Judge dismisses Aspen Land Fund bankruptcy
ASPEN – A federal judge Tuesday dismissed the Chapter 11 bankruptcy of a development group planning to build a hotel at the base of Aspen Mountain.
During a hearing in Denver, Judge Howard Tallman lifted bankruptcy protection from Aspen Land Fund II LLC after its major creditor, Alpine Bank, filed a motion last month for the case to be dismissed in an effort to collect on a $22.25 million promissory note that the development company owes.
Aspen Land Fund II, a subsidiary of Newport Beach, Calif.-based Centurion Partners, didn’t object to the dismissal because it furthers its restructuring plan for the business, according to court documents.
What the dismissal means isn’t entirely clear. Alpine Bank Vice President Jon Tollefson declined to comment, and John Sarpa, a principal with Centurion Partners, said he was limited on discussing the complex proceedings.
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But it does appear that not having bankruptcy protection furthers Aspen Land Fund’s efforts to raise capital and continue negotiating with the bank.
“We are doing everything we can to reorganize our finances,” Sarpa said.
Aspen Land Fund filed for bankruptcy protection Sept. 25, 2009, 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.
After Aspen Land Fund filed for bankruptcy, however, Alpine Bank did not enter into a contract with any other entity, which either indicates its confidence that the note will be paid or that no one was willing to get in the middle of the complex process.
Lifting the bankruptcy protection does allow Alpine Bank to continue foreclosure proceedings, but it doesn’t appear that’s likely at this point.
“The bank and I’ve agreed to keep negotiating,” Sarpa said. “Now we can have our own direct dialogue.”
The bank, through Denver-based law firm Ballard Spahr LLP, had claimed that it is not adequately protected because it says the value of Aspen Land Fund’s collateral is nearly $4.5 million less than the debt owed.
The promissory note is secured by a deed of trust, and the vacant property on South Aspen Street is being used as collateral.
Aspen Land Fund entered into a business loan agreement with Alpine Bank in 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 planning 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.
Aspen Land Fund has argued that the property will be worth more if and when the hotel development rights are secured.
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 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.
Centurion Partners is scheduled to appear in front of the Aspen City Council Feb. 26 for the first reading of an ordinance that seeks approval to build a 122,000-square-foot hotel-residence project known as The Lodge at Aspen Mountain. The majority of a citizen task force in December recommended that the ordinance be approved.
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