Located two hours north of Boise, Idaho, the Tamarack
Resort was envisioned as an all-season resort and residential community
whose mountain base rises to a summit of nearly 8,000 feet. The 7,000-acre
property offered world class alpine, snowboarding and cross-country
skiing, championship golf, biking and hiking trails, whitewater rafting
and fishing on the Payette River, and recreational boating on the adjacent
Lake Cascade. In October 2008, Tamarack’s
developer threw in the towel, a victim of the real estate meltdown, thus
becoming one of the worst casualties of The Great Recession. When
foreclosure proceedings began, the value of the loan was $247.7 million,
plus several million owed to contractors.
On October 18, 2008, the District Court of the
Fourth Judicial District of the State of Idaho appointed Douglas P.
Wilson as Receiver to take over all resort operations and coordinate
the winterization of various buildings. The agent in charge, Credit
Suisse, led a cadre of a dozen lawyers, representing creditors from around
the nation. This was not going to be a simple rents and profits
receivership, and the Receiver could not anticipate the scope of tasks
that would need to be performed in short order to prepare the Resort for
the rapidly approaching ski season.
Five participant lenders included regulated banks
and unregulated hedge funds, whose goals were not always in alignment. To
achieve consensus and avoid controversy among these disparate interests
required the Receiver to present a constant and compelling cost vs.
benefit analysis. With winter approaching, efficiency was essential.
As with any receivership, the underlying goal at
Tamarack was to preserve and protect the collateral. This project was
essentially a land play with high-gloss amenities including a golf course
and ski mountain. With so many moving parts, task one was a complete a
physical inventory of assets, to be followed by repairs, completion of
infrastructure, and winterization of the golf course and numerous
structures – including partially built condominium buildings. This case
highlights the breadth of problems that a receiver can face in a sizeable
case and the importance of speed, organization and efficiency to preserve
the assets.
The inventory – all 300 pages of it – was
comprised of lodging and conference facilities, food and beverage outlets,
retail and rental shops, warehouse storage, vehicle and maintenance,
construction materials, executive offices, recreational facilities (i.e.
golf, ski) and employee housing.
The Receiver had two days to initiate the seasonal closing and
winterization of the golf course. Designed by Robert Trent Jones, Jr., the
course was a high value asset, ranked that year as #79 of #100 top courses
by Golf Magazine.
All irrigation lines were drained (to prevent
broken pipes), fertilizers and chemicals were applied to tees, greens and
fairways (to prevent mold and frozen turf damage), and tees and greens
were staked (to discourage snowmobile trespassing damage).
With the mountain scheduled to open in 54 days,
the Receiver urgently focused on ski operations, which included ski
patrol, ski passes, snow equipment, rentals, a medical clinic, five food
and beverage outlets, and lodging. Seven lifts serviced 1,100 acres of
lift-accessed terrain, a 22’ SuperPipe and two Terrain Parks, plus 16
miles of machine-groomed trails for cross-country, as well as nine miles
of snowshoe trails, and snowmobiling opportunities.
Concurrently, security upgrades were prioritized,
including new locks and key cards for more than 400 access points around
the resort. Surveillance equipment and alarms were repaired and new
cameras were added to areas considered high risk: safes and liquor storage
areas in the Lodge, as well as in the children’s daycare center.
Another life/safety issue was the installation of
vehicle guardrail systems throughout Tamarack’s three residential areas.
With a December 31 deadline looming, the installation was successful
because the earth had not yet frozen (which would have prevented driving
pilings into the ground).
On the development side, weatherproofing began
immediately at the Village Plaza (six condominium and retail buildings
located in the center of the resort). Six buildings were divided into two
groups: (1) buildings that were largely completed on the exterior, with a
significant amount of interior work underway, and (2) buildings that were
far from completion.
Winterization procedures included waterproofing,
securing to wind-driven rain and snow, lining and wrapping piping and
drainage systems, and sealing with a continuous commercial grade
weather-resistant barrier.
Two of the condominium buildings – comprised of
approximately 40 units – had to be partially built in order to winterize
them, or they would have been lost completely.
Personnel issues also fell to the Receiver, who
worked with all department heads to hire more than 200 workers, from ski
instructors to housekeepers, from security guards to snow plow drivers.
Existing homeowners were also part of the mix.
Seven days after the Receiver was in place, a Town Hall meeting was held
with resort homeowners, broadcast via teleconference to those who couldn’t
attend in person. Disgruntled and anxious, homeowners were relieved to
know that the court had stepped in to secure and operate the resort in the
coming winter season.
In addition to routine tasks of bank accounts and
insurance, bigger challenges loomed for Tamarack.
If the lifts didn’t run for a 365-day period, the
Forest Service would have been within its rights to pull the permit and
Tamarack would have lost the ski resort. The loss of Tamarack’s ski permit
would have devastated property values for existing and future homeowners
and would have greatly diminished the value of the collateral.
Therefore, the maintenance of permits, licenses
and inspections were non-negotiable elements in the successful operation
of the resort. That list included a childcare license, recreational
activities permit (including the ski and snowboard runs, river trips and
snowmobile tours), lift insurance inspections, backcountry activities
permit, health department inspections, fire inspections and liquor
licenses.
Last, but certainly not least, was the challenge
of marketing a ski resort mired in a high-profile receivership. With no
media plan in place for the winter, the Receiver created a marketing
program for locals from nearby Valley County and Boise, and the western
regional markets of Washington, Oregon and California.
The immediate focus was on ski season pass sales,
typically purchased by local/regional patrons (the target market) and
providing a steady source of cash flow/revenue for the resort. Without a
mass marketing campaign, sales predictably fell sharply. But just keeping
the lifts running - thus preserving the Forest Service permit to protect
future value - achieved the Receiver’s goal.
Ultimately the lender group worked out a form of
forbearance with the existing owner and receivership services were no
longer needed. Reflecting on the assignment, the Receiver describes it as
akin to a SWAT operation: rushing in under serious time pressure and
multiple complications, assessing the threat, and resolving the situation
with the best possible outcome for all parties. One lesson learned is the
importance of building the right team as a receiver to address the diverse
needs of a particular case.
*Doug Wilson is the founder of Douglas Wilson Companies based in
San Diego. The company is an experienced
developer and a
frequently-appointed multi-state receiver
for businesses including
residential and commercial development projects, resorts and golf courses.
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