Judge Orders Sale of Lajitas ResortYou can read a lot between the lines here...
Judge orders sale of Lajitas resort
By STERRY BUTCHER
LAJITAS – The Ultimate Hideout resort at Lajitas is set to be sold at auction on October 18.
The sale of the 25,000-acre upscale getaway is the result of a Chapter 11 re-organization filed earlier this summer by resort owner Steve Smith. In arrears on payments for a $12.5-million loan from Prime Asset Funding, Smith sought bankruptcy protection to avoid foreclosure by the lender.
“If Mr. Smith chooses not to close a deal with a couple of potential partners we are working with prior to the 18th,” said Lajitas Managing Director Daniel Hostettler, “then the auction is held and the highest bidder will own Lajitas.”
The auction was ordered this week by U.S. Bankruptcy Judge Ronald King. If the sale goes through, and contingent upon King’s approval, the successful bidder will assume ownership of the swank 92-room hotel facilities, the 18-hole golf course, the airport, equestrian facilities, spa, and restaurants, the condos, RV slots, a hunting lodge and Clay Henry III, the town’s beer-drinking goat mayor.
“There’s no minimum bid, but we’re asking people to put their best foot forward,” said Andy Glinski, an associate director at Marcus and Millichap, the real estate investment firm that’s handling the sale. Bidders must pre-qualify by October 15 to take part, he said, and bidding will proceed in $100,000 increments.
“I’d like to think it’ll bring in around the full amount of the debt,” he said, “which is about $16 million.”
Auctions aren’t new to Steve Smith. In 2000, the Austin millionaire entrepreneur bought Lajitas at auction for about $4.5 million. Then a Western-themed tourist attraction, Smith re-envisioned Lajitas as a luxe retreat for a wealthy clientele that would welcome the resort’s rugged isolation. Home sales at the site proved sluggish, however, and various improvements and plans didn’t develop. By this summer, Prime Asset Funding was moving forward with foreclosure proceedings. A day before a July auction was planned, Smith filed for Chapter 11.
“We want to get our money back,” Frank Harrison, a Prime Asset managing member, said this week from his Greenwich, Connecticut office. His company made the $12.5-million loan to the Ultimate Hideout a little more than a year ago. “With penalties and fees,” he said, “we’re owed in excess of $13.5 million.”
Also owed in the bankruptcy are scores of unsecured creditors that include, among many others, the Golf Channel and Texas Monthly.
Any excess above the amount owed to the secured creditor, Prime Asset, will be distributed to the unsecured creditors by the bankruptcy judge, said Harrison.
“We hope there’s more than enough for everyone,” he said.
In order to participate in the auction, prospective bidders must provide Marcus and Millichap with financial statements or proof of sufficient funds to make the purchase. Bidders must put up a $100,000 deposit that is non-refundable if their bid is accepted. The winning bidder must produce 10 percent of the price within two days of the auction.
The auction takes place at 9 a.m. October 18 at a San Antonio law office, but bidders must be pre-qualified by October 15. The initial bids will be opened at the attorney’s office; bidding starts with the highest bid and goes from there.
“We’ve not received any bid packets yet,” said Glinski. “We have talked to a large number of parties and we do believe there will be people at the auction.”
One person watching the auction proceedings is John Poindexter. Up the road an hour or so from Lajitas is Poindexter’s Cibolo Creek Ranch, also a high-end ranch resort, but with a different style than the Ultimate Hideout. Poindexter recently proposed that he’d work with the state parks department and the bankruptcy parties on a complex arrangement that would net him park acreage adjoining his ranch in exchange for his purchase and donation of some Lajitas property to Parks and Wildlife. The upcoming auction doesn’t nix his proposal, Poindexter said this week.
“My idea was to join forces with one of the bidders, put up a portion of the cash required to bid, and if the bidder winds, then the transaction could take place very easily,” he explained. “I’d like to see that the state, the public and the Big Bend region benefit in some way by this tragedy that is Lajitas’ bankruptcy.”
In Lajitas, work at the resort continues. The general manager said that the hotel’s occupancy is at 100 percent for most of this week. The Ultimate Hideout employs 125 people year round, according to Hostettler, and 175 in the high season.
“I think we have a wonderful team of dedicated employees here who have been through a lot these past couple of years,” he said. “We’ve tried very hard to be good neighbors and be a benefit economically and socially to the community of South County.”
He asserted that the Lajitas tax base accounts for approximately 25 percent of the county’s operating budget. Hostettler said he believed that the new owner would retain nearly all of the existing staff. It’s tough, though, to make a financial success from a tony retreat in such remote country.
“It requires a long-term, patient investor with deep pockets in order to properly fund operations,” said Hostettler. “We have made great strides in gaining recognition during Mr. Smith’s ownership, but unfortunately we are at the point where pointing further funds into the operation is not a feasible investment choice for him.”
Harrison doesn’t disagree about Lajitas’ promise as a going concern.
“The nice thing about buying a company that’s in this situation is that everything starts all over again – a fresh start. If the new owner knows what they’re doing,” said Harrison, “it should be a tremendous asset.”
