Woodbridge declares bankruptcy, creditors include Aspen groups
December 5, 2017
Woodbridge Group of Companies, the developer of high-end properties in the Roaring Fork Valley and elsewhere, has declared Chapter 11 bankruptcy protection in the wake of an investigation by the Securities and Exchange Commission.
The company said it has approximately $750 million in debt, while it "will continue to operate as before through the Chapter 11 proceedings."
Woodbridge's Chapter 11 petition, introduced Monday in the Delaware bankruptcy court, reports it has between 10,001 and 25,000 creditors. Locally they include the city of Aspen's Utilities Department, two Aspen law firms, architectural firms, the Pitkin County Republicans, and other companies and individuals.
Of the 30 creditors with the largest unsecured claims, one — Janckila Construction of Carbondale — is based in the valley. The petition says the company is owed $527,223, though a Janckila official said Tuesday the debt is "erroneous, and it is our understanding that we will be removed in due time."
Most of the remaining creditors are mainly in the Los Angeles area; Woodbridge is based in Sherman Oaks, California.
The bankruptcy filing was the latest move by Woodbridge, which last month closed its office in the Aspen Glen residential neighborhood about 3 miles north of Carbondale, reported the Glenwood Springs Post Independent.
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"Woodbridge will close the sales office at the end of the month," the company said in a statement published by the newspaper. "Our remaining properties will be listed with local brokers. We will continue to sell, hold and develop land in Aspen Glen, based on market conditions."
Aspen broker Tony Scheer is among those brokers on Woodbridge's local website. Contacted Tuesday, he said he no longer works for the firm. He referred questions to Laura Gee, Woodbridge Realty Unlimited's managing partner in the valley. She did not return a telephone message seeking comment.
Woodbridge's local listings include an $11.75 million home for sale in Snowmass Village, a $2.7 million home in Aspen, and at least five homes priced over seven figures in Carbondale, among other properties, according to its website.
The Aspen Glen closure came on the heels of reports that the U.S. Securities and Exchange Commission is investigating Woodbridge for fraud. The Colorado securities commissioner, in an Oct. 12 statement, also said it was investigating Woodbridge Mortgage Investment Funds, a Woodbridge affiliate, of selling "unregistered securities, soliciting of securities by unlicensed representatives, and fraudulent statements and omissions of fact related to the sale of securities."
More than 450 Colorado investors had put $57 million into Woodbridge through Oct. 12, the securities commissioner alleged. Similar probes are underway in Arizona, Massachusetts, Michigan, Pennsylvania and Texas.
Dozens of Woodbridge affiliates, including some in Carbondale, also declared bankruptcy in conjunction with the flagship firm's filing.
A statement from Woodbridge said the bankruptcies are the result of the cost of doing business, the ongoing investigations, and the inability to pay its one-year notes to investors as scheduled Friday, the same day Robert Shapiro, the company's president, manager and CEO, resigned. Multiple media outlets, including The Wall Street Journal and Bloomberg News, reported Shapiro will receive monthly payments of $175,000 for his role as a consultant.
"Historically a leading developer of high-end real estate, as the size and scope of the business has grown, increased operating and development costs have been exacerbated by the unforeseen costs associated with ongoing litigation and regulatory compliance," the statement said. "This combination of rising costs and regulatory pressure led to a loss of liquidity, resulting in Woodbridge's inability to make its regularly scheduled one-year notes payment due Dec. 1, 2017.
"In consideration of all of these factors, the company determined that a recapitalization of its debt provides the most efficient and effective path to restructure debt and maximize recovery for its creditors and investors."
Woodbridge's statement also said the "company will continue to cooperate fully and work with the SEC and state regulators toward resolution of any investigations."
As part of the reorganization, Lawrence Perkins of SierraConstellation Partners has been appointed chief restructuring officer, and Marc Beilinson of Beilinson Advisory Group has been appointed as independent manager, Woodbridge said.
Woodbridge said it also has a commitment of up to $100 million in debtor-in-possession financing from Hankey Capital LLC.
"Woodbridge has already taken a number of steps in the right direction to rebuild a solid financial platform," Perkins said. "Using the Chapter 11 process, the company will be able to continue its normal daily operations and expedite the process of recapitalizing its debt. We are focused on developing a plan of reorganization to emerge from Chapter 11 as a strong and viable company."