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.
Dozens of local businesses owed money by Ghost Town are mulling over ballots this week that will ultimately decide the amusement park’s fate.
Ghost Town, which landed in bankruptcy a year ago, owes a total of $13.5 million. It hopes to regain its footing and become profitable again, eventually paying off what it owes over the next seven years.
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.
Some 200 businesses, many of them local contractors and small businesses in the region, are collectively owed more than $2.4 million by Ghost Town. They are at the bottom of the list to be repaid.
Wallace Messer of Dickson Auto Parts in Waynesville is skeptical he will ever see the $11,000 he is owed for parts and supplies.
“I just don’t see them turning a profit enough to pay off what they owe,” Messer said. “If you want my honest opinion, they will never pay off what they owe. They can’t come out from under it.”
Messer said he will vote for a liquidation and hope that a sale of the property brings enough to pay everyone back.
Mike Plemmons, the owner of Plemmons Plumbing and Heating, wants to give Ghost Town a chance to stay open and try to turn a profit, however. There is $11 million in debt owed ahead of small businesses like Plemmons, and if the property is sold off, it might not fetch enough to pay off those at the bottom of the list, he said. He thinks Ghost Town staying open is the best chance he has to get paid back.
“I’d rather go down fighting and have some chance as have no chance at all. Slim is better than none,” said Plemmons.
Plemmons is owed $8,000 for supplies, which he ordered especially for Ghost Town from distributors then had to cover out of his own pocket when Ghost Town didn’t pay.
Bruce Johnson, the owner of Champion Supply, doesn’t hold out much hope Ghost Town will ever pay off its $16,000 bill for cleaning and janitorial supplies under either scenario.
“I don’t think we are going to get money either way,” Johnson said.
So he is going to mark his ballot based on what he thinks is in the community’s best interest.
“I think it is better for the economy if they keep operating,” Johnson said. “The people they pull in help everyone.”
Johnson said he should have put a hold on Ghost Town’s supply account sooner than he did.
“They kept saying they would get us a check,” Johnson said. “We took our eye off the ball.”
Johnson did finally put Ghost Town on a cash account, and it has continued buying supplies from him over the past year, this time, paying up front.
Messer said he regularly sold parts to the previous Ghost Town owners. When new owners bought the park in 2007, they continued making purchases under same account, which had a good track record.
“I should have started a new account,” Messer said.
Plemmons said local businesses operate on good faith and is disappointed someone violated that trust.
“All your family businesses are run by people getting up every morning trying to make an honest living,” Plemmons said.
But in Ghost Town’s case, they kept promising to pay. Plemmons thought they were just being slow and allowed them to keep ordering more supplies. Eventually they quit calling him back and he was in the dark until the bankruptcy papers came through.
Those owed money have to mail their ballots by next week. The plan must be approved by the majority of creditors, and by those holding two-thirds of the total debt.
The rules prevent one big lender like BB&T, which is owed $9.5 million by Ghost Town, from swaying the vote. It also prevents dozens of smaller companies from tipping the scale by virtue of their numbers, even though the amounts they are owed is much smaller.
As for the 215 companies collectively owed $2.4 million, Ghost Town’s reorganization plan pledges to pay them back over seven years out of profits. The plan calls for dedicating 6 percent of net revenue received each year to pay back the small business owners.
However, the park hasn’t turned a profit in two years. Ghost Town CEO Steve Shiver blames the recession for lackluster ticket sales the past two years. The 1960s-era amusement park also had far more issues lurking beneath the surface than its new owners realized when buying the park in 2007, requiring costly repairs and upgrades that weren’t in the original business plan. The recession made it impossible to secure financing, but Shiver says he has now found a lender that will help put them back on stable footing.
Shiver said the park was planning to open for the season in late May, then the landslide happened.
“We are extremely concerned that we can’t open this season — for all of us and the Maggie Valley tourist industry,” Shiver said. “To be fully prepared and geared to open and then have this happen ... but the owners are committed to seeing this through.”
The reorganization plan initially called for paying back only 25 percent of what the businesses are owed over a seven-year period using a portion of net profits, but was amended to call for 100 percent payoff.
The bankruptcy of one of Western Carolina University’s largest supporters will hurt the school’s fast growing construction management program.
In 2005 Joe Kimmel, owner of Asheville-based Kimmel & Associates, pledged nearly $7 million over eight years to the construction management program at WCU, which was named the Joe W. Kimmel School of Construction Management Engineering and Technology.
Both Kimmel and his company filed for Chapter 11 bankruptcy in late December. Bankruptcy filings often affect philanthropic commitments as creditors seek to recover their investments.
WCU spokesperson Bill Studenc said delays in receiving the promised Kimmel gift would likely affect the number of scholarships the program can offer.
“Delay in fulfilling commitments planned in the Kimmel gift will mean that fewer student scholarships and less program support will be available during the interim,” Studenc said.
WCU Chancellor John Bardo said the school’s primary focus in the matter is the welfare of the Kimmel family, whom he called “close friends of the university.”
“Our current concern is for the Kimmel family and their employees,” Bardo said. “As one does with family, we will take the long view of this trying time. We wish them all the best. We will stand by them in every way we can, and trust that there will be a brighter day in the world economy soon.”
WCU’s construction management school was started in 1999 and offers an undergraduate B.S. degree and an online masters degree. Currently, 300 students are enrolled in the two programs.
Robert McMahan, dean of the Kimmel School, acknowledged that the current economic climate is difficult for the construction industry, but he said the program is still growing.
“The construction management program has been growing steadily over the years, and we anticipate that trend to continue,” McMahan said. “Freshmen entering the program in the fall will not be preparing for employment this year, but for opportunities available in four years. We anticipate that as the economy improves, the construction industry will be one of the areas to benefit most greatly from the turnaround.”
McMahan said graduates of the Kimmel School have done well finding jobs during the recession.
“Obviously, the construction industry has been affected by the economic downturn,” McMahan said. “But what we have seen is that graduates of our construction management program continue to be able to secure the jobs they seek in the industry because of the valuable mix of skills they acquire here at Western Carolina.”
Kimmel & Associates is one of the largest recruiting firms in the country specializing in placing candidates in the construction industry.
Ghost Town in the Sky, an amusement park in Maggie Valley, failed to pay employees for their final two weeks of work before shutting down for the winter.
While most employees were told upfront that they might not be paid their full wages immediately and were given the choice to work or not, the company could still be in violation of state labor laws.
“The law says they must pay all accrued wages to employees on the regularly scheduled payday,” said Darrell Sanders, supervisor for Wage and Hour Bureau with the N.C. Department of Labor. “Even with the employees’ agreement, nobody can waive the law. As soon as midnight ticked by on payday, the company automatically went into violation of the law and will be until the employees are paid.”
CEO Steve Shiver said the company still plans to pay employees what they are owed.
“They will be paid as quickly as possible. I am doing everything I can every day to make sure that takes place,” said Shiver.
In the meantime, there may be little the employees can do about it other than wait. Ghost Town is operating under Chapter 11 bankruptcy with hopes of reorganizing and regaining its footing. Workers who are not paid by an employer usually take their complaints to the labor department, but the department has no jurisdiction when bankruptcy proceedings are in play.
“It is a large wrench to throw in the machinery,” Sanders said.
Ghost Town filed for bankruptcy early this year. In addition to a $9.5 million mortgage, the park has a trail of unpaid bills with more than 215 companies totaling $2.5 million, including local contractors, electricians, media outlets and equipment rental companies.
Shiver held a meeting with employees going into the final few weeks of the season in October to fill them in on the financial status of the amusement park.
When Shiver leveled with workers and told them cash flow was tight, it came as no surprise. A few times during the year, the park couldn’t make payroll on Friday and instead relied on revenue from weekend ticket sales to pay employees the following Monday. The park eventually moved payday from Friday to Monday on a permanent basis, according to employees. Even then, the park didn’t always make full payroll, and would only give employees a partial paycheck and make up the difference the following Monday after another weekend of revenue came in.
At the meeting, Shiver gave employees two choices: shut the park down early or remain open the rest of the October. If they stayed open, however, there was a chance they wouldn’t bring in enough revenue to pay everyone on time.
Shiver then left the room while employees voted with a show of hands whether to keep working. The vote was unanimous.
“We all knew there was a possibility we may not get paid,” said David Aldridge, a Maggie resident who worked at Ghost Town. “We were willing to risk it.”
Shiver said the dedication of employees is remarkable.
“I have such great employees,” Shiver said. “It shows the dedication of all of us, including myself, to make sure Maggie Valley and Ghost Town in the Sky and all that goes with it survives. I am very humbled by their support and continued efforts.”
While Shiver never suggested employees would be volunteering their time in exchange for no pay, that was certainly in the back of their minds, Aldridge said.
“We were asked if we were willing to take half our paychecks now and half later,” Aldridge said. “Nobody ever agreed to not get paid. Everybody expected to get their last paycheck.”
The paychecks haven’t been forthcoming yet, but Aldridge said he isn’t mad. He said most employees understand and care deeply about the park and want to help it succeed. Aldridge said Shiver was a good leader and an inspiration for employees.
“He was out there working every day as hard as everybody else. He was trying to do all he could to keep Ghost Town going,” Aldridge said.
Shiver has exemplified the all-hands-on-deck attitude that allowed Ghost Town to make it through the year.
“I bussed tables, I swept floors, I blew leaves off the streets to make sure our guests could enjoy themselves,” Shiver said.
Not all employees were at the meeting when Shiver leveled with the state and the informal vote was held, however. The meeting was billed as a non-mandatory staff meeting and the topic wasn’t shared in advance, so Ron Coates, a worker who lives in Hot Springs, opted not to make the hour-long drive on his day off to attend.
No one in management ever told him what had transpired or warned him that he may not be paid if he kept working.
“Nobody ever said we might not get paid,” Coates said.
Coates has filed a claim with the bankruptcy court for $386 after being told by the state Labor Department that was his only recourse.
Meanwhile, water to the amusement park has been shut off due to failure to pay bills, according to the Maggie Valley Sanitary District.
Editor’s note: These articles first appeared in the St. Petersburg Times and are reprinted with permission of the writer.
Lawyers for 13 people who bought land in a controversial Big Ridge subdivision in Cashiers say federal prosecutors in Miami and Pittsburgh, Pa., have opened a criminal investigation into loans obtained from SunTrust Bank.
The 13 buyers have asked a federal judge in North Carolina to delay action in a civil fraud suit filed against them by SunTrust due to the federal probe.
“Defendants understand that they are more than material witnesses in the government’s investigation and have not been ruled out as targets of the criminal investigation and/or potential defendants,’’ lawyers have argued in documents filed in U.S. District Court in Bryson City.
The buyers, from Florida and Pennsylvania, bought lots in the development in 2006 and later obtained construction loan mortgages of more than $1 million a piece from SunTrust. The bank alleges that all of them falsified their income to obtain the money. SunTrust is seeking repayment of more than $19 million.
In an affidavit filed in federal court, Michael P. O’Day Sr., a Pittsburgh lawyer, says he represents one of the 13 defendants in the criminal investigation and has been in contact with federal prosecutors in Miami and Pittsburgh.
O’Day said the SunTrust transactions are part of a broader investigation of the development and “certain individuals’’ involved with it.
“I have been advised that the U.S. Government believes some and/or all of the individuals involved with the development potentially committed criminal acts,’’ O’Day said.
Most work in the development started by Domenic Rabuffo is at a standstill as SunTrust and other banks foreclose on lot after lot. Partially constructed houses sit abandoned on more than 15 lots.
Rabuffo, a native of New York and part time resident of Miami, was convicted of mortgage fraud in New York in the late 1980s.
His onetime business partner, the “fat man,’’ was killed in a 1987 mob hit as he dined at Bravo Sergio, an Italian restaurant in Manhattan.
Rabuffo and his partner were accused of masterminding a $49-million mortgage fraud. Rabuffo pleaded guilty, went into the witness protection program and served a brief prison sentence.
The only recent activity in the development, which was initially named Hampton Springs, occurred last week when workers moved a mobile home from one lot to another after a mortgage foreclosure suit was filed on the lot where the mobile home had been located. The name of the development has since been changed to Spring Ridge Vista.
Foreclosure suits have been brought against owners of most of the lots in the development as well as individual lots Rabuffo purchased in the name of his ex-wife, Mae.
Sylva lawyer Jay Pavey is fighting his own battle with SunTrust, asking a federal judge to quash the bank’s effort to subpoena his files on the land purchases and mortgages he handled for the 13 buyers.
Last month, Federal Magistrate Dennis L. Howell ordered Pavey to surrender some of the documents SunTrust has requested. Pavey said the subpoena is overly broad and would put an undue burden on his law firm.
Lawyers for SunTrust are opposing any effort to delay proceedings in the civil suit and want to question Pavey under oath.
Pavey prepared all of the deeds and mortgages for Rabuffo’s development over the last few years. He says he was not aware of anything improper.
Sims Valley, a pastoral subdivision that was once part of a historic farm, was sold in a foreclosure auction Friday, Nov. 20 at the Jackson County Courthouse.
The Bank of Macon County, holder of a $6.9-million mortgage on the property, offered the only bid — $4.7-million for 225 acres left in the development.
Five houses, a clubhouse and swimming pool, hiking trails, paved roads, underground utilities and other facilities were built by Big Ridge Partners LLC during the past three years. The development is on a farm established in 1898 by pioneers Willis and Laura Sims. It lies at the end of Pilot Knob Road off of Big Ridge Road.
Dennis Ford, project manager for the original developer, has been retained by the bank to keep an eye on the project while attempts are made to find a buyer.
Ford said the development is a victim of current economic conditions.
“My guess is that someone will buy it for speculation and wait until the market improves,’’ Ford said.
Sims Valley has 80 lots, including 19 that sold for prices ranging from $125,000 to $500,000.
Big Ridge Land Partners is owned by Brett and Susan Turner of Richmond Hill, Ga.
As developers grapple with financial woes forcing them to sell off holdings or succumb to foreclosure, environmental groups in Jackson County want to rein in vested rights previously doled out for those tracts.
A whopping 238 subdivisions were exempt from Jackson County’s new development regulations two years ago. The so-called vested rights were intended to protect developers caught mid-stream by the new regulations, but were ultimately granted to developers merely in the planning stages. The question now is what happens to the vested rights held by developers who sell out to someone else.
“We do not know what these new owners will do — whether they will continue to pursue the original development plans and, thus, make use of the vested rights; or whether they will decide to do something else entirely with the land,” Julie Mayfield, director of WNC Alliance, told Jackson County commissioners last month.
The county was too liberal in granting developers a free pass, according to several community groups that have repeatedly protested the methodology. A coalition of citizens appeared before the county commissioners last month to air their lingering concerns.
The citizens claim the county acted too hastily and failed to figure out which developers indeed qualified. The county now has a golden opportunity to take back some of those vested rights as the original developers go under, Mayfield said.
Mayfield recognized Jackson County as “a regional leader in managing growth.” She praised rules that limit the number of trees that can be cut down on a mountainside lot, curb housing density on steep slopes and mandate open space within subdivisions — naming just a few of the more salient measures that sets Jackson County’s ordinance apart.
“We now ask you to sustain that courage, be firm in the face of the changes in land ownership occurring in our county, look for every occasion to ensure future development occurs in compliance with the county’s 2007 ordinances and does not needlessly destroy our important natural resources,” Mayfield said.
Mayfield read aloud from a letter signed by several community groups: the Watershed Association of the Tuckaseigee River, United Neighbors of Tuckasegee, Jackson-Macon Conservation Alliance, Canary Coalition and Tuckasegee Community Alliance, a local chapter of WNC Alliance.
Commissioner Tom Massie told those in attendance that he understood the concern and had himself sought advice on the issue from the county’s special attorney on development matters.
County Manager Ken Westmoreland suggested bringing in an expert on the issue to give a talk for the public, possibly from the Institute of Government at UNC-Chapel Hill.
“It is a pretty complex subject,” Westmoreland said. “It may well be for clarity and impartiality we should bring in an outside consultant to provide a complete discussion on that subject.”
State statute requires local governments to make allowances for vested rights. Vested rights eventually expire if not utilized, but the exact time frame Jackson County must honor is not clear.
Balsam Mountain Preserve has been stripped of control and custody of its development as lenders continue their march toward foreclosure.
The 4,400-acre development in Jackson County owes nearly $21 million to its lender, a private equity investment firm called TriLyn. Balsam Mountain Preserve developers have been in default of the loan for more than a year.
Foreclosure could be a long way off, however, so lenders went to court last week asking that a third party be put in charge of the property in the meantime.
The third party will have full control of the development. It will take over the bank accounts, manage employees and keep up the property. It will even be able to sell lots, with revenue to be turned over to the lender.
The lender will put up the money the third party management company needs for upkeep and operations, although it will be tacked on to the running tally Balsam Mountain Preserve owes. The company selected by the lender, Radco Property Management of Atlanta, will get a fee of $25,000 a month for overseeing operations, known as a receivership.
The lender said the move was necessary to ensure the property is properly maintained, since its only hope of recouping its investment is the equity that remains in the development.
Two-thirds of the 354 lots in the development have been sold. Developers were banking on continued lot sales to pay off the loan, but the pace of sales plummeted due to the national economic downturn.
“There is no good guy, bad guy. It is just a case of the economy. The music stopped,” said George Hendon, the Asheville attorney representing the lender in court last week.
Also last week, Balsam Mountain Preserve got a 30-day extension on a foreclosure hearing. The hearing would decide whether the lender should be allowed to proceed with the actual foreclosure.
Balsam Mountain Preserve is trying to raise money to pay off the debt and needs more time, argued Sylva attorney Jay Coward, who is representing Balsam Mountain Preserve developers. Coward said there has been “substantial success” in raising the funds so far.
“Given more time the entire amount may be raised,” Coward wrote in his request for an extension.
The original loan dating to 2005 was for $19.8 million. While more than $3 million of the principal has been paid off, the total owed on the property has grown to $21 million, mostly due to mounting interest, which totals more than $4 million. Interest is accruing at a higher than normal default rate of roughly $100,000 a month, according to court documents.
Lenders are also tacking on their own legal expenses and costs associated with collecting the debt. And now, the fee paid to the third-party management company and operating costs to keep the development going will be tacked on as well.
Despite the loan being in arrears, lenders say they advanced Balsam Mountain Preserve more than $1 million over the past year to keep the property from decaying. Credit was extended for operating costs, items like payroll for workers grooming the golf course and for sales staff courting prospective lot buyers. The lender even had to pay leases on maintenance equipment to keep it from being repossessed.
“We did that on the assurance they were trying to find additional capital,” Hendon said.
Balsam Mountain Preserve has been in discussions with the lender for a year to refinance the loan, restructure it or arrive at a work-out, but the lender’s patience has been exhausted, Hendon said. The lender’s top concern now is to keep the property from deteriorating since that is the only collateral securing the debt.
“It is a critical time,” Hendon said. “They are down to a skeletal security force with no indications they are improving.”
If the foreclosure drags out, the property could be in jeopardy of losing value and, in turn, limiting the lender’s ability to recover its investment, Hendon said.
Balsam Mountain Preserve countered the suggestion that it wasn’t taking care of the property.
“When (the lender) tries to paint this bleak picture, I don’t think that is fair. We deny it,” said Coward.
The two top managers at Balsam Mountain Preserve filed affidavits in the court record stating their opposition to the lender’s representation that the property was being ill-managed and not taken care of.
If sales continued at the historical average of $500,000 per lot, there is $60 million in revenue yet to be made off unsold lots in the development — more than enough to pay off the loan. But if and when demand for lots in that price range will return is anyone’s guess. The lender is apparently not willing to take a wait-and-see approach.
Meanwhile, property owners are concerned that the third-party overseer won’t uphold the same values as Balsam Mountain Preserve developers.
“The homeowners association is very distressed about the situation,” Coward said. Coward said it has been difficult to “get a read” on the third-party overseer and its track record or experience with resort communities.
Balsam Mountain Preserve is a subsidiary of Chaffin Light, a national company with a reputation for high-end resort communities that cater to the environment and pay homage to the natural resources and scenery of the surrounds.
“The environmental ethic of this development is pretty incredible for Western North Carolina. In other words, they didn’t cut up 4,000 acres into 4,000 lots,” Coward said.
The third-party overseer has full control now, however. It even has the authority to edit marketing materials and the Balsam Mountain Preserve Web site to delete any reference to Chaffin Light.
The development has 354 lots on 1,400 acres, with the remaining 3,000 acres off limits to development under a conservation easement. The conservation easement is legally binding and protections will remain in place regardless of the outcome of the foreclosure. The number of lots is also capped, regardless of new ownership, thanks to covenants on the property.
The Balsam Mountain property owners association had an attorney of its own at last week’s court hearing on the third-party receivership to assert their interests. Property owners bought into the community under certain expectations, which should be upheld, said David Herrigel , the attorney on behalf of the property owner’s association.
“We want them to continue to operate the community the way it was represented to the members at the time that they bought,” Herrigel said.
Property owners hope to intervene by raising enough capital to pay off the loan and assume control of the property themselves, including the well-appointed amenities of an Arnold Palmer golf course, equestrian center, dining hall, swimming pool, tennis court, pavilion and backcountry camp.
“I am just hoping that it all works out for the best,” said Nancy Seidensticker, a homeowner in Balsam Mountain Preserve. “We all love this place. Most of the homeowners I know have committed to put in a certain amount to see what we can do, but I don’t know if it will be enough because I guess the lender is hanging pretty tough.”
Judge Brad Letts, the resident Superior Court judge for Jackson County, had to recuse himself from proceedings since he owns a lot in the development. Judge Dennis Winner presided instead and granted the receivership to Radco. Radco did not return phone calls seeking comment, but a representative of the company — which specializes in taking over distressed commercial properties — was on site at Balsam Mountain Preserve Monday.
Ghost Town in the Sky wants more time to prepare its bankruptcy reorganization plan and is seeking an extension.
The Maggie Valley theme park filed for Chapter 11 bankruptcy in March in hopes of holding off bill collectors long enough to get back on its feet. Ghost Town was supposed to submit a reorganization plan in U.S Bankruptcy Court within four months, which would have been early July, but is seeking a three-month extension.
In addition to a $9.5 million mortgage, the park has a trail of unpaid bills with more than 215 companies totaling $2.5 million, from electricians and contractors to marketing agents and souvenir vendors. Those owed money get to vote on whether to accept Ghost Town’s reorganization plan.
The court has not ruled on whether to grant the extension.
Meanwhile, Alaska Pressley, a longtime Maggie Valley resident and business owner, has offered a $250,000 loan to Ghost Town to help the beleaguered theme park on its road to recovery. The loan would be used to help get the incline railway working, according to the bankruptcy filing.
The incline railway was once used to transport visitors up the mountain to the amusement park, but it has not been operational for many years. Ghost Town owners began rebuilding the incline railway when they purchased the park, but ran out of money to finish.
Pressley has been a player in the Maggie tourism industry for more than 50 years and was friends with the founder of Ghost Town, R.B. Coburn. When new owners came on the scene and reopened the park after a five-year hiatus, Pressley was quick to join their side as a stalwart supporter.
Ghost Town proposes to pay back the loan over the course of five years, with $1 per customer this year and $2 per customer for the next four years.
The arrangement would allow Pressley to sidestep others who are owed money by Ghost Town by directly tapping Ghost Town’s revenue stream. BB&T, which holds a $9.5 mortgage on the property, objected to the proposal as it would funnel profits off the park to pay back a select lender. The fate of the loan and payment arrangement will ultimately be up to the bankruptcy judge.
Ghost Town in the Sky owners paid themselves nearly $25,000 over two weeks in March despite the company being in bankruptcy.
The Maggie Valley amusement park filed for Chapter 11 bankruptcy in mid-March with the aim of reorganizing, opening the park and gradually paying off debts. Ghost Town has a $2.5 million trail of unpaid bills owed to more than 200 companies. Dozens of local businesses are among those owed money. The company also owes around $9.5 million in mortgages.
As part of the bankruptcy process, Ghost Town is required to file a detailed picture of their finances with the bankruptcy court every quarter, showing all revenue and expenses. The filing for the first quarter of this year only contained two weeks, from when Ghost Town filed bankruptcy in mid-March to the end of that same month.
The filings show nearly $25,000 was paid to Ghost Town CEO Steve Shiver and a company that Shiver is president of, Global Management Services. Shiver personally got $1,657 as a salary, while $23,000 was paid to his company. Shiver’s company is billed as a professional services company and dates to Shiver’s former life in the Miami area.
While Ghost Town had launched a campaign to sell advance tickets to the theme park, sales netted only $1,659 for the reporting period, according to the filing.
So far a hunt for a cash infusion to help the park get on its feet has not been successful. Ghost Town has been unable to get traditional bank loans, or strike a deal with last-resort lenders. Appeals to the county economic development and tourism entities have not been fruitful either.
Shiver has rented out the Maggie Valley pavilion from 5:30 to 7:30 p.m. on Tuesday, May 12, for a public event presumably intended to rally support for the amusement park’s request. He is also going door to door soliciting public support.Shiver did not return calls seeking comment for this article.
Among Ghost Town’s debts is $136,000 in back sales taxes owed to the state of North Carolina. It was previously reported that Ghost Town failed to remit sales tax to the state collected as part of ticket sales. Ghost Town nor the N.C. Department of Revenue would elaborate on the source of the back sales tax.
However, it was learned in bankruptcy court last week that the sales tax owed is actually from the purchase of large piece of equipment by Ghost Town. Ghost Town is at odds with the state over whether it actually owes the tax, and thus is why it hasn’t paid up. Ghost Town claims the tax should be paid by the company it bought the equipment from, not by Ghost Town.