Lajitas Resort

[bdann]

from the Midland paper:

From Staff and Wire Reports

Four entities of a West Texas resort billed by its owner as an exclusive desert getaway for the rich and famous filed for federal bankruptcy protection Monday.

The eight-page filings in U.S. Bankruptcy Court in Midland came a day before a Connecticut real estate loan company was set to foreclose in Alpine on an unpaid $12.5 million loan and sell at auction the 25,000-acre Lajitas, the Ultimate Hideout, resort.

According to the Chapter 11 filings by Fort Worth attorney Kevin Herd, Lajitas Resort Ltd. claims it owes more than $1 million to its top 20 largest unsecured creditors, including about $40,000 to the Golf Channel. The debt to Prime Assets Funding, the Greenwich, Conn., company that lent Lajitas the $12.5 million more than a year ago, was not listed in the filing.

Steve Smith, an Austin multimillionaire, bought the property at auction in 2000 for about $4.5 million. Smith did not return a cell phone message Monday.

According to Midland court records, the entities seeking Chapter 11 protection are Lajitas Airport, Lajitas Real Estate, Lajitas Utility Co. and Lajitas Resort.

Last year, Smith told The Associated Press that his goal was to create a luxury resort that appealed to the extremely wealthy. The remote location would be part of the draw, he said. Lajitas sits on a rugged stretch of desert at the Mexican border between Big Bend Ranch State Park and Big Bend National Park and more than 250 miles from the nearest commercial airport.

The development plan included a golf course expansion, a state-of-the-art clubhouse and a housing development that would eventually include about 1,000 high-end properties. The resort recently added daily flights from Austin and Dallas aboard a private plane. According to the Lajitas Web site, flights start at $399 a person.

Last year, the resort sold only five condominiums and fewer than a dozen homes.

Frank Harrison, a managing member of Prime Assets Funding, said he understood about $9 million worth of real estate had been sold at Lajitas, although he did not know how many homes and condos had been marketed.

Harrison said his company made the loan to Lajitas last year presuming that it was a good investment. But after more than a year with no payments being made and no hope the loan would be repaid, the company moved forward with plans to foreclose on the loan and sell the property at a noon auction today on the front steps of Brewster County Courthouse in Alpine.

"I really just want to get my money back," Harrison said, adding that the bankruptcy filing was not a surprise. It's unclear what effect the filing will have on property owners in Lajitas.

[SHANEA]

mywesttexas.com: Lajitas Resort files bankruptcy in Midland

Last year, the resort sold only five condominiums and fewer than a dozen homes.

I don't think there are a dozen homes out there?  Maybe homesites...

[SHANEA]

Perhaps Steve Smith needs to get the DHS CBP - Customs and Border Protection AKA "Border Patrol" to build a sector station in Lajitas.  

There appears to be a real estate boom and housing shortage in Sanderson as a result of the new Sanderson DHS CBP Station.

http://www.tcnewsleader.com/

That's not a small little ranch house either...

[SHANEA]

Lajitas files for Chapter 11The Lajitas resort in South Brewster County has filed for Chapter 11 bankruptcy, the Avalanche confirmed Tuesday.

According to a representative of the federal bankruptcy court in Midland, the resort filed for Lajitas Resort Ltd., Lajitas Airport Ltd., Lajitas Real Estate Ltd. and Lajitas Utility Co. Inc. on Monday, July 2.

A Chapter 11 filing is typically used to "reorganize" a business, according to a U.S. Courts website.

According to Antonia Korosec, the assistant to resort General Manager Daniel Hostettler, Lajitas will "definitely" remain open for business throughout the proceedings. She said an official statement had been prepared, but it wasn't available at press time Tuesday.

The bankruptcy filing comes on the heels of a foreclosure sale which had been re-scheduled for July 3 after the original sale on June 5 was postponed to allow the resort more time to pay back a $12.5 million loan owed to New England lender.

Lajitas currently owes almost $22,000 in interest and penalties on its 2006 tax bill.

"We are secured creditors," said County Judge Val Beard. "The odds are very good that we will receive that payment in full. It means delay, but we are in a much stronger position than the unsecured creditors."

According to the Brewster County Appraisal District, Lajitas is valued at $16,969,433, including the resort, airport, golf course and adjacent real estate.

http://www.alpineavalanche.com/articles/2007/07/03/news/news03.txt

[SHANEA]

http://www.bigbendgazette.com/blog/_archives/2007/7/3/3069690.html

Lajitas Resort seeks bankruptcy protection: $25 million financing too late
Publish Date: July 3, 2007  
by John Waters
Publisher

On July 2, Lajitas Resort, the financially beleaguered south Brewster County resort that has strived to be a destination for the wealthy, sought protection from creditors by filing a Chapter 11 petition with the federal bankruptcy court in Midland.

The filing late Monday precluded the auction of the 25,000 acre resort scheduled for July 3. Despite successful last-minute efforts to secure a $25 million rescue package, the resort slid into bankruptcy protection.

Stephen R. Smith owner of Lajitas made this statement about the move: “The action we have taken is a necessary and responsible step to preserve Lajitas’ value and execute a plan which completes the vision for Lajitas.”

Smith also said the resort is “open for business as usual and will continue normal business operations throughout the reorganization process.”

In the voluntary petition to the court, Lajitas listed $1.2 million in unsecured debt to its top 20 creditors. The $12.5 million note due to PA Funding that was payable June 2 was not listed, as the 25,000-acre resort is pledged as collateral to secure that note. PA Funding had originally sought a foreclosure auction scheduled for June and had extended that auction to July 3.

The lender’s unwillingness to make any more extensions and the resort’s inability to secure new financing before today’s scheduled auction precipitated Lajitas’s Chapter 11 filing. Under the loan agreement with PA Funding, court papers indicated Lajitas had failed to comply with “earnings, before interest, taxes and amortization (EBITDA) provisions,” meaning the resort made less that required by the loan agreement. PA Funding also claims Lajitas defaulted by “the alleged violation of the use of funds to pay accounts payable.” The loan extensions were also described in court papers as made “at a relatively high cost to the Debtors.”  

IIn the bankruptcy petition filed by Lajitas is was disclosed the resort had intended “to be operated with a with a negative cash flow in order to execute development of the planned resort community.” Lajitas also contended a “significant drain on capital caused by the development of the property was unpalatable to the lender.”

Court records also claim “the lender restricted availability to the cash to be advanced under the note and as a result Lajitas was unable to implement development of a planned community as scheduled.”

Lajitas was also encumbered by late payments to vendors and other creditors.

Lajitas had sought and received a commitment from Kennedy Funding, Inc. of New Jersey for financing in the amount of $25 million. The resort was breathtakingly close to avoiding bankruptcy ,as court records stated: “Despite having provided a written commitment, Kennedy did not close the advance in time to avoid the July 3, 2007 foreclosure. No agreement could be reached with PA Funding to further extend the time to satisfy the Note.”

Requests for comment from John Hormik, General Counsel at Kennedy Funding, were not returned by press time. The San Antonio Express-News reported today that Kennedy Funding was still in active discussions with Lajitas and expects to make the $25 million loan. Jeffrey Wolfer of Kennedy told The Express-News, “They have some very good ideas. If Mr. Smith builds certain things and does certain things, we're very confident in what he can do out there,” he said. “We are very interested in making them a loan. We're on very good terms with them.”

The auction scheduled today by Countrywide Home Loans seeking sale of personal property in Lajitas owned by Stephen R. Smith, owner of Lajitas, was “pulled” according to a spokeswoman for the Substitute Trustee. This auction was not affected by the bankruptcy filing of Lajitas.

Under Chapter 11, entities may remain in business while the federal bankruptcy court oversees a reorganization plan and grants the distressed entity relief from creditors. A Chapter 11 filing does not liquidate the business; the post-petition period is intended to give the business time and guidance from a trustee appointed by the court.

Under Chapter 11, secured creditors such as PA Funding have a far better chance in recovering their money than unsecured creditors.  Several Brewster County businesses were listed as unsecured creditors. In bankruptcy, Lajitas will have the exclusive right to offer the court their reorganization plan for a period of time as determined by the court. After that time the creditors may also propose a reorganization plan.

Daniel Hostettler, CEO of Lajitas commented, “We are grateful for the continued support of our members, property owners, and suppliers. As Lajitas rises to meet new challenges, our resolve to deliver the highest standards of service will not falter.”

The following is Lajitas Resort's official statement about the bankruptcy filing:

Lajitas, The Ultimate Hideout Files For Reorganization, Announces Pursuit of Permanent Financial Partner: All Resort and Subsidiary Operations Will Continue While Post-Petition Financing is Arranged

AUSTIN, TX – Lajitas, The Ultimate Hideout has announced that due to the failure of its new lender to close on its loan commitment in the allotted time period, and the unwillingness to extend its loan and threatened foreclosure action by its current bridge lender Prime Asset Funding, the company and its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
 Lajitas’ ownership directed the management team to take this action after determining that a Chapter 11 reorganization is in the best long-term interest of the company, its employees, property owners, customers, creditors, business partners and stakeholders.
Lajitas expects to continue normal business operations throughout the reorganization process, and will continue to do the following:

* Honor reservations for both group and leisure guests
* Operate its full summer schedule of flights
* Honor air service tickets and reservations and provide refunds and exchanges
* Continue to provide full resort amenities and services to the highest standard
* Provide employee wages, healthcare coverage, vacation, sick leave and similar benefits without interruption
* Pay suppliers for goods and services received during the reorganization process.

“The action we have taken is a necessary and responsible step to preserve Lajitas’ value and execute a plan which completes the vision for Lajitas,” said Stephen R. Smith, owner of Lajitas. “Lajitas is open for business as usual and will continue normal operations throughout the reorganization process. Our guests and property owners should feel confident that they remain our number one priority and that their travel plans and property investments are secure.”

Over the last year, Lajitas has completed a comprehensive appraisal of the property by a nationally recognized firm, placing its market value in excess of $200 million, as it executed a plan with its investment banking advisors to review financing and/or equity options to maximize the value of the property.  However, the attempt by the current bridge lender, Prime Asset Funding, to foreclose on the property due to the expiration of its $12.5 million bridge loan, Lajitas has determined that it has no alternative but to utilize the protections and flexibilities provided by the U.S. bankruptcy laws.

“As we face this current challenge, it is important to keep in mind that Lajitas, Texas’ only destination resort and member of the Leading Hotels of the World and Preferred Boutique Hotels, has formidable strengths: the foremost being our employee and management team, as well as the guest loyalty inspired by their superior service,” said Daniel Hostettler, CEO of Lajitas’ management company.  “We are grateful for the continued support of our members, property owners and suppliers.  As Lajitas rises to meet new challenges, our resolve to deliver the highest standards of service will not falter.”
Lajitas’ Chapter 11 cases were filed yesterday in U.S. Bankruptcy Court for the Western District of Texas.  Lajitas has filed a motion with the Court seeking interim relief that will ensure the company’s continued ability to conduct normal operations.

[Al]

I have trouble imagining anyone being too surprised.  The mayor being dead and all . . .

Al

[BigBendHiker]

mywesttexas.com: Lajitas Resort files bankruptcy in Midland

Last year, the resort sold only five condominiums and fewer than a dozen homes.

I don't think there are a dozen homes out there?  Maybe homesites...

Shanea...you are right.  When we were in BIBE in Jun 2006, we drove through Lajitas.  Not much going on at the time.  There was one model home that had the garage door up...and you could tell that some of the cable and ethernet wiring for the house was not yet done...just kinda laying there...

BBH

[TheWildWestGuy]

Very interesting stuff ShaneA!   Can I say "I Told You So" now?   The billionaire from Austin got tired of his playhouse town and would not pony up the $$ to pay off his loans and bills.   He spent big $$ of OPM (Other People's Money) building a new airport, surveying lots, and employing a butcher, a baker, and a candlestick maker all without nearly enough customers.    The trading post became an upscale grocery/wine store, the resturant tripled it's prices, the bakery baked bread with no customers, and the golf course suddenly became 'world class' for big cash.   Essentially nobody bought the lots, nobody flew their private planes into Lajitas, nobody bought the prime rib at the trading post and nobody wanted to pay >$200/night to stay in a movie set town.
Valued at $200 million - yeah right, they are never going to get through this and keep going.   It's a money sinkhole because it is marketed/priced towards a niche market and the niche doesn't want to drive/fly a long long way to be in Lajitas.  Why go to Lajitas when you can go to Palm Springs, Lake Mead, Santa Fe, or a 1000 other places?
I feel sorry for all the South Brewster companies and individuals that are owed money by the "resort", they will probably only collect 50% if they are lucky.   I also feel sorry for the handful of individuals who invested in lots and homes in Lajitas.  Their investments bought at a premium are now worth much less and probably not very liquid.   Poor saps... TWWG

[Drifter]

One correction.  Smith spend over 85 million of his own money to build and remodel the resort.  The only money he borrowed was the last 12.5.  The idea was  a dream, yes a bad dream, but the mistake was his and he has paid for it.  When he borrowed the 12.5 the loan commitment stipulated that he could not have management control of the resort, not that that would have plugged any of the holes in the ship.  Can you imagine the sales jop he did on that lender. What were they thinking with out a personal guaranty.  And in regard to the "poor saps" who bought the homesites.  Not one of them is "poor" or will ever be bothered by the "loss".  They bet that much on a poker hand or a new mistress on a regular basis.  Don't shed a tear on them.

[TheWildWestGuy]

I don't know if I believe his claim he spent "almost $100 million" of his own money on the resort.  After all it's only valued at about $16M total by the appraisal district and I sure can't see that much capital investment in anything he has done.  Even if it's losing money it's hard to believe he sunk $85 Million into Lajitas.
I don't believe all the people who bought "homesites" or houses in Lajitas are all super-rich fat cats who can blow off a few hundred thousand every day.  Some are probably just upper middle class retired people who fell for the "dream" like many have in land scams across West Texas.  Plus there are the employee's, locals, contractors, etc.. who are bound to get burned in this deal... TWWG

[Roger, Roger]

I don't know if I believe his claim he spent "almost $100 million" of his own money on the resort.  After all it's only valued at about $16M total by the appraisal district and I sure can't see that much capital investment in anything he has done.  Even if it's losing money it's hard to believe he sunk $85 Million into Lajitas.
I don't believe all the people who bought "homesites" or houses in Lajitas are all super-rich fat cats who can blow off a few hundred thousand every day.  Some are probably just upper middle class retired people who fell for the "dream" like many have in land scams across West Texas.  Plus there are the employee's, locals, contractors, etc.. who are bound to get burned in this deal... TWWG

He spent the money allright...anyone who has been paying attention to all the things they've been doing can see that he's easily over $50 million.  The appraisal district value is meaningless.  

As far as people "getting burned", there were no jobs to begin with, and now there are jobs.  And the resort will continue to run as it did before.  So who's getting burned other than the lender of the $12.5 million?

[Drifter]

The 85 millon is not a claim , it is fact.  In my world if you spend 100k for an RV pad with water and juice, you are rich and not some middle class working stiff.  The list of people that did buy property and joined his club  reads like a whos who of Austin, Dallas and Houston.  Also, resale value and comparable sales in the area does not have a direct relationship with someones level of money invested.

[SHANEA]

http://www.marfatx.com/uploadedfiles/lajitas7507.html

Bankruptcy at the Ultimate Hideout
Lajitas resort files for protection from creditors
By STERRY BUTCHER

MIDLAND – The Ultimate Hideout resort at Lajitas avoided foreclosure this week by filing for bankruptcy.

An earlier foreclosure auction was staved off in June when the resort agreed to continue refinancing efforts to re-pay a year-old, $12.5-million loan from a Greenwich, Connecticut firm called Prime Assets Funding. The loan company later posted another foreclosure notice, this one with a July 3 deadline. The day before the deadline, four Lajitas resort entities filed for Chapter 11 re-organization in Midland.

“It stops the foreclosure; that’s why they filed bankruptcy,” said Prime Asset attorney Robert Ladd. “Their attempts at refinancing had fallen through.”

The filings list the resort’s 20 largest unsecured creditors. PAF is a secured creditor, said Ladd, which means “we have first lien on all their assets. For the unsecured creditors, they just owe them money – the IRS for payroll taxes, a bunch of unpaid suppliers, advertisement, that kind of thing.”

According to reports, the resort owes more than $1 million to its top 20 unsecured creditors, including tens of thousands of dollars each to the Golf Channel, Texas Monthly magazine and Texas River Expeditions of Terlingua.

It’s those unsecured creditors that has the attention Brewster County Judge Val Beard.

“Our main concern is for the people who work there, but we’re also concerned about the local folks who’ve performed services for Lajitas because some have not been paid. That does not set well with me – the local people who have not been paid. They’re the ones who can least afford to ride the debts.”

Resort representatives released a press release late Tuesday afternoon. The bankruptcy action was in “the best long-term interest of the company, its employees, property owners, customers, creditors, business partners and stakeholders,” the statement reads.

Normal business operations will continue, it says, including hotel reservations, flights and all resort activities. The resort will provide wages, healthcare coverage and vacation to employees without interruption and pay suppliers for goods and services.

The press release indicated that a “comprehensive appraisal of the property by a nationally recognized firm” placed the resort’s market value in excess of $200 million, a figure that could be somewhat higher than Brewster County’s appraisal.

Telecommunication millionaire Steve Smith owns Lajitas, which he purchased at auction about seven years ago.

“The action we have taken is a necessary and responsible step to preserve Lajitas’ value and executes a plan which completes the vision for Lajitas,” he said in the release. “Our guests and property owners should feel confident that they remain our number one priority and that their travel plans and property investments are secure.”

Judge Beard points out that the resort is a significant employer in south Brewster County and the attraction’s continued operation is important to those residents.

“Tourism is the lifeblood of the economy,” she said of the area. “If the resort is to close, that would be very negative. We hope it works out. We want it to.”

[TheWildWestGuy]

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

[SHANEA]

Thanks to public information records, Al Gores Internet  :lol: , and public access; we are starting to get a better picture of the internal workings of Lajitas.  A lot of peoples employment, benefits, etc. depend on Lajitas working out somehow.  In an already economically depressed area with few jobs to speak of - forget high paying or even middle class wages, it behooves ME to drop the La Hideous and hope that Steve Smith and his crew can work out of this jam.  Personally, 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.  JMHO

http://www.chron.com/disp/story.mpl/metropolitan/4949751.html

July 7, 2007, 9:12PM
Getaway for rich comes up short
Lajitas Resort seeks federal bankruptcy protection
By JOHN MACCORMACK
San Antonio Express-News

With wealthy tourists staying away and debts mounting, the luxurious Lajitas Resort and three related companies in the Big Bend area have filed for federal bankruptcy protection.

The court filings late Monday came hours before the $100 million resort, the ambitious if flawed vision of Austin telecom magnate Stephen R. Smith, was set to be foreclosed in Alpine.

The bankruptcy filing halted Tuesday's sale over the alleged default on a $12.5 million loan from a New England firm, Prime Asset Funding.

It's not clear if any outside buyer would have put up the $13.3 million now owed to Prime Asset to buy the resort, best known for its beer-swilling goat Clay Henry.

"We're a secured creditor. We just want to be repaid. We don't want to own the resort," Prime Asset fund manager Frank Harrison said.

Originally set for early June, the foreclosure was delayed a month to allow Lajitas to find alternate funding. Though that effort fell short, another lender appears willing to bail Lajitas out.

In a prepared statement, Smith vowed that the resort will continue to provide guests with full amenities and meet its financial obligations.

"The action we have taken is a necessary and responsible step to preserve Lajitas' value and execute a plan which completes the vision for Lajitas," he said, adding that a recent appraisal valued the property in excess of $200 million.

The Lajitas airport, utility district and real estate development firm also sought bankruptcy protection for reorganization. Together they listed a handful of small creditors.

The resort, however, is estimated to owe more than 100 creditors between $1 million and $100 million. Led by the IRS, the top 20 unsecured creditors are owed $1.2 million, according to the filing.

Some of the creditors
The list includes the Trans Pecos Land Surveyors in Marathon, owed $125,820; Texas Monthly magazine, owed $35,346; Texas River Expeditions in Terlingua, owed $24,230, and the Golf Channel of Orlando, Fla., owed $40,000.

Smith, who made his fortune with Excel Communications, bought the scruffy Old West resort and surrounding 20,000 acres of Chihuahuan Desert for $4.2 million at a public auction in 1999.

Though his initial plans were modest, he soon began pumping money by the truckload into Lajitas, creating an emerald-green golf course, a gourmet restaurant and several subdivisions. The vision that emerged was "The Ultimate Hideout," an exclusive getaway for the ultra-rich who could fly in by private jet for a weekend of golf and pampering amid spectacular red mesas.

"I've spent at least $30 million this year, and it will get to $80 million by the end of 2002. Before it's over, $100 million is possible, but if you're gonna do it, why not do it right?" Smith said in 2001.

The resort sold memberships for $75,000 and offered two-bedroom suites for more than $900 a night, but not enough paying customers shared the vision.

Eventually, Smith's heady plans were waylaid by unforgiving economic realities.

Cash flow sluggish
A one-page cash-flow projection for the first 10 days of July, attached to the bankruptcy petition, suggests the gravity of the situation.

Though $344,000 was listed as anticipated expenses, only $80,000 in income was projected. The balance would be made up by a loan from one of Smiths' companies, the document states.

In the Monday bankruptcy filings, resort lawyers claimed Kennedy Funding Inc. had committed in writing to provide $25 million but "did not close the advance in time to avoid ... foreclosure."

Kennedy Funding President Jeffrey Wolfer said his firm is still in active talks with Lajitas and expects to lend up to $25 million.

"They have some very good ideas. If Mr. Smith builds certain things and does certain things, we're very confident in what he can do out there," he said. "We are very interested in making them a loan. We're on very good terms with them."

jmaccormack@express-news.net