Lodge at Aspen Mountain developers file for bankruptcy
September 26, 2009
ASPEN – A development group that wants to build a hotel at the base of Aspen Mountain filed for Chapter 11 bankruptcy Friday.
John Sarpa, a principal with Aspen Land Fund II, said the filing was a strategic move designed to prevent a third party from acquiring the land and development rights on South Aspen Street.
“It’s an effective tool to continue to operate the business,” Sarpa said.
Sarpa said the company will reorganize its finances as it moves forward with a citizen-based task force called the Lodge at Aspen COWOP (convenience and welfare of the public) for an approval to build a 160,000-square-foot hotel.
“After careful consideration of the options available that would permit its partners to continue to pursue the COWOP process and a possible hotel project in the face of this third party action, Aspen Land Fund II has concluded that having the financing reorganized under a Chapter 11 bankruptcy was the best course of action at this time,” Sarpa said in a press release.
For the past several months, Sarpa has said publicly that by the end of September he and the partnership group needed to have a definitive direction regarding what type of mixed-use hotel project would be acceptable by the community and elected officials at the Lift 1A site on the western side of Aspen Mountain.
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That’s because a key bank loan for the site was due to be renegotiated. While Aspen Land Fund II was renegotiating with the lender, the bank advised that it had entered into an agreement with an unknown third party to sell its loan on the project.
That third party has stated that its sole purpose for buying the loan is to eliminate Aspen Land Fund II and move forward in building 17 townhomes, which were approved years ago by a previous City Council.
It’s unclear what bank is involved or who has instigated the hostile takeover. Court documents, filed in U.S. Bankruptcy Court in Denver, were not available Friday afternoon.
Sarpa said Aspen Land Fund II has new capital sources that are in support of the bankruptcy filing, and the investors have a high level of confidence that there can be a reorganization and financing plan developed that will allow the process and the eventual hotel project to be successful.
Sarpa said Aspen Land Fund II wants to proceed with the COWOP process, which is currently reviewing the hotel project.
The land-use proposal has been in the works for six years, and has been shot down by the Aspen City Council twice. The most recent was in January when the council voted to send the development proposal to Aspen voters, but then pulled the May ballot measure so developers could regroup.
That resulted in the formation of a second COWOP group, which is focusing on the hotel and residence’s scale and mass – an issue that didn’t get fully flushed out last year when a different 26-member COWOP reviewed the proposal. The building’s size was the main reason the council wanted to send the proposal to voters.
Sarpa this past spring met with critics and in June presented a scaled-down development proposal, which is about 10 percent smaller than last year’s reiteration.
The Lodge at Aspen Mountain last year was part of a master plan that included a development proposal across the street known as the Lift One Lodge.
The master plan was recommended by the COWOP but was ultimately withdrawn because of a lack of support by the council. As a result, the COWOP task force was disbanded.
The developers of Lift One Lodge, David Wilhelm, Jim Chaffin and Jim Light, who are represented by Bob Daniel, have filed a separate application to build a 14,000-square-foot membership property on the eastern side of South Aspen Street.
Sarpa said the motives behind the bankruptcy are similar to other companies that have filed for Chapter 11 in that it allows Aspen Land Fund II to continue operating its business while reorganizing.
“Needless to say, this current situation is regrettable but in these uncertain economic times, many other companies and projects have used this method of reorganization to effectively restructure their financing and thus permit the underlying business to proceed,” Sarpa said in a statement.
“… We are confident that this course of action and process will allow us the time and flexibility in which to continue our progress and fulfill our ultimate goal of creating a mixed- use hotel project on the Lift 1A site.”
The matter will be discussed at the next COWOP meeting, scheduled for Wednesday.