosure agreements. Prospective buyers include rich families, private-equity firms and sovereign-wealth funds.

A small group of unnamed, ultrawealthy club members has broken away from a larger group that supports CrossHarbor's bid and is considering making its own offer. Tim Blixseth, who hasn't been involved in Yellowstone since selling his stake last year, also said he will put in a bid.

"I plan on trying to buy back my dream that I had several years ago," he said, adding that he is "sick" about recent events.

[Peter]

I think this is good news?

CrossHarbor to be Yellowstone "stalking horse"
Mon Mar 9, 2009 1:12pm EDT
Reuters

By Phil Wahba

NEW YORK, March 9 (Reuters) - CrossHarbor Capital Partners LLC said Monday a federal bankruptcy court in Montana has approved the investment firm as the "stalking horse" bidder in the bankruptcy auction of the exclusive Yellowstone Mountain Club LLC ski and golf community.

A "stalking horse" makes the lead bid at a bankruptcy auction and creates a floor for the bidding, in exchange for certain protections that often include break-up fees.

Boston-based CrossHarbor, which specializes in distressed real estate assets, said in a statement it was bidding about $100 million for Yellowstone Club's equity and debts, and would provide at least $75 million in additional capital to Yellowstone.

Yellowstone Club, part luxury resort, part residential community for the ultra-wealthy, is located near Big Sky, Montana and Yellowstone National Park.

It filed for Chapter 11 bankruptcy protection in November, showing how the financial crisis hitting the real estate and leisure industries is also hurting the higher end of the market.

Last week, another luxury resort property club, San Francisco-based Solstice LLC, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in the Southern District of New York, listing assets of up to $1 million and debts of up to $100 million

Solstice gives members access to luxury properties, including top ski resorts in Aspen, Colorado, and villas in Florence, Italy, for upfront fees of up to $1.95 million down and annual dues of $86,000, according to its website.

"The whole premise of destination clubs leaves people exposed," said Heidi Sorvino, head of the New York bankruptcy practice for Smith, Gambrell & Russell LLP.

"You pay $250,000 for the right to use a house somewhere and you still have no rights. You're an unsecured creditor. I'd rather take a quarter of a million dollars and stay at the Four Seasons for the rest of my life."

Yellowstone's website advertises condominiums with access to private ski areas for up to $8.75 million and customized residences going for $16 million.

In its bankruptcy filing, Yellowstone Club listed assets and liabilities of between $100 million and $500 million.

[Peter]

This is a long read, but very interesting if you've been following this mess.
http://www.newwest.net/topic/article/sam_b...e_club/C35/L35/

Sam Byrne on the Future of the Yellowstone Club
In an exclusive interview, Sam Byrne, principal at CrossHarbor Capital Partners and prospective buyer of the bankrupt Yellowstone Club, discusses his involvement with the club and his vision for its future.

By Jonathan Weber, 3-09-09

Sam Byrne, the Boston-based real estate investor and would-be buyer of the Yellowstone Club, generally tries to keep a low profile, even as he maneuvers to gain control of one the more high-profile properties in the world. In stark contrast to the celebrity-loving former owner, Tim Blixseth, the 44-year-old Byrne comes across as a sober, thoughtful businessman, eager to find a viable (and, hopefully, nicely profitable) solution for a place that he and his family love. His multi-billion-dollar investment firm, CrossHarbor Capital Partners, counts distressed real estate as one of its specialties, and thus the machinations surrounding the Yellowstone Club bankruptcy are not exactly unfamiliar territory.

Yet even by the standards of a complex real estate workout, the Yellowstone Club drama has been exceptionally emotional and contentious, and Byrne has absorbed a lot of brick bats from various parties who claim that he has schemed to steal the club on the cheap. In particular, Credit Suisse, the club’s primary lender, has engaged in a relentless - and so far, wholly unsuccessful - effort to prove that Byrne, together with club manager Discovery Land Company, has exploited the financial troubles of club owner Edra Blixseth to gain advantage. Credit Suisse arranged a $375 million loan for the club in 2005, and now represents a lender group that is still owed $310 million - much of which will likely never be recovered.

Byrne has been involved with the club since 2005, as a member and then as a developer of several major projects. He had a deal to buy the whole property from Tim Blixseth early last year for about $400 million, but the deal fell through. When the club slipped into bankruptcy last November, CrossHarbor provided $20 million in interim financing after Credit Suisse was unable to come up with the money for its own interim loan.

Now Byrne and CrossHarbor are proposing to buy the club out of bankruptcy, offering $100 million in cash and assumed debt, a commitment of $75 million in working capital, and $7.5 million to pay off all the trade creditors. A bankruptcy court judge last week approved a framework for the sale of the club, with CrossHarbor’s offer functioning as the official “stalking horse” bid; other parties will have the chance to make their own offers at an auction that is likely to take place in early May (assuming, of course, that other bidders actually emerge).

In the wake of that decision, Byrne agreed to sit down with NewWest.Net founder Jonathan Weber and discuss his involvement with the club and his vision for its future. Byrne clearly takes a lot of pride in his club properties, including an extraordinary $14 million spec house and the luxurious Sunrise Ridge condominiums, where the interview took place.

New West: In the bankruptcy proceedings, various players have painted you as a ‘bad guy’ who is trying to steal the club on the cheap. How do you respond to that kind of attack?

Sam Byrne: I think the record in the court speaks for itself. We have said all along that our goal is to have the club survive and thrive, and get separated from the circus atmosphere of the bankruptcy as quickly as possible. We don’t think a lot of the noise of the bankruptcy is helpful to value, but it’s something that’s part of the process and everyone has to deal with that.

NW: Some of those accusations are related to the deal you had to buy the club back in March of 2008. Why did that deal fall apart?

SB: It was our desire to have seen that transaction go through at the time as it was contracted for. It didn’t happen.

NW: Why didn’t it happen?

SB: I’m not sure I’m the one who has the answer as to why it didn’t happen. We wanted it to happen, we were prepared for it to happen. The court filings provide more detail on that.

NW: What about this notion that you didn’t have the money to close?

SB: That is not legitimate. That is not the reason the transaction didn’t close.

NW: You had attempted to buy the club last spring, and you are now going through a difficult and complicated process to hopefully acquire the club now. What is it about the club that is so compelling? What motivates you to continue through this process?

SB: We have significant business interests in the club that we need to protect, and we believe in the club as a long-term investment if properly capitalized. There is a process now for a resolution of this in a reasonable timeframe, a process that will ensure the transition of the club to well-capitalized ownership, be it us or someone else. We think that’s very good.

NW: You said you had significant investment in the club already—can you quantify that?

SB: We have the Sunrise Ridge condominium project, over $150 million has been spent on that project. It’s been successful to the extent that is was delivered on time and on budget; at one time it represented the largest construction project in the state of Montana. We had great partners on that project – Boles Construction, UpperCross Development, various tradespeople and contractors. And it’s a very successful project for people who have bought here, it’s a real community. We still have units to sell - 58 units total, 27 left to sell.

We also own five single-family development projects in the club. Those homes are all available on that market. So that’s another $35 million.

In the fall of 2005 we acquired the golf course lots, we invested $55 million in that. And we have a lot of money invested in investigating the club and understanding it.

NW: What prompted you to get involved in the first place?

SB: I came here as a guest of a family friend, in 2004.

NW: And what was it that caused you to say, ‘wow, this is a great opportunity’?

SB: We really enjoyed the club, found it to be a special place with a great group of people. In 2005, we bought some single family home lots to test the waters in Montana with a homebuilding company we were involved with - a high-end home builder who we had a lot of experience with in Hawaii. We used a series of different contractors and architects. Then we were offered the property at Sunrise Ridge in early 2006.

NW: And you saw it as a development opportunity?

SB: We thought there was demand for a vertical construction project, and we thought we could do a great job, as I think has been proven out. Then in the summer of 2007 we were offered the opportunity to invest in the whole property.

NW: And you found it personally compelling?

SB: It’s a very special property.

NW: What would you say is so special about it?

SB: The skiing is something that is truly unique worldwide, almost impossible to replicate anywhere else. The natural beauty is extraordinary. And there is a tremendous group of people in the membership.

NW: Can you tell me a little bit about your business outside of the Yellowstone Club?

SB: We are a real estate private equity firm. We manage a series of co-mingled funds. We’re currently investing our eighth fund, and fundraising for our ninth fund. These are funds that institutional investors make capital commitments to.

NW: What’s the scale of those funds?

SB: In the half-a-billion to a billion range in the current iterations.

NW: How quickly do these funds exit?

SB: They tend to have a five to nine year life. In addition to the funds, we also co-invest in larger deals – the fund partners will also put money in alongside.

NW: What kind of deals do your funds do?

SB: All kinds of debt and equity deals throughout the country that have some relationship to real estate.

NW: And the Yellowstone Club investments are made through one of your funds?

SB: Several funds.

NW: Can you say who the investors are?

SB: That information is not public, but we have an outstanding group of blue-chip limited partners and we are very proud of that.

NW: We are currently in a pretty disastrous real estate climate, and a lot of real estate investors are in very bad shape. How have you dealt with the downturn?

SB: We are doing fine. We are a very low-leverage firm. Going into 2006 we liquidated $2.5 billion of property. We do a lot of distressed debt investing so we saw the market going in a certain direction.

NW: This all goes to the question of who, exactly, is trying to buy the club…

SB: One thing that’s important about who it is: We have offered the membership the opportunity to co-invest as much as they’d like in the club. It’s part and parcel of trying to bring long-term stability, we think it’s a great idea for the members to invest side by side. These is no doubt this club can be successful. They’ve sold $1 billion worth of real estate here.

NW: Do you have previous experience with this type of development?

SB: We’ve done some resort development in Hawaii, and the Caribbean. Take a look at what we have done up here, what Sunrise Ridge is about. Speak to some of our owners. We have proven we can over-deliver.

Discovery Land is one of the best operator/ developers in the country, in and of themselves, the best private club operator in the country. We have never said we wanted to operate. We interviewed a series of operators for the club and we think Discovery has the right experience to take Yellowstone Club to the next level.

NW: So they would run the club and you would manage the development?

SB: We would do it jointly.

NW: The real estate market is obviously in very tough shape. If you look around there is a lot of inventory of high-end mountain real estate, and at the moment at least, essentially no demand. How do you see the market evolving?

SB: We think it’s going to take a few years for there to be any kind of market recovery and the club has to be capitalized adequately to weather that storm.

NW: Do you think it’s going to recover to what we saw over the last ten years?

SB: Clearly there aren’t going to be as many buyers for this type of property as there have been in the past. I don’t want to speculate about the market in general, but I know that the club is truly a unique place. It is well past the tipping point in terms of its membership base, it certainly has all the tools to be successful, provided that it’s capitalized to get through this challenging economic downturn. We are not projecting any robust property sales for four years. We hope to be pleasantly surprised once the club is stabilized and out of the bankruptcy proceedings.

NW: If you emerge as the owner, do you envision any substantial changes from the way the club is has been developed up to now?

SB: Historically, the club has been primarily developed with single family lots. The next generation of the development will be focused on vertical product. There will be some lot sales, but development will be largely vertical product concentrated around the base area in an environmentally sensitive and thoughtful masterplan.

The prior plan had been to take single family lots all the way up Eglise, one of the 3 primary peaks on the property, which would have been very expensive and environmentally insensitive, and it would have made expansion of quality skiing onto Eglise very difficult. Maintining the ski experience as the membership base expands is critical to the club’s success and must be the primary focus of future development plans.

Controlling the vertical development in one enterprise rather than selling product in bulk is also important. It eliminates property being sold to disparate developers, where ownership would not have adequate control over delivery of product, product quality or pricing. We think it is important for future plans to be fully integrated in a thoughtful master plan. Our plan involves concentrating much of the future development activity down into the base area in order to create more of a community, a village concept. This plan was created with months of planning work and charrettes, between ourselves, Discovery, Hart Howerton, Snow Engineering and Morrison & Maierle – there is a great team working on it.

NW: So all of that means fewer single-family lots and more high-density development?

SB: Yes, a plan that preserves as much open space within the club as possible. The key differentiating factor for the club has been the skiing. Maintaining the ski experience as the club gets bigger is the primary rationale behind our planning. At 550 members, we think you need to expand the ski terrain to maintain the existing experience. To do that, you want to build out the skiing on Eglise.

Snow Engineering is the best of the best. We had them in here to do an extensive analysis of the skiing and what the right way was to preserve the ski experience that you have today with more members. For the club to be viable it needs a robust membership, but to keep it special you have to keep the skiing special.

NW: You also mentioned developing in a more environmentally sensitive fashion?

SB: Yes, more of a new urban concept. And we certainly envision the club having a greater focus on sustainability. That means different things to different people – environmental sustainability, human sustainability, financial sustainability – where those things intersect makes for long-term sustainability. Construction practices, consumption of energy, all those things are going to be looked at.

NW: What about the relationship with the community, Big Sky and Bozeman and the nonmember neighbors? These days I think there is a sense in town that this was a crazy project and people are getting what they deserve, though people also lament the lost jobs. How do you think about this issue?

SB: It’s unfortunate if that’s the case. I think the memberships efforts with Big Sky LIFT, the desire for ownership to be sensitive to the economic sustainability of the club is critical. It’s an important economic driver. Making sure it continues is probably the best thing we can do. It’s hard for me to think the community has problems with the members.

We have made arrangements in our plan to make sure the community and the unsecured trade payables are getting paid. It’s not something we get credit for in our bid, it’s an incremental $7.5 million that we are gifting to a fund to make sure people get paid in the community. We think that’s critical to rebuilding the relationship the club has in the community.

NW: Some people have problems with the very idea of a private club.

SB: It’s analogous to a private golf club, or a private tennis club – I don’t know why this would be viewed any differently, these were private lands.

NW: Actually they weren’t, they were public lands.

SB: Well, they were checkerboard. But it’s a private club like any other private club, we want to be a good neighbor, and be supportive of the community in which it exists. It would be a primary goal of ours to do everything we can to be the best possible neighbor, and the most important thing in that is to make sure the club prospers.

NW: So what do you think are the challenges? What are the things that worry you?

SB: We’re in a very challenging economic environment. Of all the private residential communities developed in 2004-2006, probably 40 percent - 60 percent are insolvent, largely due to debt.

NW: Any other significant challenges?

SB: The club has a lot of work to do rebuildling its reputation. First and foremost the privacy of the club members has been really violated, we have to give them that back. We need to separate the club from public scrutiny. At the end of the day it’s a sensational story, but it’s really just a real estate development, a very special real estate development and club, and it doesn’t need to be anything more than that.

NW: One of the ways the club was marketed was as a super-exclusive place, not just another real estate development…

SB: We want to offer an exceptional experience; It’s not about being exclusive. It should be a great experience for families that are members. It’s a unique person that wants to be here in southwest Montana. This isn’t Aspen, it isn’t Vail, there is a family focus, and a focus on skiing, an extraordinary ski experience, that’s what it needs to be about. If people want to be in the public eye and have exclusivity, this is not the place.

NW: I take it you are an avid skier?

SB: I’m an avid skier and the club needs to be very skier centric. Everything we do needs to focus on the skier experience.

NW: And your family are big skiers and snowboarders?

SB: Yes, the kids are big skiers and snowboarders and have developed great relationships with the other kids at the clubs. If you look at what goes on, with the member race programs, biathlon, all kinds of skier-focused events. Keep it about the skiing.

NW: Given everything that has gone on, do you wish you’d never come near the place?

SB: I still love the place. It’s been a challenging year. With the process that has been put is in place, it’s on the rails to a resolution, with capitalization and new ownership.

NW: Do you expect there to be multiple bidders?

SB: I don’t know, it seems from the testimony from current ownership that there is a lot of interest.

NW: Do you expect the former owner [Tim Blixseth] to make a bid?

SB: I’m not going to comment about the former ownership. We’re looking forward.

[Peter]

In This Market, What’s the Yellowstone Club Really Worth?
Former owner Tim Blixseth and others say they're eager to bid for the Yellowstone Club. But with the resort real estate market in a free-fall, the value of even the most prestigious properties might not be what it seems.

By Jonathan Weber, 3-17-09



Behind all the histrionics of the Yellowstone Club bankruptcy is a straightforward question, but one that’s surprisingly hard to answer: how much is the Yellowstone Club really worth? Sam Byrne and CrossHarbor Capital Partners have opened the bidding at $100 million, but some parties - including lead banker Credit Suisse, former owner Tom Blixseth, and a member group that’s contemplating an offer for the club - insist that it’s worth a lot more than that.

Blixseth, who has said he intends to make an offer for the club in the court-supervised auction that will likely take place in early May, told NewWest.Net last week that he would “set a floor” on the price, and implied that his offer would be considerably higher than $100 million.

“What’s on the table currently isn’t a real offer,” Blixseth said. “The structure of the offer is bogus and I’m sure there will be much better offers before it’s over.” Blixseth declined to provide further details on his prospective bid, including what partners might be involved, but he did say he’d had no contact with the member group that’s considering an offer.

Meanwhile, the Credit Suisse lender group that’s owed $310 million by the club is preparing to make a bid, and expects the price to reach $200 million, according to a brief item in the trade publication Real Estate Alert. Credit Suisse spokesman Duncan King could not confirm or deny the accuracy of that report.

The member group has been close-lipped about its intentions, but sources say the group is unhappy with CrossHarbor’s plans for the club and is focused on the business strategy. This group, which sources say includes club members Bob Burch, Yoav Rubinstein, and Jon Hemingway, would prefer to see a smaller, member-run club, and they’ve brought former club operations manager Jon Reveal on board as a consultant to help with the planning. Burch, an active investor and businessman who was behind the failed Everlands destination club, is said to be leading the group; he could not be reached for comment. Hemingway, who runs a shipping company out of Seattle, did not return calls seeking comment. Rubinstein also declined to comment.

Whether other bidders might emerge remains to be seen. When the official marketing process began earlier this month with an email from broker CB Richard Ellis there was quite a bit of response, and at least a few dozen entities have signed confidentiality agreements. But whether those initial expressions of interest will turn into serious offers is not clear. East West Resorts, which already has some operations in Big Sky and was mentioned in court as a possible bidder, did not return a call seeking comment.

Valuing the Yellowstone Club is no easy trick, in part because of the complexity of the business and in part because the real estate market meltdown has made traditional valuation processes meaningless. Just a year ago, even Sam Byrne thought the club was worth a lot more than $100 million; he had an agreement to buy the property from Tim Blixseth in March of 2008 for a little over $400 million, but that deal did not close.

The idea that Byrne could now get the club for just a quarter of what he was willing to pay a year ago has infuriated Credit Suisse (not to mention Blixseth), and indeed that pique appears to be at the core of Credit Suisse’s allegations that the bankruptcy was all a clever CrossHarbor plot.

Clearly, though, the club is worth much less now than it was even a year ago. The luxury second-home market has been crushed by the economic meltdown, and even without the uncertainty of a bankruptcy it’s likely the Yellowstone Club would be selling virtually no real estate or memberships at the moment (as opposed to 30-50 a year in 2004-2007.) Most real estate developers don’t expect an upturn until 2011 at best. As the world’s only major private ski resort, the 13,600-acre Yellowstone Club - and the 450-odd memberships and comparable number of lots, houses or condos that it has left to sell - is certainly a premium property, but it’s not without risk.

By way of comparison, Tamarack Resort in Idaho, a new four-season development that was dependent on real estate sales, is now shut down, and it’s probably worth almost nothing. (Credit Suisse, which led a $250 million loan to Tamarack, is currently foreclosing on the property). Promontory, a private membership club outside Park City, Utah, is currently trying to raise $70 million in new funds to emerge from Chapter 11 bankruptcy (with Credit Suisse noteholders, who put up a $350 million loan in this case, as the new owners). But if Credit Suisse can’t raise the money, Promontory will be sold at auction, probably for a pittance. Yellowstone Club’s luxury resort neighbors, Moonlight Basin and Spanish Peaks, are slashing prices and struggling mightily to find home-buyers and fresh sources of capital.

The Yellowstone Club is now doing an appraisal as part of the bankruptcy process, but of course an appraisal in this context can show almost anything. Bogus appraisals in fact were at the root of the real estate bubble to begin with, and there is simply no way to objectively determine what the club is worth (except of course by seeing what the market will bear). Lots that sold for $3 million a few years ago could easily be worth less than half that now. And even after you make a guess at how many lots and condos can be sold how quickly and at what price, what is the value of the membership agreements and the lodge and the ski infrastructure and everything else that makes up the business of the club? To further complicate matters, the club also owns a castle in France and a golf property in Scotland, but its title to those properties could be in dispute, and even if that is resolved it’s not at all clear what those assets might sell for in today’s market.

CrossHarbor’s offer for the club includes $30 million in cash, which will mostly go to pay back the interim funding provided by CrossHarbor itself, and the assumption of $70 million in debt (meaning the $310 million owed to Credit Suisse’s bondholders would become a new loan of $70 million, assuming the loan claim isn’t disallowed by a pending lawsuit). CrossHarbor also committed to invest $25 million in the club upfront, and another $50 million down the line. It would set aside an additional $7.5 million to pay unsecured trade creditors. The European properties - as well as any proceeds from possible legal claims against Tim and Edra Blixseth - would not be part of the deal and would be transferred to a “liquidating trust” for the benefit of any unpaid creditors.

One key point of contention relating to the marketing of the club and the auction process is whether other bidders would have to propose a structure similar to CrossHarbor’s, and whether they’d have to buy all the equity of the ongoing business rather than bid on specific assets. (The court’s answer to that, for now at least, is yes.) Clearly the club needs a lot of cash - it’s currently losing about $20 million a year on operations, and needs capital investment in everything from the golf clubhouse to the road network - and there are limits as to how much debt it can support. But other buyers might want to put forward very different business plans.

Because it’s a trophy property, it’s also possible that a buyer could emerge who is in it for “emotional” reasons, as money people like to say with a touch of condescension. The betting here, though, is that in this market, buyers like that are very thin on the ground.

[kstrange3]

...sigh......

[mthornton]

When I first got into this ski-business, 35 years ago, it was driven by skiers. Motivated by the love of mountains and the excitement of fresh snow on a clear blue winter day.
Sheesh... what a load....

Back then there was a saying that "The sure way to make a small-fortune in the ski-business, was to start out with a big one."

I know that real-estate development was the salvation of the ski-industry back in the 70s... but now, finally, I begin to understand, why I never trusted anyone or any entity which based their ski-resort business-plan purely on real-estate.

So, to those ski-hill owners out there who have thrown their hats in, without any real-estate slant, I salute you.

For the last 20 years I have earned an Intrawest paycheque. I feel good that Intrawest has shifted it's focus to revenue generating resort operations. This means that skiing managers will be making the key decisions at the ski-hills. And we focus on offering a high-quality on-hill product to attract customers in a competitive market.

This economic shakedown will result in some pain for all, but especially bad for the resorts with a business-plan based on continual boom-times & perpetual rabid-hot real estate markets. These shysters need to be ousted. In the end, let's hope these very fine ski-hills (Yellowstone, Tamarack etc), get picked up & operated by skiers.

MThornton
Today I rode the lifts, my lifts that I helped build, with some very happy customers. Gratification.

[Peter]

Yellowstone Club owner declares bankruptcy

By JESSICA MAYRER Chronicle Staff Writer

Yellowstone Club owner Edra Blixseth filed for personal Chapter 11 bankruptcy protection Thursday to stop a creditor from seizing and liquidating her personal property, according to court records.


ERIK PETERSEN/CHRONICLE The Warren Miller Lodge stands at the base of the Yellowstone Club in 2008. Edra Blixseth, owner of the club, filed for personal Chapter 11 bankruptcy protection to stop a creditor from liquidating her personal property, according to court records. Blixseth, who had been silent amid reports of her mounting financial difficulties in recent months, issued a written statement Friday explaining her decision.

“There has been an orchestrated campaign to discredit my good name, my business interests, and the years of hard work I have invested in … the club, other businesses and my many philanthropic endeavors,” she said. “There are individuals and groups, including my ex-husband and his attorneys, led by Mike Flynn, who I believe have sought to undermine my good work, make false and hurtful allegations against me and my family, and done everything in their power to blame me for the mistakes and questionable activities that occurred under their watch.

“This disinformation campaign has also included making false claims and allegations in court and leaking false and misleading stories to media publications,” she said. “It is my firm belief that the only way to weather these relentless attacks was to seek the court’s protection and work to satisfy any and all claims against me.”

In response, Flynn, Tim Blixseth’s attorney, attributed Edra Blixseth’s financial challenges and those of the Yellowstone Club to her mismanagement.

“These matters arise out of Ms. Blixseth's decision in her divorce proceedings to wrest control of the club through her lawyers,” Flynn said in a written statement Friday.

Edra Blixseth’s bankruptcy filing in federal court comes as banks across the West lined up to seize her assets.

On Thursday, Gallatin County District Judge Mike Salvagni ordered Blixseth to cooperate with local authorities as American Bank worked to recover collateral, much of it furniture and fixtures from her Bozeman furniture company, Monarch Design, in exchange for a $1 million loan.

“I guess we always knew there was the potential that she could declare bankruptcy,” said American Bank attorney, Dave Wagner from Crowley Fleck PLLP. “We have a judgment against her and this shouldn’t affect that judgment.”

The filing estimates her assets total between $100 million and $500 million and debts between $500 million and $1 billion and states there will likely be no funds available to pay unsecured creditors.

In addition to American Bank, Blixseth owes money to club members, including three-time Tour de France winner, Greg LeMond and Western Capital Partners LLC, a Colorado-based bank actively seeking to recoup a $13 million loan taken out in 2007.

When Blixseth did not show up for a February debtor’s exam in Colorado to account for the loan, a U.S. District Court judge declared her in contempt and issued a warrant for her arrest.

And the Yellowstone Club declared Chapter 11 bankruptcy in November. The 13,500-acre exclusive ski resort with a championship golf course is going on the auction block, with club member Sam Byrne and Tim Blixseth having stated their intent to bid for the property.

“It’s said that truth will set you free,” Blixseth said. “And I intend to do everything in my power to see that the truth restores my good name, both in the court of law and the court of public opinion.”

[Peter]

This can't be good...

Donald Trump makes a bid for Montana's private golf and ski residence club, the Yellowstone Club

by Catey Hill
daily news staff writer

Tuesday, April 7th 2009, 4:00 AM

Looks like Donald Trump is making a bid for a piece of the American West - specifically the Yellowstone Club.

The Wall Street Journal reports that Trump wants to expand his holdings to include the 13,500-acre private ski and golf community, billed as "the world's only private ski and golf community."

“I’m looking at it,” Trump said in an interview with the Wall Street Journal. “But it’s a very troubled club.”

He's right about that - Yellowstone is troubled. The club is broke, owes $300M to Credit Suisse and many of its employees have not been paid.

Private-equity firm CrossHarbor has already bid $100 million for the club, which means that subsequent buyers will have to bid higher.

When asked if he can turn the Yellowstone Club around, Trump told the newspaper, “That’s what we’re looking at, but it won’t be easy.”

Yellowstone Club has 340 members and offers a private golf and ski community for its residents.

[Peter]

It seemed inevitable, but someone has written a fiction book about the YC.

http://www.amazon.com/Triple-Cross-Mark-T-...n/dp/0312378505

"On New Year's Eve during a snowstorm, members of the Third Position Army, a group devoted to fighting corporate greed, seize the Jefferson Club, a twelve-thousand-acre ultra-private resort for the super-rich, in southwest Montana. General Anarchy, the group's leader, and his troops free most of the vacationers, but take the world's six richest men hostage and sequentially put them on trials broadcast over the Internet. Summary executions follow in most cases. The twist: the 14-year-old triplets of the club's security chief, Mickey Hennessy, manage to squirrel themselves away within the resort's back rooms and stealthily work to foil the terrorists."