Vineyards Resort seeks bankruptcy protection

By David Lester, Yakima Herald-Republic November 24, 2008 

The promise that is the Vineyards Resort will have to wait.

Developers filed for bankruptcy protection last week to reorganize and avoid a sale of the property.

Backers of the 500-acre resort near Zillah blamed the nationwide financial meltdown and frozen credit markets for the filing.

"No banks are lending. Zero," said Rich Barnes of Avon, Colo., a co-managing partner for the $100 million project. "There is no commercial lending market out there."

Gary Scott of Ellensburg is the other managing partner. The development group also includes Yakima builder and developer Craig Schultz.

The reorganization under Chapter 11 of the federal bankruptcy code protects the asset, allowing time to develop a new plan to move the project forward, the developers, Vineyards Property LLC, said in a news release Friday.

That asset is a destination resort with an 18-hole golf course, nearly 600 homes, a hotel and other amenities designed to enhance the growing Washington wine industry.

The property is located off Nightingale Road, northwest of Zillah.

If completed, the Vineyards would be the second major destination resort in Central Washington, appealing primarily to Western Washington residents interested in wine, golf and other recreational activities. The largest current resort is the massive Suncadia resort near Cle Elum. Spread across 6,400 acres, Suncadia features three golf courses, 3,000 housing units, a lodge, a spa and fitness center.

Home sites at The Vineyards are expected to fetch up to $1 million.

The filing occurred one day before a planned foreclosure of the property for failure to maintain payments on a $12.9 million bridge loan obtained in 2006 to get the project off the ground.

The foreclosure sale, which was scheduled to take place inside the county courthouse because of chilly outside temperatures, was the second developers have faced in the last month. Friday's sale was called off at the last minute because of the bankruptcy.

Developers had obtained additional financing to proceed with the project and to begin repaying the bridge loan held by Stark Financial, a Milwaukee, Wis., hedge fund.

After an initial payment of $800,000 under a financing plan that staved off foreclosure last month, the spigot ran dry, exposing developers to another foreclosure scheduled for Friday morning.

Without funding, the Vineyards filed for bankruptcy.

"We are very disappointed that our lenders will not fulfill their commitments," Barnes said in a news release. "This move is about protecting an asset that will some day become the keystone platform for Washington wine country."

A telephone call to Stark was not returned Friday.

The filing in bankruptcy court in Spokane did not list total assets and liabilities or secured creditors of the huge development.

Among the 20 top unsecured creditors, the largest debt is owed to Selland Construction of Wenatchee, hired to develop the site off Nightingale Road. The firm is owed $1.4 million, according to the filing.

Huibregtse Louman Associates, the Yakima engineering firm, is owed nearly $342,000.

A meeting for creditors is tentatively scheduled for Dec. 18 in Yakima.

A group of about 30 people who made $250,000 financial commitments for some of the 230 single-family housing lots that would be created in the project are protected. Their payments are in escrow and will be returned if the lots aren't created, members of the group have said.

One of those initial purchasers, called founding members, Yakima auto dealer Bob Hall, said Friday he remains confident about the value of the project and its future despite the economic upheaval.

"Allowing a judge to be the protector of the assets while water seeks its level only makes sense," Hall said. "We all believe that time will get it worked out and we have to live with a little delay here while the leadership transitions."

Barnes said in a telephone interview that he and his partners have begun working on a new plan to obtain additional financing with the respite the bankruptcy provides.

He insisted the project remains viable and will become an important part of Washington wine country.

"This puts the project in better shape than it otherwise would have been. We will continue to work the project," Barnes said. "We are working to discover other sources of stabilized financing."

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