Steamboat Springs One Steamboat Place, the mountainous luxury condominium project adjacent to the Steamboat gondola, went into foreclosure Wednesday with $100 million on its original construction loan owed to seven lenders.
The developers said they and two large investors have been in the middle of negotiations with the banks to restructure the outstanding construction debt.
Reached during a business trip to San Francisco, Timbers Resorts CEO David Burden said the news of the foreclosure took him by surprise.
“I was shocked to hear this,” Burden said. “I immediately e-mailed the biggest (of the) lender(s) in New York and asked, ‘Are we negotiating in good faith? Does this mean you think our negotiations are not going well?’ Their reply was that this is standard procedure, the loan has matured and they have to take this action, although our talks are promising.
“If this is standard procedure, it’s a tactic. I’m sorry; the standard procedure doesn’t make sense. At least give us a few ski seasons.”
Routt County Trustee Jeanne Whiddon confirmed late Wednesday afternoon that she had filed a notice of election and demand against SV Timbers LLC, the development entity related to Timbers Resorts based in Carbondale. The date of a foreclosure sale has not been set, but Whiddon estimated it would be in mid-March. Timbers would have until within 15 days of the sale date to formally file its intent to cure or redeem the foreclosure.
Burden confirmed that the $100 million was due in full at the end of October. He said that given the real estate economy, he’s thrilled that the project is closing in on $80 million in sales and thinks there are more sales in the pipeline for winter. He added that all of the contractors and subcontractors who participated in the construction of One Steamboat Place have been paid.
Burden said SV Timbers is not broke; the development group includes two multibillion-dollar companies who believe in the project, and together, they have $50 million in non-debt equity they aren’t about to abandon. Instead, they’ve made it plain to the banks that they will inject more capital into the project.
“We and the investors are stepping up in a big way,” Burden said. “I’m positive we’re working this out. My partners are willing to invest many million, but only on certain terms. ... We’re very confident we’ll get this loan restructured.”
Beyond a restructuring of the debt and resolution of the foreclosure filing, Burden said his investors are intent on providing seller financing for unsold condos because they understand that is a sticking point in the market right now. Typical original asking prices for whole-ownership condos were $1 million to $2 million. A $4.45 million sale closed in late 2009. There was a $3.05 million sale in early October.
Burden emphasized that the promissory notes involved in the foreclosure are on unsold residential condominiums only, not the commercial condominiums or the common areas in the project.
He added that One Steamboat Place is a stand-alone limited liability company. The development has a strong homeowners association, and although the developers represent a majority of the HOA and carry a corresponding share of the HOA fees for the 465,000-square-foot building, those fees have been funded by sales.
One Steamboat Place broke ground in summer 2007. It posted $15.25 million in sales during its first round of closings in November 2009. The project includes 80 large condominiums with 38 whole-ownership vacation homes among them.
Mark Scully, the Colorado representative for the developer of Howelsen Place and Alpenglow in downtown Steamboat, expressed doubt that One Steamboat Place would get to a foreclosure sale, though he added that he has no direct knowledge of the development’s finances.
“OSP is a world-class project and asset to Steamboat,” Scully said. “Timbers Resorts is a world-class company. The (notice of election and demand) is just part of a formal process for working through loan issues in today’s world. They will get through it.”
A bank in Germany with New York offices, WestLB AG, holds the biggest share of the debt at $58 million. The same bank originally loaned Timbers $130 million in a “global note” in October 2007 and promptly began spinning off portions of that debt to other banks including Western Slope bank group, Alpine Bank, which is one of the creditors listed in the foreclosure filing with $25 million of the development’s debt. Others are CoBiz Bank, $15 million; TD Banknorth, $20 million; MT&SB, $10 million; RBA, $7 million; and Morgan Stanley, $30 million.
In the process of assigning portions of the original debt, the loan grew to $165 million.
David Baldinger Jr., managing broker/owner of Steamboat Village Brokers, agreed with Scully that the foreclosure filing against Timbers may be very different from the familiar foreclosure process in which a homeowner loses a home.
“In this case, it could be a way to negotiate and trade debt,” Baldinger said. “It could be a way to get all the lenders to the table and reorganize the debt. In some ways, governance — who’s in charge of the debt — is as important as the asset.”
Baldinger said it’s possible that consumer perception of the resort condominiums at One Steamboat Place would not change, regardless of how the foreclosure proceedings are resolved. However, he added that it would be a plus if Timbers still managed the project coming out the other side.
“It’s still too early to tell how the market will internalize a reassignment of debt, but the quality of the asset is most important to buyers,” Baldinger said. “From a market standpoint, the project is still fantastic.”