Luxury Residence Club in Montana Files for Chapter Eleven

The invitation-only Yellowstone Club resort in Big Sky, Montana has filed for chapter 11 bankruptcy protection, after the luxury real estate market in Montana slowed dramatically this year

Yellowstone Club

Court documents show the exclusive club owing around $343 million to local contractors and banks. Club attorneys are due to appear in federal court later today to ask a U.S. District judge to approve another loan of $4.5 million to allow the club to open through the winter season.

A spokesman for the club said that “tight credit markets,” were at fault for their current situation, although some critics are claiming the fault lies squarely with the club’s founders Tim and Edra Blixseth. Jim Goetz, an attorney who represented former Tour de France winner, Greg LeMond in a $39.5 million lawsuit against the club, which was settled recently stated:

What this is about is an orgy of spending. An orgy of borrowing. They (the Blixseths) lived pretty well — Gulf Stream (jets), Bentleys, Aston Martins,” In hindsight, as well as in our foresight, it was ill-advised.

The final instalment of that settlement ($13 million) now seems unlikely to be paid. Yellowstone Club spokesman Bill Keegan said Goetz’s claims “have no basis in fact” and that the Blixseths’ possessions were not bought with the club’s assets. The couple has since divorced, with Edra now controlling the club.

The club had planned to build anothr 450 houses on the property, along with an ice rink, a baseball field, a luxury spa and more ski runs. Rather at odds with the club’s exclusivity, one has to wonder where the money went exactly, as none of these improvements have been completed. The bulk of the debt stems from a $375 million loan that was arranged through Credit Suisse, the bankers for the recently folded Tamarack Ski resort in Idaho.

Montana Gov. Brian Schweitzer said that he is concerned that local contractors and subcontractors might not get paid for work already performed, and that the state will have an observer at the court hearing.

The club is still claiming to own more assets than the outstanding debts, and have listed the value of the property at $778 million, and is attempting to continue to operate while restructuring the debts.

This is not the first time the 13,400-acre club has been in the news, with a string of violations of natural resource laws being broken in the past. In 2002, the Club was accused of 60 violations of the federal Clean Water Act when they dumped dredge and fill material into 2 miles of streams and on 10 acres of wetlands. The Yellowstone Club was also fined $86,000 for 400 violations of stream pollution, killing of trout, diversion and obliteration of streams, putting earth dams across streams, breaking down stream banks and operating heavy earth moving equipment in stream beds, draining and destroying stream beds and pumping water, stemming from constructing a golf course, roads, bridges, culverts, ski lifts and ski runs without a permit. State and federal regulators accused the Club of ignoring state stop orders, violation of state and federal water quality laws, state sanitation laws and building more condominiums than permitted.

In 2003, Yellowstone Club was fined $231,000 for failing to comply with DEQ permit requirements for construction activities. In August 2004, the Club was fined $1,800,000 by the Environmental Protection Agency for 60 un-permitted construction activities. In 1996, the Corps had met with Blixseth to educate him on permit requirements. He knew the requirements but ignored them. Violations consisted of dumping fill or dredged mud into federally protected wetlands and streams, causing serious erosions with 5 ft. deep gullies.

The New York Times covered the Lemond lawsuit recently with an in-depth look at the luxurious facilities available at the club.

Montana River action
Associated Press
New York Times