Construction of the Tamarack Ski and Golf resort in Donnelly, Idaho is at a standstill despite the best efforts of the owners to find suitable investors

Tamarack hit the headlines in 2003 when it became one of the few new ski resorts to be approved in Western USA in over 20 years. Buyers committed more than $500 million for condos, houses and building sites. Luxury homes brought an in flux of cash of and a scramble started to buy land with rents tripling over a matter of months. The luxury-resort boom brought short-lived windfalls to towns throughout the Rockies, as developers planned resorts with secluded homes and memberships to golf and ski clubs. Credit Suisse Group Bank syndicated nearly $1 billion in loans to luxury developments in the West.

Then, last winter, building all but stopped in Tamarack. The Ski lifts continued to run but motel occupancy plummeted and the May 2008 unemployment rate was 6.1% in Valley County, nearly double the year-earlier rate. Idaho’s May statewide unemployment was an estimated 3.6%. According to The Wall Street Journal, “This place just quit,” says Gordon Cruickshank, a Valley County commissioner.

A Tamarack lender recounted in recent court filings, the resort had a business model in which “operating expenses would exceed revenue and the primary source of profit would be generated by the sale of real estate.” When the bust came, Donnelly was hit hard. It didn’t have much of an economic base before Tamarack. Mexican developer Alfredo Miguel Afif began planning Tamarack in the late 1990s. He brought in Jean-Pierre Boespflug, a former executive at Cisco Systems Inc., as chief executive. Mr. Boespflug helped persuade Idaho’s governor to support Tamarack’s development plan, which got final approval in 2003.

Tennis stars Andre Agassi and Steffi Graf agreed to develop a Fairmont Hotel as part of the resort. Mr. Boespflug personally wooed prospective buyers, leading hiking tours. Construction attracted workers who spent at hotels, restaurants and bars. Idaho Gov. C.L. “Butch” Otter last year declared April 27 “Alfredo Miguel Afif Day.”

Things abruptly changed in June 2007, Mr. Boespflug says, when he traveled to the East Coast to meet with another investor in Tamarack’s planned Fairmont Hotel. Buyers had just committed more than $100 million for an initial offering of Fairmont condos, so “we were hoping to be greeted by big cheers and a check,” he says. Instead, the investor, who had already put up money for the hotel, said, “‘We don’t have the money,’” Mr. Boespflug says.
The investor confirmed his group has decided not to put up any more money for the hotel, but couldn’t comment in detail because of legal proceedings.

Lack of funding forced the resort to slow construction on the base village and hotel in late 2007 and in danger of missing a payment to Credit Suisse, Mr. Boespflug arranged a $118 million credit line with French bank Société Générale. February this year, the bank withdrew the line “due to market conditions,” says Société Générale spokesman Jim Galvin.

Tamarack went into default on its Credit Suisse payments the same month and business entities owned by Messrs. Boespflug and Miguel, which hold a majority ownership stake in Tamarack, filed for Chapter 11 bankruptcy. Credit Suisse followed with a foreclosure suit, seeking to take over Tamarack’s majority-ownership stake, according to state and federal court filings.

Almost immediately, ex-vice president, Rory Veal sued the resort to recover severance pay and unpaid commissions he claimed were still owed.

Credit Suisse has filed a second lawsuit for unspecified damages aimed at Boespflug and Afif for breaching a written agreement included as requirement for the $250 million loan.

In all, Tamarack Resort owes more than $300 million to lenders and international banks, including about $262 million to Credit Suisse.

At the time of the lawsuit Boespflug said that the move was anticipated and will give the resort time to “either refinance, add a partner with additional financing or sell the resort to a suitable buyer capable of managing the asset with the continued interest of the community in mind.”

It would seem they are still looking as construction grinds to a complete halt this summer. – The base village is still unfinished; the area slated for a Thai restaurant is roofless and the ski shop and pub are in plastic tents. Home sales have all-but dried up says Judy Land, a local real-estate agent. In 2006, 1,250-square-foot Tamarack cottages sold for more than $900,000 - Ms. Land says she recently sold one for $650,000.

One mans disaster is another mans bargain