They still talk about the time President George Bush came to Tamarack, the up-and-coming Idaho resort that seemed destined for fame right from the get-go. On a warm August day, a Marine One helicopter landed on the fourth hole of the new Osprey Meadows Golf Course, and out stepped the President, surrounded by an entourage of 100 Secret Service agents. During two days of mountain biking and schmoozing with Governor Dirk Kempthorne, Bush bestowed instant credibility on a place that most people would be hard-pressed to find on a map.

That was in 2005. Since then, Tamarack’s appeal to the rich and famous has grown. In 2006, Andre Agassi and Steffi Graf, the husband-and-wife former pro tennis stars, joined with a Florida development group to plan a luxury Fairmont Hotel. Other sports figures took notice and started buying homes and lots. Then the Tinseltown set, looking for the next Deer Valley but with fewer paparazzi, discovered the joys of hanging out without folks making a fuss over them. Even teen sensation Hilary Duff could slip into a spa session at The Lodge at Osprey Meadows without creating a stir.

With seven chairlifts on the mountain, a Robert Trent Jones II golf course and robust presales for condos in the future Tamarack Village, the resort’s success appeared to be a slam-dunk. For Tamarack CEO Jean-Pierre Boespflug, a former Silicon Valley electronics executive who partnered with Mexican businessman Alfredo Miguel in 2000 to start the project, the dream was close to reality.


Snap, Crackle, Pop
But in the middle of March the sky fell. In a series of fast-moving events, the resort’s key lender called in its loan, a second lender backed away from a bailout plan, and the resort was forced to file for bankruptcy to avoid foreclosure. Construction of the European-style village was abruptly halted, cranes and other heavy machinery went silent, and an army of workers retreated. Surrounded by a chain-link fence with padlocked gates, the half-finished village—with some buildings framed and others fully skinned—became a ghost town before it had ever been born. The scene resembled one of those sci-fi flicks in which the humans have vanished and zombies are about to move in.

Tamarack’s credit began to unravel in the latter part of 2007. The resort had borrowed $250 million from Credit Suisse Bank to finance the village, on an admittedly tight budget. But buyers were lining up in droves, and the condos were moving briskly. By year’s end there were commitments for 90 percent of them, according to Boespflug. Still, as is typical of such projects, the developer is obliged to keep deposits in escrow until completion, so the money could not be used to pay the debt.

The partners realized they needed more capital to finish the village, so they approached a French bank, Société Générale, for a new loan of $116 million. While that bank was evaluating their application, Tamarack continued work on the village, using what funds were left, and Boespflug and Miguel pressed Credit Suisse for extensions on their monthly loan payments.

They also asked Agassi and his Florida investors to purchase the site for the future Fairmont Hotel, a step that was not required when the project was announced in 2006. But with the hotel months away from starting its own construction, and with the sub-prime loan crisis paralyzing the financial world, the Agassi-Graf team wasn’t ready to accelerate a land transaction. Thus, another option was off the table.

Things took a turn for the worse in late January when Société Générale decided not to fund the new loan. No reason for the turn-down was given, but SG was having problems of its own, stemming from losses of $7 billion that were blamed on an unauthorized trader.

Soon afterward, Credit Suisse, citing missed payments, demanded that Tamarack cough up the entire amount, immediately. Boespflug and Miguel, who feared that the bank would foreclose on the property, filed for Chapter 11 bankruptcy.


Hoping for the Best
Ironically, the sturm und drang over Tamarack’s financial situation was raging while visitors were enjoying one of the best snow seasons since the resort opened in the winter of 2003. Managers say the ski area was generating good cash flow with more skier-days, more overnight stays and more ancillary revenue than ever before. “It’s been business as usual,” says Boespflug.

And the Fairmont folks hope so. “We want to break ground as soon as possible, between this year and next year,” says Robbie Oppenheim, president of Echo Partners LLC of Coral Gables, which is allied with Agassi Graf Development LLC. Oppenheim says he is confident that Tamarack’s money woes will be resolved. “The horses have left the barn. There is too much infrastructure here for this place not to succeed,” he says. “People who come here love it.”

“Right now, the financial markets are in a situation that we haven’t seen in 30 years, but our sales at the Fairmont are not particularly affected,” he adds. The hotel consists of 285 hotel, condo and penthouse residences that are being sold as whole-ownership units. If all goes according to plan—the original plan—the Fairmont Tamarack would open for the 2010-11 ski season.

For his part, Boespflug has been diligently looking for saviors. “There is still alternative financing available and we have not exhausted all of the sources,” he says. “We also are not against forming a strategic partnership with a very good lodging operator. We can always use someone who has access to a bigger book of consumers, and we welcome conversations with anybody who has a name in this business.” Other options, he says, include European hedge funds and pension funds: “While some lenders are overextended, there is still money out there in the world.” An outright sale of the resort, he acknowledges, is also possible.

Boespflug says that most lending institutions are unfamiliar with mountain resort developments, and take a dim view of condominiums as investments. That’s why Tamarack was launched with sales of cabins, chalets and lots. “If you do 100 cabins at $500,000 apiece, you can get the buyers to finance them. But if you do condos at the same price, you have to get the banks to finance them,” he says. “Return on investment with lots is very quick, but with condos it’s very slow.”

But without the worldwide lending meltdown, Boespflug claims, the Credit Suisse loan would have worked. “They were trying to do something original with resort financing, and it was the first time they had structured a product like this. We saw the danger of this crisis coming, but they said, ‘Do you want the $250 million or not?’ We negotiated with them, tried to fix the situation. But it’s harder to fix something than to do it right in the first place. I guess you could say ‘shame on us’ for accepting it. The lesson to be learned here is that the financial markets are inadequate for resort financing; they don’t understand the dynamic.”

Boespflug admits that the financial hiccup has had repercussions among potential buyers for real estate at the resort. “People see a half-finished product, and right now I cannot tell them when the village will happen,” he says. “I don’t have an answer for them. In some ways, this is a good time to buy, because I have given some discretion to my sales managers to be flexible.”

Tamarack’s financial woes are the latest in a long line of travails for the mountain. In 1983, French and American investors launched a four-seasons resort concept called Valbois—French for “wooded valley.” They aspired to build 3,500 residential units, ski trails, a marina on Cascade Reservoir, a golf course and snowmobile and equestrian tails. The site consisted of 2,500 acres of national forest land and 580 acres of private land. But Valbois became embroiled in controversies that stemmed from environmental impact studies and, in 1993, after investors started abandoning the project, the U.S. Forest Service cancelled a special-use permit. Five years later, Valbois was bankrupt.

That was when Miguel and Boespflug pooled their capital to resurrect the project. They scaled down the real estate to 2,100 units and shifted the site northward, outside the firing line of environmental opposition. Tamarack’s ski trails are on 2,143 acres of leased state lands, with the village and surrounding residential development safely tucked away on private land.

And it could grow beyond those limits. The Idaho Department of Lands is moving ahead with a plan to swap about 13,000 acres of isolated state lands for 8,000 acres of U.S. Forest Service land on the south boundary of the ski area (including terrain initially proposed to be part of Valbois), and the state could lease its new holdings to Tamarack for additional skiing terrain—yet more frosting for real estate investors.

Has Tamarack reached the point where it has to go forward, with or without its current owners? Perhaps. Scott Turlington, Tamarack’s former vice-president for external affairs and currently a consultant for the partners, says that Tamarack has invested over $500 million so far, with millions more to come. “Honestly,” he says, “we don’t envision a scenario of this resort failing.”

But then, very few foresaw the credit market meltdown, either.