The Yellowstone Luxury Residence Club Drama Comes to an End

Yellowstone Club sold at auction for $115 million

The saga of Yellowstone, the super-expensive luxury residence club in Montana is finally over. At an auction last week, the less-than-surprising winning bid of $115 million came from CrossHarbor Capital partners. $35 million will be in cash, $80 million a promissory note to Credit Suisse, the original lender.

Earlier this month, the Federal judge in charge of the case ruled the original loan to the Yellowstone was predatory, and was to be subordinated to other debts – despite the fact that Credit Suisse was the primary charge holder on the property. Seeing as Credit Suisse made in excess of $7 million in fees and apparently allowed one or both of the original owners, the Blixeths, to use the money outside the club, meaning less than $38 million of the original $375 million went into the club, this is perhaps not surprising, and part of the agreement reached is that this allegation will now be dropped.

Previous to that, the same judge had allowed an interim loan (coincidentally from CrossHarbor Capital) of $20 million to be given to the club on top of a $4.5 million loan given in November last year. Credit Suisse fought this loan and were instructed by the judge to move their lien to a French Chateau owned by Mrs. Blixeth. Said Chateau has been on the market for some time, and is still unsold.

Mrs. Blixeth, one of the previous owners said,”It’s bittersweet for me, but the goal of getting Yellowstone Club into a stable ownership and foundation for both the employees and the members has been met.”

I find that a little odd, considering Mrs. Blixeth was also loaned $35 million by CrossHarbor during a divorce battle for control of the club in 2008 when it was first put into bankruptcy. Mr. Blixeth was not available for comment, but I understand he is still under investigation for using $200 million of the original $375 million Credit Suisse loan to pay off personal debts. It is also worth noting that one of the principals of CrossHarbor, Sam Byrne, is also a member of the club and owner/developer of part of the property.

So perhaps the drama is not quite over? One wonders who exactly is going to pursue the missing $200 million, whether or not the judge happens to have any interests in CrossHarbor Capital and whether Credit Suisse have the stomach for any more in-fighting. Their losses on this one alone are in the order of $300 million; they have dropped another $250 million on Tamarack, and are looking at more losses on several other ski, golf and beach resorts around the U.S. Still – small potatoes compared to their overall losses of $5.2 billion Q4 2008, but I have a feeling they will be rethinking their involvement in luxury resorts in the future.

During the original bankcruptcy filing, the club claimed $778 million in assets, so this is also one of the bargains of the century. Yellowstone has, in the past, been sued numerous times for environmental destruction and has been forced to pay millions in fines for water pollution, failing to comply with DEQ permit requirements and building without a permit.