Tears gathered in Alaska Presley’s eyes as she moved one step closer to attaining a Maggie Valley icon that has remained close to her heart but out of her possession for more than 50 years.
Surrounded by supporters, former Ghost Town employees and her lawyer, Presley, a longtime Maggie Valley resident, listened as a foreclosure attorney dryly recited the property boundaries of Ghost Town in the Sky, a once-popular amusement park in Maggie Valley. Presley was one of about 20 people who attended the public auction of Ghost Town on Feb. 10 outside the Haywood County Courthouse.
She is the only person who bid on the property at auction, offered $2.5 million for the property and its equipment. Competing buyers can file an upset bid for 10 days. Presley is now counting down the days until Feb. 20 to see if anyone places a counterbid.
Presley, 88, hopes to leave a functioning and profitable Ghost Town as her legacy to Maggie Valley.
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“Maggie Valley has some of the best people in the world,” she said. “And without Ghost Town, they have been having a very, very hard time.”
When the amusement park finally went up for sale, Presley just had to buy it. She said that a forever closed and abandoned Ghost Town is her “greatest fear.”
“Maggie Valley needs it,” Presley said. “I’m most interested in getting it going for the prosperity of Haywood County.”
However, Maggie residents are no longer quick to pin their hopes on the reopening of an amusement park that has been a continual cause for disappointment during the past decade.
Acquiring Ghost Town has been a long process and restoring the amusement park to its original glory will be a struggle all its own, which is why Presley began renovating it months before the foreclosure was finalized.
“This is the third time I’ve tried to help bring it back,” she said.
The to-do list is phenomenal. The rides and mock Old West town are decades old and in continual need of repair and upkeep, let alone the neglect they’ve seen since the park shut down three years ago.
Presley has already started touching up the buildings, which are quick to show their wear given the beating they take from the elements on the high-elevation mountain top.
Although she has made a few strides, there is still a lot of work to do and not much time to complete it before June, when she hopes to open at least a portion of the park.
“It has taken so long (to foreclose),” Presley said. “It’s kind of up in the air how much I can get done before the season.”
But, she does have a plan. Presley’s top priority is getting the chair lift and the incline railway working again. Tourists can only reach the mountaintop amusement park by the riding one of the two contraptions up the steep slope — but they have been in a seemingly perpetual state of malfunction in recent years.
Visitors would park in a large lot at the bottom of the mountain and ride either the lift or railway up to the park’s entrance. Neither are currently operational.
She has already purchased the parts needed to repair the incline railway, but it will still be about five months before it’s fixed, she said.
She must also assess the condition of the rides, particularly the roller coaster and drop tower.
“What’s good I’ll keep; what’s good I’ll refurbish,” she said, adding that she has yet to have anyone evaluate them, and some may not be repairable.
In the past, rides did not receive the proper care and maintenance. They looked rundown and often broke down. When Ghost Town briefly reopened five years ago, the kiddy rides and Wild West Town were up and running, but the roller coaster and drop tower — which attracted a more adult crowd — failed to pass state inspections. Although the previous owners attempted to repair the coaster, it only opened temporarily before it was once again deemed a safety hazard.
Next to the rides and cosmetic improvements, one of the biggest projects associated with the renovation is a overhauling of its water system. The previous owners did not shut off the water to Ghost Town after it closed, subjecting the full pipes to the mountain freeze-and-thaw cycle. The already aging system is now likely in desperate need of repair.
“That will be one of the worst things to do,” Presley said.
If she can overcome those hurdles and open Ghost Town for part of the tourist season, Presley can start earning revenue and hopefully move the park toward self-sustainability.
People are cautiously optimistic about Presley’s endeavor.
“Only an Alaska Presley could ever get Ghost Town to run again,” said Waynesville Mayor Gavin Brown said. “She is a very sharp lady; she sees value there. (But) In today’s market, in today’s world, I don’t see any value there.”
While people disagree about what, if anything, the amusement park is worth, Presley’s long history with Ghost Town and her wherewithal seem undisputable.
“If anybody can do it, she can do it,” said Teresa Smith, executive director of the Maggie Valley Chamber of Commerce. “I think she will definitely do the very best she can to get it up and running.”
Although the park has been closed for more than a year, the chamber still receives phone calls everyday asking if and when Ghost Town will reopen — an encouraging sign that if it is rebuilt, people will come.
“It encourages families to come here,” Smith said. “It would just be something else for people to do.”
But, the economy is still struggling, and gas prices continue to bounce up and down. Both are problems that have affected Ghost Town’s visitation numbers in the past and could influence its bottom line in the future as well.
“I think this go around those same worries are going to be there,” Smith said.
Town Alderman Phil Aldridge, who attended Friday’s event, said that residents are weary of anyone championing Ghost Town’s potential success after so many years of disappointments. Maggie Valley residents and business owners have had their hopes dashed before when investors promised to revive Ghost Town and bringing prosperity back to the valley.
But still, Aldridge leans toward the hopeful point of view.
Ghost Town was the “heartbeat” of Maggie Valley, he said. “It certainly can be again.”
When the amusement park profited, so did the town and county. In its heyday, 400,000 people visited Ghost Town each year, and families would pack into restaurants and motels along Maggie Valley’s main strip. Since the beginning of the recession and the park’s first closure in 2002, however, business in the valley has drastically declined.
If Presley can’t open the park this season, it would cause “more damage,” she said. An open park means money to help cover upkeep and the employee payroll. It could also eventually mean more improvements — something already weighing on Presley’s mind.
“It needs to have some high-tech stuff,” she said, throwing out the idea of adding a zip line.
And, while some little boys still play cowboys and Indians, the Wild West theme has lost some of its luster now that the golden years of John Wayne and “Bonanza” are over.
“The western theme is passé now, and it needs the help,” Presley said. “The gun fights are good, but they are not enough.”
Although Presley was unable to provide more specifics regarding improvements, she estimated that the entire project will cost in excess of $11 million. And, she said she is not planning to take out any loans, adding that Ghost Town has had enough debt problems.
“Poor management and bad debts has plagued it for years,” Presley said. “A friend thought there was demons on that mountain; it has had such bad luck.”
So, for now, she will foot the bill herself.
“I have enough — to get started anyway,” Presley said. “I believe in paying as you go.”
Presley said she did not know how many employees she will need to reopen and operate the amusement park, but she has already hired Robert Bradley, a former gunfighter in the Wild West Town, to help with renovations and an armed guard to keep hoodlums off the property.
“It’s been vandalized pretty bad, but I got guards up there now, and I’ve got cameras all over the mountain,” Presley said.
Like Presley, Bradley has been around since Ghost Town beginnings.
“I started fallin’ off the roof in 1962,” he said, adding that Presley made him promise not to fall anymore now that he has passed 65.
Bradley, who has known Presley for most of his 67 years, is happy to help and anxious to get back to work as director of entertainment — his previously held title.
“I could probably put a show on next week,” Bradley said.
“Give us two hours,” chimed in Tim Gardner, a.k.a. Marshall Red Dawg.
While Ghost Town has been shut down, Bradley and some of the old band of entertainers from the Wild West Town have traveled around the U.S. doing shows. People are still interested in seeing their performances, he said.
During Friday’s foreclosure proceeding, Presley bid $2.5 million for Ghost Town. But, that is not what she will actually pay for the property.
The actual price tag is only $1.5 million, thanks to an interesting and non-traditional financing arrangement Presley struck to bail Ghost Town out of foreclosure.
When Ghost Town’s previous owners went bankrupt, BB&T was their biggest creditor — holding $10.5 million in debt.
BB&T chased Ghost Town into bankruptcy and to the doorstep of foreclosure. But for the past 18 months, it hasn’t pulled the trigger on foreclosure — likely because it knew that the beleaguered park would fetch nowhere near what the bank was owed. The idea that anyone would pay anything close to $10 million for the dilapidated and broken down amusement park is inconceivable.
“Who is going to pay $10 million for Ghost Town? Well, nobody is,” said Waynesville Mayor and lawyer Gavin Brown.
Instead of going forward with the foreclosure, BB&T sold its note to Presley for $1.5 million — a far cry less than the $10.5 million the bank is owed.
“What they (did) is just cut their losses and run,” Brown said.
When Presley purchased the note, she all but ensured that Ghost Town would be hers. Presley now owns BB&T’s entire $10.5 million note against Ghost Town — even though she only paid $1.5 million for control of the note. Someone would have to bid more than $10.5 million before they could top what she has in it.
The foreclosure is a mere formality, as was the $2.5 million Presley bid for the park. In essence, her $2.5 million bid will come back to her since she is the primary note holder.
So, not counting the court fees and related costs, how much did Presley pay for Ghost Town?
The simple answer is $1.5 million — the amount BB&T sold its note for, Presley said.
Other possible investors have until Feb. 20 to place an upset bid. However, John Doe cannot simply walk off the street and offer a few cents more than Presley’s current bid for Ghost Town. Upset bids must be at least 5 percent higher and bidders must put down a percentage of their bid up front.
As for the millions owed to private investors and small businesses by Ghost Town’s former owners? They won’t be seeing a dime.
With North Carolina suffering from some of the worst unemployment rates in the country, the U.S. Treasury Department is dedicating $159 million to help laid off workers in the state avoid foreclosure.
Another $121 million is likely on the way, according to Margaret Matrone, communications director for the N.C. Housing Finance Agency.
Over the next three years, federal dollars will help 7,200 jobless people statewide keep up with mortgage payments while they seek new jobs or train for a career switch.
“It will help stabilize property values in their neighborhoods by reducing the number of foreclosure sales,” said A. Robert Kucab, executive director of the N.C. Housing Finance Agency.
The federal assistance has only been made available to the 17 “hardest hit states” that are suffering from high unemployment rates and dismal housing markets.
In 2009, about a quarter of the state’s population lived in a county with an unemployment rate of 12 percent or higher. North Carolina suffered the loss of 278,000 jobs between 2007 and 2009.
The Hardest Hit program will be made available in Haywood, Jackson, Macon and Swain counties only in December.
Most of the allocated money will cover entire mortgage payments for the unemployed, while the remainder will refinance loans to reduce monthly bills. Residents in 50 struggling counties in North Carolina, including Swain County, will qualify for additional financial assistance.
With the Hardest Hit program, the unemployed may be eligible for 24 months of mortgage payments up to $24,000 in most counties. Those who reside in the 50 high unemployment counties in North Carolina could receive 36 months of mortgage payments up to $36,000.
The North Carolina Housing Finance Agency, which will administer the federal program, already offers similar assistance to the unemployed.
Unlike other states, North Carolina already has experience running a similar program. The state Home Protection Program helps struggling workers pay their mortgages through interest-free loans for up to 15 years.
However, Matrone points out that it will be much easier to qualify for the federal program. Also, those who receive Hardest Hit assistance won’t have to pay back anything if they don’t move from their house for at least 10 years.
But Matrone suggests that North Carolina residents struggling to keep up with house payments should not wait till December to seek assistance.
“If you’re on the verge of foreclosure now, it’s much better to go ahead and use the program that’s available,” said Matrone.
For more information, contact On Track Financial Education and Counseling Services in Asheville at 828.255.5166 or 800.737.5485.
With federal and state grants in hand, work will soon get underway to stabilize the remnants of a massive landslide still looming precariously over Maggie Valley.
“You can see the cracking of the soil. It is obviously very unstable and just hanging there, if you will,” said Mike Hinton, manager of the federal Emergency Watershed Protection Program administered by the Natural Resources Conservation Service office in Raleigh.
The landslide originated from Ghost Town in the Sky, a mountaintop amusement park, and damaged five homes along its 3,000-foot path. But several other households are in the potential line of fire if the remaining portion of the mountainside gives way, essentially leaving them without a home until something is done to fix the unstable slope.
A chief concern right now is spring rain. A good, soaking rain could easily trigger a second slide, which makes time of the essence, Hinton said. But not at the expense of a carefully crafted plan.
“I know it is an emergency, and I know the people who are out of their homes are anxious for work to be started. I know if I was in their shoes I would be thinking ‘This is taking forever,’” Hinton said. “But at the same time, we need to make sure that whatever we do does not cause further damage and takes into account the workers’ safety.”
While a second slide would certainly solve the problem of trying to stabilize the precarious slope — it would simply come crashing down on its own — a second slide could be even worse than the first one.
Only a portion of the slope collapsed in the first slide. Far more is still vulnerable.
While a second slide would likely follow the same route down the mountain, it would be deeper, wider and faster — and travel further. Houses unscathed last time could be taken out by a second slide, Hinton said.
Plus, giant piles of dirt and debris left in the landslide’s track would get caught up in a second slide, creating even more momentum, Hinton said.
But figuring out how to shore up the remaining mountainside remains elusive. Clearly, it can’t all be stabilized in place. Some will have to come down, Hinton said.
“That is easier said than done: how do you remove it?” Hinton said. “That part is really the dilemma.”
A contractor who was at Ghost Town the same day Hinton was surveying the site said he was willing to get on his dozer and just start pushing dirt off the side. But if the whole slope began to give, the man on the dozer would have had a wild ride to the bottom.
Hinton said it would be impossible to be stationed on the slope itself while performing the work. Equipment would have to far from the edge and on stable ground. But from that far back, could it reach out far enough to knock loose the unstable part?
Another option is evacuating everyone who lives below and blasting the soil off — not in one big blast but a series of smaller, controlled blasts.
“But who is to say one little blast wouldn’t trigger the whole thing?” Hinton said. So that option would likely be frowned on.
Simply coming up with an estimate was challenging. They obviously couldn’t scamper along the face of the slope. Hinton wasn’t willing to stand at the bottom and look up at it either. So all they could do was stand at the edge and look down on it.
As a result, the estimate of $1.47 million is an estimate in the truest sense of the word.
“That amount could change dramatically,” Hinton said. “This is really a starting point if you will. We had to come up with an estimate in order to request the funds, so that’s what we did.”
The first order of business now is to hire a geotechnical engineer to do a more thorough assessment. Once work does get underway, Hinton has no guess how long it may take, since the approach hasn’t even been figured out.
Last on the list will be cleaning up debris left along the track of the first slide. The area is steep, wooded and inaccessible, so carting off truckloads of dirt from the slide’s wake may be difficult, Hinton said.
“You would likely create even more of a problem, so the question is ‘Can we stabilize it on site?’” Hinton said. “I think everyone would agree just throwing grass seed on it isn’t going to do it.”
But, it could be possible to recontour the mounds of debris and build some retaining walls that would hold it. Rich Cove Road, which winds up the mountain to Ghost Town, is crossed twice by the slide’s track.
“For a while every time you get a rain, it is going to wash some of that across the road,” Hinton said.
For now, that’s the least of their concerns.
“The main thing is to stop a major movement,” Hinton said.
In the meantime, Hinton does not foresee Ghost Town amusement park opening until the slide is stabilized, although it is not an area his agency has jurisdiction over.
“I don’t see how they could,” Hinton said. “I wouldn’t want a crowd up there on a Saturday and that thing decide to let loose.”
Ghost Town has been struggling with bankruptcy for the past year. Foreclosure against the park is scheduled for June by BB&T, which is owed $9.5 million on the property. However, Ghost Town owners are optimistic that investors or some sort of financing will materialize between now and then. If so, BB&T has said it would call off foreclosure.
Ghost Town in the Sky amusement park could be foreclosed on as early as June unless investors step forward with a cash infusion between now and then, according to Ghost Town’s bankruptcy attorney.
The theme park in Maggie Valley has been struggling with bankruptcy for the past year. Owners pledged to pull through and become profitable again.
But as of now, the company doesn’t have the money to ramp up to open for the summer season, according to David Gray, bankruptcy attorney for Ghost Town.
“We don’t have any funding to open the park,” Gray said in court last week.
Meanwhile, BB&T has been pushing to collect on its $9.5 million loan to Ghost Town. The current owners took out the loan to buy the park in 2007 and make major repairs. A frustrated BB&T has been calling for a court-ordered liquidation of Ghost Town, essentially a forced sale of the park to pay off its debts.
Ghost Town chose not to put up a fight in bankruptcy court last week and instead agreed to let BB&T start the wheels of foreclosure with one caveat: that it not take place before June. The move bought Ghost Town owners three months to continue their hunt for funding.
“They are going to try to put together some sort of financing,” Gray said.
Gray said it takes $250,000 to $300,000 to open the park for the season. Most of that goes to hire some 200 employees and pay their salaries until revenue from ticket sales starts to roll in, and to spruce up the grounds and get everything working again.
Ghost Town was supposed to formulate a plan on how it would emerge from bankruptcy and repay some $13 million in debt. Such a reorganization plan is required by the bankruptcy court.
The park owners came up with a plan that requires $2.3 million in new equity this year in order to pull off a reorganization, according to the bankruptcy administrator. But the plan fails to say where the new equity will come from. Gray said the park owners need more time.
Gray said Ghost Town will revise its reorganization plan — which faced serious court objections anyway — and present a new one if it can find the necessary capital.
If that doesn’t happen by June, Ghost Town will be sold to the highest bidder. CEO Steve Shiver could not comment on negotiations with potential investors but is positive about the eventual outcome.
If Ghost Town can come up with a new, viable plan between now and the June foreclosure proceedings, BB&T will likely be willing to work with Ghost Town and halt the foreclosure, Gray said. If Ghost Town is sold in foreclosure, it is unclear whether it would fetch enough to cover what BB&T is owed.
Ghost Town includes 288 acres and a collection of amusement park rides. Often with foreclosures, the bank holding the mortgage ends up owning the property.
“Do you think BB&T wants it?” Grey asked. “It’s the tar baby. What are they going to do with it?”
Prospects of a buyer are complicated by a mudslide originating from Ghost Town’s property last month. Who’s liable for the cleanup and stabilization is still being debated.
Maggie Valley Mayor Roger McElroy just hopes that it stays an amusement park rather than getting turned into a real estate development.
“Whoever can make a go of it will be what’s best for the town, whether it is this group or another group,” McElroy said.
Ghost Town is zoned commercial by the town. Residential is not allowed without an exemption. If a future owner wants to turn the mountaintop into a residential development, they would have to seek an exemption from the town zoning board of adjustment.
When Ghost Town’s current owners appeared on the scene in 2007, the park had been closed for five years.
“A lot of motels and restaurants were hanging on by the skin of their teeth. When Ghost Town opened back up, it made a difference,” McElroy said.
Lacking start-up capital for the season is not new, however. Ghost Town faced the same problem last year. Ghost Town CEO Steve Shiver went on an extensive but unsuccessful hunt for public funding from the Town of Maggie Valley, and courted numerous local and regional tourism and economic development entities but to no avail.
The town was unwilling to pledge tax dollars to help the struggling amusement park reopen with no guarantee it would be paid back. Investors, many of them Maggie Valley business people, chipped in to provide the capital to get the park open.
Brenda O’Keefe, owner of Joey’s Pancake House, invested in the park’s new owners out of her love and devotion for Maggie Valley. For four decades, Ghost Town was an anchor attraction that pulled tens of thousands into Maggie Valley each summer and fall. Like so many, O’Keefe was eager to see it reclaim its former glory.
“Was I 100 percent sure it was going to make it? No. But the motel owners have to have people come into Maggie Valley and stay overnight to make it,” O’Keefe said. “I am a member of this community, and I want to see it thrive.”
So she and others stepped up to the plate.
When Ghost Town reopened in 2007 after five years of being closed, it garnered lots of media attention. Now, it could be worse than if it had never reopened at all.
“A closed amusement park is one thing. A failed amusement park is much worse,” O’Keefe said.
Feedback from customers who had visited Ghost Town was all positive this year, which hasn’t always been the case, O’Keefe said. O’Keefe said that shows the park and its employees were trying their hardest to provide tourists with a positive experience. O’Keefe believes the park is almost where it needs to be, but has been a victim of the economy.
“If you got the figures for all theme parks last year, it wasn’t good,” O’Keefe said. “Everybody’s figures were way down. It is not just Ghost Town.”
O’Keefe credits Ghost Town CEO Steve Shiver for doing all he could.
“He has worked very hard to try to keep it going. He has put a lot of money into it certainly more than anyone else,” O’Keefe said. “It is just a matter of having enough capital to go forward. It has always had a problem of being undercapitalized.”
Like McElroy, O’Keefe is concerned about the impacts to Maggie Valley business owners if Ghost Town doesn’t open this year.
“We are very distressed about it,” O’Keefe said, adding that it is time for the town to get creative. “We are certainly going to be looking for something else to bring people to Maggie. We are not going to sit on the sidelines.”
When Ghost Town agreed to a June foreclosure by BB&T, what could have been a lengthy and dramatic courtroom showdown last week was reduced to less than five minutes.
Had Ghost Town pushed ahead with the reorganization plan in its current form, it’s unclear whether a judge would have approved it. It faced serious hurdles due to inadequacies, according to Alexandria Kenny, a federal bankruptcy administrator who works for the bankruptcy court.
Kenny wrote in her objection that the plan is “vague, ambiguous and not feasible,” and even called one portion “absurd.”
A handful of major stakeholders objected to the plan.
BB&T claimed the plan was not proposed in “good faith.” BB&T also objected to the general way Ghost Town has conducted itself during bankruptcy proceedings. Ghost Town’s reorganization plan was slow to materialize, requiring several court extensions. It has repeatedly failed to meet other court-imposed deadlines for filing various financial documents.
Failure by Ghost Town to pay its taxes in 2009 led both Haywood County and the town of Maggie Valley to object to the reorganization plan. Both are still owed taxes from 2008 as well.
Everyone owed money by Ghost Town could vote on the plan. Other than BB&T, there are 225 companies collectively owed $2.5 million from Ghost Town for everything from radio ads to souvenir merchandise to plumbing parts. Of those, 90 sent in ballots and 84 voted in favor of the reorganization, Gray said. It’s not surprising since those companies stand at the back of the line. Under a foreclosure or liquidation, the park’s 288 acres would have to sell for more than $10.5 million before those companies saw their first nickel.
Under reorganization, Ghost Town proposed paying back those 225 companies starting in summer 2011 based on a 6.5 percent cut of the park’s revenue. Kenny objected that Ghost Town should pledge a specific minimum dollar amount it would pay each year.
While in bankruptcy protection, Ghost Town got a hiatus from bill collectors and old debt. But the park continued to rack up new debt during 2009.
Financial filings show past due bills of more than $400,000 still lingering from last year. Some are for goods and services rendered, like attorney’s fees, termite exterminators and a marketing consultant.
But there are also hefty utility bills. Ghost Town owes a water bill of $4,430 and power bill of $20,000, both of which were cut off due to failure to pay at the end of the season last year. It owes AT&T $2,000.
Other past due bills from 2009 include $85,000 in property taxes to the town of Maggie and Haywood County. Both are still owed taxes from 2008 as well.
Ghost Town also owes the state $10,500 in sales tax from 2009 and $4,800 in amusement tax. It owes the IRS $2,300.
In addition to $400,000 in past due bills from 2009, Ghost Town owed investors and partners $712,000 that was put up over the course of the year. Ghost Town has listed the $712,000 from as part of its debt to be repaid.
Ghost Town’s current reorganization plan forecasts the park would continue operating at a loss until 2013, even with the infusion of new equity to the tune of $4 million over the same three year period, according to the bankruptcy administrator.
Balsam Mountain Preserve, a mega-development in Jackson County, was sold to the highest bidder on the courthouse steps Monday (Jan. 25) in a closely followed foreclosure proceeding.
TriLyn, a private equity investment firm which initiated the foreclosure, was the highest and only bidder for $15 million and is now the new owner for 120 unsold lots on the property and all the recreational amenities, including an Arnold Palmer designer golf course, dining room, swimming pool, horse stables and myriad other features.
TriLyn was owed $20 million on an outstanding loan made to Balsam Mountain Preserve by developers Chaffin and Light. But the total had grown to about $22 million due to legal costs and interest since defaulting.
Prospective buyers have 10 days to file an upset bid. Each time there is an upset bid, the 10-day clock is reset.
The fact that TriLyn bid only $15 million when it claims it is owed $22 million shows they may be willing to part with the property and take a loss on the investment in exchange for cold, hard cash.
The foreclosure moved at a relatively fast pace, with just five months passing since the lenders made their intent known and foreclosure took place. Balsam Mountain Preserve developers attempted to stall the process longer, hoping to find financing to bail themselves out, pay off the lender and retain ownership of the development, but were unable to do so in the amount of time they had.
Foreclosure against Balsam Mountain Preserve could happen by month’s end barring a last-ditch financing deal by developers in the next couple of weeks.
A court order gave lenders the go-ahead to move forward with foreclosure at a hearing last week. The now imminent foreclosure was successfully put off by developers for three months while they attempted to raise capital to satisfy their lender. They say there is still a chance that they can do so, although the window is closing.
The property will be sold to the highest bidder at a public auction on the steps of the Jackson County Justice Center in late January or early February. Once there is a starting bid, prospective buyers have 10 days to file an upset bid. Each time there is an upset bid, the 10-day clock is reset.
Typically, the starting bid belongs to the lender, which is out to protect its outstanding debt on the property, a total that now tops $22 million, according to the lenders.
The sum continues to grow larger with each passing day. Lenders are tacking on costs for legal fees, property management and interest at a higher-than-normal default rate — making it increasingly difficult for developers to rally the capital they need to bail themselves out.
Balsam Mountain Preserve initially took out a loan of $19.8 million from the private equity investment firm Trilyn in 2005 to help develop and market the property. Balsam Mountain Preserve had paid down some of the loan, but since defaulting has racked up $4.5 million in interest, giving rise to the substantial payoff now required.
Jay Coward, a Sylva attorney representing Balsam developers in foreclosure, challenged the lender’s claim of more than $1 million in legal fees and administrative costs associated with foreclosure proceedings in the hearing last week. Coward said Trilyn will need to provide documentation detailing the alleged costs.
Lenders wrested control of the property from Balsam Mountain Preserve and placed it in the hands of a third party in November. The outside company, called Radco, is charged with upkeep of the property, mainly security and maintenance.
Radco has tapped a profitable niche in the faltering real estate economy: reviving or at least stabilizing distressed property developments. Radco has repeatedly declined requests for an interview since assuming control of the property, but was featured in a November article in the New York Times profiling Norman Radow, Radco’s founder.
“Banks hire him to resurrect developments gone awry, particularly those half-empty condominium towers and gated communities that sprang up like weeds during the boom and are now in foreclosure,” according to the article.
The company is at the helm of $2 billion in real estate properties nationwide, Radow estimated in the article.
In some cases, the firm completely takes charge of the development in hopes of accomplishing what the ousted developer failed to do, namely making a profit.
The lender often puts Radco at the helm for the long haul, hoping to recoup their investment in the property. Radco makes tough decisions, like paring down luxury amenities initially promised to buyers by the developer or slashing prices to unload lots and raise cash rather than simply waiting for the market to turn around.
But property owners question how another company could do any better than the original developers, the well-capitalized firm Chaffin and Light with a strong national reputation for quality, high-end eco-developments.
“The only way out of this deal is you have to sell more dirt, and it isn’t going to happen until the economy recovers somewhat,” said Ron Hanlon, a homeowner in Balsam Mountain Preserve.
Property owners in Balsam Mountain Preserve don’t know how long Radco will remain in the shoes of the developer. For now, Radco has been mostly tasked with upkeep of the property, a move pushed by the lender to protect the property’s value while foreclosure proceeds. If maintenance was neglected, it could lead to decline in value, which would be bad for the lender. If no one bids on the property during foreclosure and the lender becomes the new owner, they may keep Radco on board.
Radco is currently involved in drafting an annual budget for the community association and the operation of the recreational amenities, including an Arnold Palmer designed golf course, dining room, swimming pool, horse stables and myriad other features.
The fate of recreational amenities is the top concern of property owners in Balsam Mountain Preserve these days.
“If we are paying dues, we need to have the amenities,” said Dave Sparks, a homeowner in Balsam Mountain.
The initiation fee for the amenities was $75,000, which is mandatory when buying a lot in the development. There is also an annual fee for the upkeep of amenities, which could rise this year.
Theoretically, annual dues by property owners will pay for the upkeep and operation of recreational amenities, but a balanced budget usually isn’t possible without a critical mass of individual homeowners. But until then, the developer often chips in to subsidize them.
Chaffin and Light has been heavily subsidizing the amenities within the development in recent years. It is, after all, in the best interest of the developer to ensure the amenities are functioning at full tilt, a calculated selling point when courting new lot buyers. But new owners likely won’t subsidize the costs to the extent the current developers are, according to property owners involved with the issue.
The Arnold Palmer designed golf course in particular carries a hefty annual operating cost. Opening up the golf course at Balsam Mountain Preserve to outside memberships is one of the many options on the table.
Property owners hold one trump card to ensure the amenities are maintained and kept open. They could stop paying their dues. The developer — whoever that may be post-foreclosure — would be stuck footing the entire bill to keep the recreational amenities presentable in order to fuel future lot sales.
“We hope Trilyn and Radco realize it is important to keep us happy,” said Sal Guerriero, a homeowner in Balsam who sits on the community association board.
Two-thirds of the 354 lots in the development have been sold already. There are 120 lots still to go, and those lots are largely where the profit margin lies.
“That’s why the amenities need to be taken care of,” Guerriero said.
While an annual membership for the recreational amenities is voluntary, homeowners pay mandatory dues as part of the community association, which is responsible for road maintenance and security. That, too, has been heavily subsidized by the developers, but the financial burden will be shifted almost entirely to property owners this year, according to Guerriero.
In the long run, homeowners are confident the groundwork has been laid for a one-of-a-kind mountain community.
“We don’t anticipate there will be any significant change in the format of the community. The only question is who is going to own it,” said Hanlon, a homeowner. “Two years from now, we’ll look back on this and say it was an unfortunate dip in the road.”
As Ghost Town heads toward its first big showdown in bankruptcy court next week, objections from those owed money are beginning to pile up.
Ghost Town, an Old West amusement park in Maggie Valley, recently filed a disclosure statement and reorganization plan, which are supposed to outline how it intends to pull out of bankruptcy — presumably making enough profit to repay its debts.
However, Ghost Town failed to include profit and loss statements, back tax filings or basic financial projections as part of its disclosure statement. Objections over the spotty disclosure statement were filed by several parties owed money, including the Haywood County Tax Collector, Mountain Energy and BB&T, the mortgage holder on the property.
Some 200 businesses, many of them local contractors and small businesses in the region, are collectively owed more than $2.4 million. They are at the bottom of the list to be repaid. The reorganization plan calls for paying back only 25 percent of what the businesses are owed over a seven year period using a portion of net profits.
In an objection, BB&T said such a claim was disingenuous. Since Ghost Town’s current owners have never turned a profit, it is possible the businesses owed money would never get a dime, BB&T wrote in its objection.
Ultimately, everyone owed money will get to vote on whether to accept the reorganization plan or force Ghost Town into a liquidation — namely selling off the mountaintop property to the highest bidder and using the proceeds to pay off the debt.
In the disclosure statement, CEO Steve Shiver encouraged everyone owed money to vote yes, claiming they likely won’t see a dime if the park is liquidated, since it won’t fetch enough to pay off all the debt.
Affluent property owners in Balsam Mountain Preserve have raised commitments of $16.3 million in an effort to stave off foreclosure of the development by lenders.
Balsam Mountain Preserve, a mega development on 4,400 acres in Jackson County, owes nearly $20 million to lenders, who initiated foreclosure proceedings earlier this month. A hearing on whether the foreclosure can proceed was scheduled for Wednesday, Oct. 28.
Dave Walters, one of the property owners leading the effort to raise capital, hopes they will get a seat at the table in the dialogue between the lender and Balsam Mountain Preserve.
“We hoped to raise enough capital that would create an environment the lender would want to have serious dialogue with us during this process,” Walters said. “We have a very active and very intelligent and very vested and worldly group of property owners who are engaged and will remain so.”
Ideally, property owners hope to step into the shoes of the lender and get in control of their own destiny, Walters said. Commitments have been raised from 65 property owners — more than a third of the total property owners within the development.
“I think that is indicative of the overwhelming love for the place and the desire to keep the lifestyle what we hoped it would be,” Walters said.
Property owners would rather keep Balsam Mountain Preserve’s parent company Chaffin Light on board as the developers rather than an unknown player, Walter said.
“The ultimate goal has always been to keep the Balsam in Balsam,” Walters said “Balsam Mountain Preserve is a very unique place.”
Lots in Balsam Mountain Preserve have averaged $500,000. The grounds are rife with multi-millionaires and corporate executives who bought into the culture the upscale development embodies: top-notch amenities, an environmental ethos, strict covenants and a woodland estate setting. The conservation ethic is particularly important to property owners, Walters said.
“Nobody knows what a new owner or someone who took over would do,” said Nancy Seidensticker, a homeowner in the development. “It is a little frightening. We don’t want it change. We like it the way it is.”
Balsam Mountain Preserve has been in default of a $19.8 million loan since January, trying the patience of TriLyn, a private equity real estate investment firm based in Connecticut. The property owners knew a foreclosure was in the cards since May and have been working on a plan since then.
They created an LLC, wrote an investment prospectus and solicited pledges from property owners. The deal is twofold, mirroring the two major pieces of equity within the development.
One fund, called the Balsam Mountain Sustainability Plan, would be collateralized with the unsold lots that are still in the developers’ hands — approximately 120 lots. The current developers would remain on board as operators and pay back the loan from property owners through lot sales. So far, $8 million has been raised through that fund.
A second fund, called the Amenity Purchase Plan, would be collateralized through the amenities, including an Arnold Palmer golf course, riding stables, dining hall, pool, tennis courts, pavilion and backcountry camp. The amenities have been shut down for now.
“The amenities are a very large part of keeping the Balsam in Balsam,” Walters said.
Property owners buying into the fund would own the amenities and make money back over time through memberships and any profits off their operation.
Property owners are not willing to take a second position to the current lenders, Walter said. The property owners have fallen a few million short of being able to pay the lender off in full, however. Whether the lenders are willing to take what they can get and walk away, or whether they would prefer to move forward with foreclosure in hopes of eventually making all their money back, is not known.
“In today’s market, it is all about the money,” Walters said. “That is the position the lender has taken since day one. They have a right, it is their money.”
The fate of an unfinished Clarion Inn in Sylva is up in the air after a bank foreclosed on the property earlier this month.
The developer burned through a $5.1 million construction loan for the hotel but ran out of money before finishing the job. Meanwhile, the developer filed for bankruptcy and still owes the contractor $1.9 million.
The boarded-up windows and a weed-engulfed sign of the abandoned hotel casts a cloud over the main commercial thoroughfare in Sylva. The four-story hotel seems doubly tall given its placement on a high, steep bank above the road, its bulk now a prominent feature against the mountain skyline.
Sylva Town Commissioner Maurice Moody hopes that someone will step in to finish the construction and open the hotel.
“There is too much money in it to sit there and do nothing. If it does sit there and do nothing it will become an eyesore,” said Moody, who is running unopposed for mayor this fall.
Its developers, the father-son team of Thomas and John Dowden, took out a $5 million loan in September 2007 from the Alpharetta Community Bank of Georgia.
The loan was due in full two years later. As September of this year approached, however, the Dowdens still owed nearly the full loan amount.
“It is a shame it had to stop in its tracks,” said Thomas Dowden, the father, who lives in Cashiers. “We were 80 percent done and we should be open and running by now. That’s what our plans were.”
Thomas said his son, John, was the principal manager of the project and questions should be directed to him. John Dowden, however, did not return calls seeking comment.
The Dowdens hired Cooper Construction to begin construction in September 2008. Cooper Construction of Asheville did $4.8 million in work before construction was halted. Cooper was only paid $2.9 million, however, leaving the company holding the bag on $1.9 million in labor and materials that it already expended but has been unable to recoup.
“It has been a terrible, terrible, terrible hit to this 42-year-old company,” said Larry Rocklin, the general manager.
Rocklin said the loss has been difficult for the company to absorb, despite being the third largest contractor in Western North Carolina. The family-owned business has 60 employees currently.
Initially, the Dowdens planned to build a three-story Sleep Inn, Rocklin said. But along the way, they decided to upgrade it to a four-story Clarion. Rocklin said they miscalculated the extra cost of the additional story, which requires significantly more structural support.
“That’s where he blew it,” Rocklin said.
The Dowdens’s plan was to seek additional financing from the same bank that made the original loan. When that fell through, they sought other investors to no avail.
“I’m afraid what happened is the bank wouldn’t provide any further monies to finish the project,” Thomas Dowden said. “With all the bank problems going on since last fall, we got caught up in all that. We went out and found some new investors but couldn’t get it structured properly.”
The construction contract with Cooper Construction was $6.33 million — $1 million more than the initial construction loan, not counting additional costs such as architecture fees, furnishings and water and sewer connections.
Rocklin said he didn’t realize until it was too late that the Dowdens didn’t have enough money for the upgraded design.
“The bank never had any intention of giving him additional money,” Rocklin said.
In late December 2008, just a few months into the construction, Cooper filed a lien against the property. By February 2009, however, John Dowden had filed for Chapter 7 bankruptcy.
The bank got permission from the bankruptcy court to proceed with foreclosure in July. A foreclosure sale was initially on tap for late August.
Cooper Construction managed to stave off the sale for a month. With the developer in bankruptcy protection, Cooper’s only recourse was a claim against the tangible property. Once it fell to a new owner or was repossessed by the bank, that claim would be harder to make.
Cooper has a lawsuit prepared to go after the bank for the outstanding balance on the construction work.
“It then becomes a decision of do we want to push forward with a lawsuit with a chance of winning or a chance of possibly losing,” Rocklin said.
In addition to the $2.9 million paid out to Cooper Construction, the Dowdens spent at least $1.4 million in additional costs related to the project: $480,000 on land, $270,000 on water and sewer hook-ups, $60,000 on a franchise fee to Clarion, $200,000 on architecture and $400,000 on furnishings and equipment, according to court documents.
The total — $4.3 million — leaves $800,000 of the initial construction loan unaccounted for in court documents. Rocklin said he has been unable to determine how the full balance of the construction loan was spent.
Clarion Hotel, which is one of several brands under Choice Hotels, has no interest in stepping in to take over the proerty, according to a spokesperson.
“We don’t own or operate any of our properties. They are all individually franchised,” said Heather Soule, spokesperson for Choice Hotels.
Soule said the company has seen a national slowdown in new hotels coming online over the past year.
“It is taking longer for new construction to get off the ground and find the financing to do so. People are having to wait to get that construction loan,” Soule said.
Exactly what Alpharetta Community Bank will do with the hotel now is anyone’s guess. As for what happens now, Rocklin doesn’t thinks they can sell it for enough to recoup the original $5.3 million loan. The bank will either have to sell it at a loss or hire someone to finish it then sell it, he said.
At first glance, it is hard to see why Balsam Mountain Preserve has been unable to satisfy the lenders behind a $19.8 million loan dating to 2005.
The exact amount of the payoff on the loan has not been revealed, but is the only debt Balsam Mountain Preserve is carrying, according to Chris Chaffin, managing partner of the development. Chaffin did say Balsam Mountain is current on the interest portion of the loan.
Since taking out the loan four years ago, Balsam Mountain Preserve has had $65 million in lot sales, according to real estate transactions and records. That’s enough to pay off the principle of the loan three times over.
However, the majority was spent constructing amenities. Chief among them is the Arnold Palmer golf course, a dream course that was no small feat to pull off given the mountainous terrain. The golf course likely ate up much of the revenue from lot sales, but Chaffin did not provide an exact price tag.
In addition, the development boasts an equestrian center, a sports center with tennis courts and a pool, a nature center, a dining room and lodge, guest cabins and a road network.
Of the 354 lots in the master plan for the development, two-thirds have been sold. There are 120 lots left, and with the infrastructure and amenities mostly in place, any profit to be realized would largely rest with the remaining parcels.
Lot sales have declined in 2009 over previous years, but are strong in comparison to what most developments have seen since the recession. Balsam Mountain Preserve sold 12 lots so far this year, bringing in $6.17 million at an average of $514,000 a lot. If the rate is sustained for the remaining 120 lots, the development would realize an additional $60 million in revenue.
That begs the question of why the lenders aren’t being more patient on the undisclosed balance of the $19.8 million loan.
At the 2009 pace of lot sales, it would take three years to pay off the principal, not taking into account the inevitable overhead expense of maintaining a sales presence or the construction of additional road infrastructure, which is still needed in new phases of the development.
Sustaining operations and the additional capital for more road construction would drag out the payoff much longer than basic calculations allow for, and thus make the lender uneasy. The question, it seems, is whether TriLyn is willing to keep waiting or will attempt to take matters into its own hands.
Of the 120 lots that remain, 40 are scattered through existing phases of the development, while 80 are in new phases. The 40 scattered through existing phases require no additional infrastructure in order to market, but are merely waiting for buyers. The other 80 lie in two future phases and would require a capital investment to upgrade old logging roads into development-caliber roads before aggressively marketing the lots.
In some developments, the last lots to sell are likely the least desirable and lowest in value — whether they’re too steep, lack a view or are otherwise unappealing. Some are so flawed they may never sell.
But given the sparse number of lots in Balsam Mountain Preserve — 354 sites on 4,400 acres — the layout and design was likely more thoughtfully considered on the front end, making it less likely that the remaining lots are of less value or won’t sell at all.