East West Files for Bankruptcy in Tahoe Project

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17 February 2010

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SAM Magazine-Truckee, Calif., Feb. 17, 2010-East West Resort Development, an affiliate of East West Partners which has built luxury resorts in the Tahoe area, filed for bankruptcy yesterday.

The filing primarily affects three Tahoe-area properties: Old Greenwood, Gray's Crossing and the Northstar Highlands, along with Tahoe Mountain Club. It does not affect Northstar-at-Tahoe, which is owned by CNL Lifestyle Properties and managed by Booth Creek Ski Holdings.

East West said in court documents that its real estate sales have plunged by almost 60 percent. It has been unable to obtain funding to continue operations, forcing the bankruptcy filing.

East West has proposed a reorganization in which Barclays Capital will lead an investment of up to $32.5 million to recapitalize the company and bring it out of bankruptcy, and provide $10 million in short-term working capital. A company owned by East West principal Harry Frampton III will invest alongside Barclays.

Frampton told the Vail Daily that the bankruptcy filing won't affect operations in the rest of the company. In Colorado, East West is involved in the Westin Riverfront Resort & Spa project in Avon, still has interests in Eagle Ranch, and is doing projects in Breckenridge and Denver. The company is also involved in a project in Deer Valley, Utah.

Frampton said the Lake Tahoe development was rocked by both the weak economy in the Tahoe area and the loss of its lender, Crescent Resort Development. Crescent, a REIT, was bought a couple of years ago by Morgan Stanley for $6.5 billion, which financed the deal through Barclay's. When Morgan was unable to meet its payments, it relinquished Crescent to Barclay's.

Frampton told the Vail Daily that taking the Lake Tahoe project into bankruptcy was essential to "clean up" financing and other problems. He termed Barclay's infusion of cash "a real endorsement of the project," adding, "there are very few projects or companies that get $40 million in this environment." East West hopes this will put it back on track to complete the three projects involved in the bankruptcy.