Lajitas Resort

[presidio]

I think the best thing to do would be to scale it way back, drop the golf course and other cash flow draining eminities and stream line operations.

Actually, if Smith is really interested in making the development successful,  all he needs to do is rejigger the focus from the extremely wealthy who have displayed their lack of interest in the middle of nowhere by not coming out, to amenities and facilities priced to attract the more numerous middle class that is likely to visit.

Since the facilities already are built, and he is losing money due to unused capacity, reducing the price structure does not result in further loss.

If you want accommodations other than camping, prices in the region run from a low of around $50/night to the upper end of Forever Resorts' costs for park lodging. In most cases, all you are getting is a drab motel room of dubious quality.

If he were to price his facilities competitively I have no doubt he would see an upswing in income, but that would mean rubbing shoulders with a lower, but more easily attracted social class.

However, I still think it is a tax shelter. As in all things of this nature, follow the money to understand the game.

[Roger, Roger]

Like I said it looks like a lot of locals who can least afford it are going to get burned by this.   They may not make it into the top 10 list of creditors but even $500 or $1000 of lost revenue means a lot to many people in South Brewster County.   The fat cats with the $100K trailer park sites and $300K lots may be able to afford a near-total loss but what about all the carpenters, plumbers, landscapers, river guides, and contractors that have unpaid bills?  Shame on Steve Smith - reminds me a lot of Ken Lay! .. TWWG

The little contractors who are owed $1k are getting paid.  With Lajitas still operating, they need people like this to be working.  Think about it...if you did $500 worth of work for them and they file bankruptcy, I'll bet you're not going to show up and do anything else until you get paid.

It's the big charges that aren't getting paid, and the Texas River Expeditions is the only one that really bothers me...that's a lot of money for a group like that.

Presidio is right I think...I don't think Smith ever thought Lajitas would actually make money.  And then he found a way to steal $12.5 million along with helping himself out with his W2 situation, so he took the opportunity instead of just paying back the loan himself.  Considering the shady sales tactics that Excel used back in the day, it doesn't surprise me.

[SHANEA]

http://www.statesman.com/news/content/news/stories/local/07/11/0711lajitas.html?imw=Y

Lajitas developer says bankruptcy not a problem
'I'm wealthier than I've ever been,' owner of border town says.
By Mark Lisheron
AMERICAN-STATESMAN STAFF
Wednesday, July 11, 2007

For a man who recently filed for bankruptcy protection and who faces a federal tax court fight that could cost him more than $20 million, Steve Smith is remarkably bullish about his future and that of Lajitas, the West Texas resort that is both his dream and the cause of his difficulties.

"I look at Steve Smith asset-wise, and I'm probably wealthier that I have ever been," Smith said from his ranch in Kerrville. "This isn't really about Steve Smith. It's about Lajitas, and I truly believe we're going to emerge stronger and healthier than we went in."

His optimism is no more confounding to the skeptics than anything else Smith has done since Feb. 24, 2000, when he flew in by helicopter and, on little more than a whim, paid $4.25 million to buy what amounted to the whole town of Lajitas.

Smith has since spent more than $100 million of his own money, a fraction of a fortune made in telecommunications, to transform the town on the Rio Grande at the western tip of Big Bend National Park into a luxury resort. An appraisal done for Smith by PKF Consulting Co., which specializes in resort properties, estimated its value at $220 million.

At the same time, Smith has created a kind of company town, employing about 250 people and representing the second biggest enterprise in Brewster County next to Sul Ross State University in Alpine, the county seat. (Brewster has just 9,048 people spread out over 6,192 square miles.)

The more than $300,000 the resort paid in sales, property and hotel occupancy taxes last year is more than a quarter of the county's annual tax base.

"Some people here don't realize all Steve Smith has done for this area," said Kathy Killingsworth, superintendent of the Terlingua Common School District. Smith once cut a personal check for $34,000 for a school construction project, among other donations.

"In my opinion, he's a wonderful man, and I hope he gets past all of this," Killingsworth said.

Not just for friends

On the day he bought Lajitas from Walter Mischer, a Houston real estate developer, Smith, a founder of Dallas-based Excel Communications, said he intended to fix the place up a little bit for friends.

"I've got this thing about me that once I embark on something, I get pretty wrapped up in it," Smith now says. "What I thought I was doing for a few friends, I realized, I was going to need a wider circle of friends to make work."

For some time, there have been telltale signs that skeptics have interpreted as Smith finally overreaching on Lajitas. For the third consecutive year, Lajitas has been late paying its taxes, according to Betty Jo Rooney, Brewster County's tax assessor. Every year, the company has paid the county in full, but the months-late payments are unusual for a business in Brewster County, Rooney said.

Hotel room receipts tracked by the state comptroller show that Lajitas' lodging business is down. In 2006, receipts were $1.8 million, down slightly from $1.9 million the year before. Lajitas generated $471,570 in hotel receipts in the first quarter of this year, down 20.4 percent from the $592,438 generated in the same quarter in 2006 and down still more from the $674,488 for the quarter in 2005, according to the comptroller's figures.

Then, in April, Smith challenged a decision by the U.S. Tax Court that AD Balanced Equity Fund, which includes Smith and members of his family, had improperly sheltered at least some of more than $140 million. Smith calls the action "a textbook example of the proper way to use the shelter," a case he and his attorneys will try to make at a hearing this fall in Dallas.

Foreclosure threat

In May, Prime Assets Funding, a Greenwich, Conn., loan company, posted a notice at the Brewster County Courthouse that the company intended to foreclose on Lajitas for failing to meet the requirements of a $12.5 million loan. The company did not foreclose but repeated its threat in June.

On July 2, Lajitas Resort Ltd. filed for federal Chapter 11 bankruptcy protection. The filing does not mention Prime Assets but does list 20 creditors and more than $1 million in debt.

Robert Ladd, an attorney for Prime Assets Funding, said only that Lajitas failed to meet certain performance standards, prompting the foreclosure notice. While declining to comment on the loan or the company that made it, Smith said he disagreed with the language of those performance standards.

Far from evidence of weakness, Smith said, Chapter 11 will allow him for the first time to find a loan or an equity partner who will help Lajitas complete an expansion, the building of new cottages for sale, a new clubhouse for the golf course and a spa. Financial advisers, Smith said, have persuaded him to stop using his own money to improve what is just one of several assets.

The tax and loan problems are part of doing business, he said. He said nothing at the resort would change during the Chapter 11 proceedings. Potential investors and lenders are already lining up, he said.

"In anything on this scale, you're going to have problems, and you have to have a solution for each and every one of them," Smith said. "The plan isn't going to change. I just fell in love with this place. The best way to go through life is to have fun doing what you're doing. I'm still having fun."

mlisheron@statesman.com; 445-3663

[SHANEA]

Too bad the government didn't tighten up the rules on corporations filing bankruptcy the way they did on individuals.  My former company has filed for bankruptcy twice in just 3-4 years.  Great way for companies to get debts and other noxious stuff off the balance sheet.  :twisted:

[Undertaker]

Funny how losing money makes the wealthy more money.

[SHANEA]

http://tinyurl.com/3de97c

90 days left for Lajitas
Web Posted: 07/20/2007 10:12 PM CDT
John MacCormack
Express-News

The operators of the bankrupt Lajitas Resort in far West Texas have been given until mid-October to either obtain a sizable new loan or put the luxurious complex on the auction block.

The deadline from U.S. Bankruptcy Court Judge Ronald King came after Prime Asset Lending, which is owed about $13.5 million, agreed to delay collection of the debt.

"We're agreeing to give them 90 days to either find an equity lender or sell it. After that, I guess, we'd have a courthouse auction," said Frank Harrison, a manager of Connecticut-based Prime Asset.

On July 2, on the brink of a foreclosure sale in Brewster County, the Big Bend-area resort and several related entities filed for Chapter 11 reorganization.

The resort had defaulted on a $12.5 million loan from Prime Asset. Lajitas now owes about $15.5 million to numerous creditors, with Prime Asset being the only secured creditor.

In two Thursday court hearings in San Antonio before King, resort lawyers acknowledged that no significant new money has been found and suggested a sale was increasingly likely.

"There are a lot of places where we think we could get the money, but at this point, we don't have the money in place," said one of them, Mark Petrocchi.

Assuming no financial bailout, the resort complex will be sold to the highest bidder, he said.

Resort president Daniel Hostettler, who was present, did not respond to an e-mail asking about the developments.

Stephen R. Smith, an Austin telecom magnate who pumped more than $100 million into the resort since buying it for $4.2 million in 1999, was not in court.

The resort, which billed itself as "The Ultimate Hideout," featured an emerald-green golf course amid scenic desert mesas, a gourmet restaurant, a private jet runway and an equestrian center.

But it never broke even and is now losing $500,000 a month, according to its lawyers.

"We're going to need some money in a hurry. It may be as soon as Monday or Tuesday of next week," Lajitas lawyer Clay Roark told the judge.

To stay open for the next three months, the resort got King's permission to borrow another $1.5 million, assuming a lender can be found.

"We recognize this is a distress sale. There simply is not the operating capital to keep it open, and the burn rate is so high," Petrocchi said.

Lawyers for Prime Asset did not oppose the new borrowing after beating back an attempt by the resort to borrow up to $5 million from a lender who would have had first claim on the property.

Opinions differ as to what the resort, the surrounding 20,000 acres of desert and a beer-drinking goat named Clay Henry would bring at a hastily arranged sale.

"Our view is that this property can be sold in this period of time, and will probably generate enough to pay both Prime Asset Funding and the unsecured creditors," said Stephen Pezanosky, representing Prime Asset.

Lajitas lawyers assured King that the property is worth far more than is due the various creditors.

"There is tremendous equity cushion in the property," Roark said.

"The lowest appraisal that has been done on this property for a quick sale is almost $18 million. We think the property is worth much more. The other end of that appraisal is $26 million."

jmaccormack@express-news.net

OK, how about either BBRSP or BIBE ponying up the $$$$ and purchasing Lajitas and making it part of the park??  Forever Resorts could purchase the infrastructure at Lajitas, dispense with the golf course, etc.  20,000 acres is a bunch of land that is right between BBRSP and BIBE.  Perhaps get the Nature Conservatancy, Sierra Club, etc. to also pony up some money too.   By keeping the infrastructure in place, employment is preserved,  etc.  If Forever Resorts purchased Lajitas infrastructure,  then at least that part of it could remain on the tax rolls...

[bdann]

I'm just wondering what is stopping Steve Smith from paying off the $13.5 mil with his own money?  If it's so near and dear to his heart, why all the delay?  Surely he has the money.

[SHANEA]

I'm just wondering what is stopping Steve Smith from paying off the $13.5 mil with his own money?  If it's so near and dear to his heart, why all the delay?  Surely he has the money.

Good question.  I guess at some point in time you have to cut your losses?  I suppose it's an expensive play toy.  He has a hill country ranch, maybe he likes that better?

[Undertaker]

Wonder how many people really thought the place would fly, high lonesome is why I visit the BB area, If I want to eat in a fancy food factory I don't have to leave the Houston Area, I can always bring my own to the area and I usually drink good scotch when in the BB area, I will not miss anything but the goat.

[Roger, Roger]

I'm just wondering what is stopping Steve Smith from paying off the $13.5 mil with his own money?  If it's so near and dear to his heart, why all the delay?  Surely he has the money.

Good question.  I guess at some point in time you have to cut your losses?  I suppose it's an expensive play toy.  He has a hill country ranch, maybe he likes that better?

There's no way he'll let it sell at a cheap price at auction.  I haven't spent much time analyzing or thinking about this, but I'm sure he'll end up stepping in at some point and buying it back/paying off loans on the cheap.  Then he'll be able to claim huge losses for tax purposes, etc.  I'm pretty sure the angling so far has just been paving the way for Smith to keep the $12.5 million since that creditor is unsecured.

That all said, I know Smith has gone through a divorce and had a lot of his assets tied up with other things.  So maybe he really doesn't have the liquidity.

[bdann]

I'm just wondering what is stopping Steve Smith from paying off the $13.5 mil with his own money?  If it's so near and dear to his heart, why all the delay?  Surely he has the money.

Good question.  I guess at some point in time you have to cut your losses?  I suppose it's an expensive play toy.  He has a hill country ranch, maybe he likes that better?

There's no way he'll let it sell at a cheap price at auction.  I haven't spent much time analyzing or thinking about this, but I'm sure he'll end up stepping in at some point and buying it back/paying off loans on the cheap.  Then he'll be able to claim huge losses for tax purposes, etc.  I'm pretty sure the angling so far has just been paving the way for Smith to keep the $12.5 million since that creditor is unsecured.

That all said, I know Smith has gone through a divorce and had a lot of his assets tied up with other things.  So maybe he really doesn't have the liquidity.

It's the 12.5 mil that is secured, that's the part that's has to be paid to prevent sale at auction.  If he feels as strongly about the property as he says he does, I think he'll pay it out of his own pocket before the deadline.

[presidio]

OK, how about either BBRSP or BIBE ponying up the $$$$ and purchasing Lajitas and making it part of the park??  Forever Resorts could purchase the infrastructure at Lajitas, dispense with the golf course, etc.  20,000 acres is a bunch of land that is right between BBRSP and BIBE.  Perhaps get the Nature Conservatancy, Sierra Club, etc. to also pony up some money too.   By keeping the infrastructure in place, employment is preserved,  etc.  If Forever Resorts purchased Lajitas infrastructure,  then at least that part of it could remain on the tax rolls...

Governmental entities will not do this for a variety of reasons. First and foremost is that they are ill-equipped to purchase land on the fly when it becomes available. For the state or federal government to buy land there has to be funding, and such funding is specifically dedicated for the purpose of purchase. This can take years to accomplish in the legislative process. Thus, no opportunities, even ones that are extraordinarily good, can be capitalized upon when they just pop up.

The second strike is that governmental entities cannot pay more than fair market value. That value is going to be far less than all the figures bantered about by Smith, his attorneys and other parties with a financial interest in the property. A fair market appraisal likely would be stunning in how little the investment actually is worth (still, a lot of money, but nowhere near the triple digit millions Smith would have you believe).

In a situation like this, the only real viable alternative is for some entity like the Nature Conservancy to pony up the money. However, even they are not going to make a reckless purchase with their limited funds. Of course a philanthropic person could come along and donate it....

Once an organization like the NC acquires something like this, they do have a history of working with governmental organizations to sell/transfer the property and then are willing to wait/carry the note while the aforementioned legislative funding process grinds on.

[Roger, Roger]

I'm just wondering what is stopping Steve Smith from paying off the $13.5 mil with his own money?  If it's so near and dear to his heart, why all the delay?  Surely he has the money.

Good question.  I guess at some point in time you have to cut your losses?  I suppose it's an expensive play toy.  He has a hill country ranch, maybe he likes that better?

There's no way he'll let it sell at a cheap price at auction.  I haven't spent much time analyzing or thinking about this, but I'm sure he'll end up stepping in at some point and buying it back/paying off loans on the cheap.  Then he'll be able to claim huge losses for tax purposes, etc.  I'm pretty sure the angling so far has just been paving the way for Smith to keep the $12.5 million since that creditor is unsecured.

That all said, I know Smith has gone through a divorce and had a lot of his assets tied up with other things.  So maybe he really doesn't have the liquidity.

It's the 12.5 mil that is secured, that's the part that's has to be paid to prevent sale at auction.  If he feels as strongly about the property as he says he does, I think he'll pay it out of his own pocket before the deadline.

That's right...I was thinking about the fact that the $12.5 million was not secured by Smith himself.

[TheWildWestGuy]

This will be interesting to see what happens.
My prediction is that Steve Smith is done for good with the money-pit playtoy of Lajitas and that it will sell very very cheap (<$5M) to someone else who has no plans to continue running the place and just wants to dismantle it, sell off pieces of it, and dump the "lots" on idiot internet investors.  Although you could reduce expenses by closing the golf course and other under-utilized businesses the place is still going to be a big money loser for 8 months out of 12 every year.   It just has way too many employee's and way too few paying customers.  As far as I know it has never had a profitable year.

About the most I think you could do with it would be to close it entirely down except during peak season Thanksgiving-Spring Break and then try to run it with a skeleton staff, no resturant, no airport, no bakery, etc..   The trading post, liquor store, and part of the hotel could probably operate year-around if they were refocused on the regular market $$.
The airport is a bit tricky - several million $$ invested, can't keep it maintained but can't easily mothball it either.  I visited it once on my way to Dam Tinaja - it's very nice, new, clean, and even has a pilots lounge but no paying customers.

I also predict that the secured investors will get 100% of the sales proceeds but still lose money and all the individuals owed money will never see a single dime of it.  The few people that bought lots or trailer sites are going to see their investment drop to 10% of what they paid for it and will find it even more un-fungable than it was in the first place.

It will be interesting to see though and I DARE others to stick their necks out and make specific predictions.  Winner gets a free beer in the Basin next time I'm there... TWWG

[chisos muse]

I think that Smith will hold on to it for a while, and make good on the $ when he's ready to. I'll say this.....there's been more talk of Lajitas now than ever before...you know what they say, there's no such thing as "bad" publicity. :lol:  Nothing like a good controversy to spark a bunch of free advertising.

Look at that Lohan girl, getting popped for drugs again, and she just "happens" to have a new movie coming out soon....  [-X