Anna Stonehouse/The Aspen Times
The Aspen Club has less than seven weeks to file a reorganization plan in its bankruptcy case or deal with the prospects of foreclosure.
U.S. Bankruptcy Court Judge Joseph G. Rosania Jr., last week in Denver, set a Sept. 16 deadline for the business to submit its plan or face losing the court’s protection from its creditors that are collectively owed more than $100 million.
Aspen Club President Michael Fox, however, said Tuesday the health spa and fitness organization’s prognosis isn’t so dire.
“Our refinancing is finalized,” he said. “Now it’s just getting a plan a majority of our creditor classes can live with. We’ll never make anyone happy, but we’re trying to.”
The Aspen Club — once 1,500 members and 250 employees strong, generating $6 million in annual revenue, according to court filings — suspended its operations in April 2016. Around that time also marked the beginning of a major commercial and residential redevelopment of the facility, by Aspen standards, on the east side of town.
Construction ground to a halt, however, in the late summer/early fall of 2017, after the bulk of the subcontractors walked off the job because they had not been paid.
With little or no revenue being generated, the club currently is managing its financial affairs on $4 million in interim financing through a court-approved agreement with Florida-based EFO Financial Group.
That’s the same lender, Fox said, that has agreed to float another $110 million to the Aspen Club that would help settle its debts and allow construction to resume on the stalled project.
The bankruptcy court’s blessing would be required for that deal, and Aspen Club’s largest creditor in the project has been challenging its maneuvers at nearly every turn in the proceedings.
The creditor, lender GPIF Aspen, is the holder of a $45 million construction loan it acquired from FirstBank in December 2017. The club currently owes more than $34 million on the note.
In a May 31 court motion, GPIF Aspen suggested the Aspen Club’s Chapter 11 declaration on May 16 was an “abusive filing” and the organization has “little or no cash flow and no means to fund a reorganization or to make adequate protection payments.”
Speeding up the bankruptcy process, which GPIF Aspen successfully did with the judge’s approval of the May motion, forces the Aspen Club to demonstrate it has a strategy in place to start paying back its creditors. The Aspen Club, which owns the 5-acre property, has listed the value of its assets at $118.9 million.
The redevelopment project includes a remodel of the 40,000-square-foot Aspen Club & Spa building, the construction of a 54,000-square-foot lodge with 20 timeshares, and 12 multi-family affordable-housing units.
Attorneys for GPIF Aspen Club argued in the motion that the property is a “mothballed construction site consisting of real property improvements in various states of semi-completion.”
Yet the club has offered upbeat snippets about its future in court filings, including on June 14 saying, “Upon completing of the construction redevelopment, the Aspen Club will restart its operations, rehire its employees and again serve its members onsite.”
The Aspen Club’s legal team also has portrayed GPIF Aspen as hungry to acquire the property through foreclosure, with little concern for other creditors in the case.
GPIF Aspen Club is affiliated with Dallas investor Jeff Goff’s GP Invitation Funds, and is associated with companies that own the Canyon Ranch luxury resorts in Tucson, Arizona, and Lenox, Massachusetts, and the Brown Palace hotel in Denver.
Houston attorney Jason Cohen, GPIF Aspen’s lead counsel in the Aspen Club bankruptcy case, declined comment Tuesday.
Forcing the club to submit a reorganization plan on such an aggressive time line, Aspen Club’s attorneys had argued, failed to consider that “substantial construction” already has been completed on the redevelopment. Even so, Fox said “we’re planning to have the plan before that” — the deadline imposed by Rosania Jr.
GPIF made its argument using a provision in the Bankruptcy Code that stipulates that when a court deems a debtor a “single asset real estate” debtor, or SARE, it can set a deadline for a reorganization plan, and lift the stay on creditors if the plan is not filed on time.
Rosania Jr. ultimately agreed the Aspen Club is a SARE, setting into motion the mid-September deadline.
The SARE provision was part of Congress’ Bankruptcy Reform Act of 1994, and was intended to curb bankruptcy abuse by debtors seeking to buy time from their creditors.