Alpine Bank seeks order to resume foreclosure on Aspen hotel property
ASPEN – Alpine Bank is seeking a court order that would allow it to continue foreclosure proceedings against the development group that is planning to build a hotel at the base of Aspen Mountain.
Alpine Bank this month filed motions in U.S. Bankruptcy Court in Denver seeking to dismiss Aspen Land Fund II LLC’s Chapter 11 bankruptcy case and asks for relief from the automatic stay, which prevents adverse action to be taken against the development company by its creditors.
The bank, through Denver-based law firm Ballard Spahr LLP, claims it is not adequately protected because the value of Aspen Land Fund’s collateral is nearly $4.5 million less than the debt owed.
“In order for the debtor to effectively reorganize, the debtor must rid itself of the property,” states the motion filed by Alpine Bank on Jan. 8. “The extreme debt on the property renders the possibility of a recapitalization of the debtor highly remote without selling the property. Even the sale of the property would not capitalize the debtor as the entirety of the proceeds would be paid to the bank with the remainder, if any, to South Aspen.”
The development company, which is a subsidiary of Newport Beach, Calif.-based Centurion Partners, owes Alpine Bank in Aspen $22.25 million in the form of a promissory note. That note is secured by a deed of trust, according to court documents.
Aspen Land Fund entered into a business loan agreement with Alpine Bank in March 2008 to fund the development of either 17 townhomes, which have already been approved, or a hotel, which is currently going through the city’s approval process.
The bank recently obtained an appraisal of the vacant property, which as of Nov. 20 lists its value at $19 million, assuming current land use approvals. That property is being used as collateral for the promissory note.
Alpine Bank holds as additional security a CD valued at nearly $1.6 million. The value of the property and the CD is roughly $20.6 million. The bank claims it is left unsecured by $4.5 million, according to court documents.
The property also is encumbered by a $4.9 million junior lien to South Aspen Real Estate LLC, which was financed by Goldman Sachs. Alpine Bank claims Aspen Land Fund is unsecured on that lien as well.
Alpine Bank claims that the total debt is nearly $29.9 million – 57 percent more than the appraised value of the property.
“There has been a substantial or continuing loss to or diminution of the estate and there is no reasonable likelihood of rehabilitation,” according to Alpine Bank’s motion to dismiss the bankruptcy case. “The nationwide economic downturn has substantially impaired property values in Aspen and continues to erode the value of the property. The credit markets are illiquid and offer no reasonable likelihood of rehabilitation whether through obtaining a construction loan or refinancing the debt …”
John Sarpa, principal of Centurion Partners, declined to comment on the recent motions, and said he and his partners are still renegotiating the loan with Alpine Bank.
Aspen Land Fund II filed for bankruptcy protection Sept. 25 in a move to prevent another company from acquiring the land and the development rights on South Aspen Street.
The move was in response to Alpine Bank entering into a contract with an unknown third party to sell its loan on the project even though the firm had been in negotiations to extend the terms of the note.
Chapter 11 allows the company to reorganize its finances and prevents Alpine Bank from foreclosing on the property. In the meantime, Sarpa and his partners are raising new capital in an effort to continue planning and building the hotel, known as The Lodge at Aspen Mountain.
Alpine Bank claims that Aspen Land Fund has failed to meet the requirements of the bankruptcy code in that it has been more than 90 days since it filed for Chapter 11 and neither a plan of reorganization has been filed, nor have there been monthly payments made on the bank’s interest in the property, according to court documents.
Therefore, Alpine Bank is requesting that a judge grant its request to lift the bankruptcy protection, or give it relief from adverse actions as a creditor, so it can pursue remedies against the collateral.
“Not only is the collateral, of which the property is part, not necessary to an effective reorganization of the debtor, but an effective reorganization of the debtor is likely impossible in this case,” according to Alpine Bank’s motion.
A hearing is set Feb. 2 in U.S. Bankruptcy Court in Denver on the matter. Aspen Land Fund has until Jan. 26 to object to Alpine Bank’s motions.
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