The Silver Creek ski resort, a partially built, bankrupt development near Slatyfork, W. Va., was sold to the Federal Savings and Loan Insurance Corp. for $17.1 million at an auction held Friday in Marlinton, W. Va.
FSLIC, which was holding $33.5 million in debt secured against the 600-acre development, purchased the resort after a U.S. bankruptcy judge in South Carolina gave the federal deposit-insurance agency permission to foreclose on the project several weeks ago.
James DeFrancia, senior vice president of Lowe and Associates, a Fairfax consulting company that handled the sale for FSLIC, said there were no other bidders.
The property auctioned included a condominium lodge that still is under construction, 12 ski runs, three ski lifts and hundreds of acres of undeveloped land on Cheat Mountain. DeFrancia said FSLIC plans to spend approximately $750,000 to get the resort in operating order and to open it Dec. 14. The Kahler Corp., a management company from Rochester, Minn., has been hired by FSLIC to run the resort this winter.
FSLIC's long-term plans, however, are to sell the project, a spokesman for the agency said. FSLIC will consider plans for either a bulk sale to a developer or a plan for offering the finished condominiums to the public.
Silver Creek, which was started three years ago by American Resort Services of Columbia, S.C., was to be a sprawling four-season complex with dozens of ski runs, swimming pools, a skating rink, golf course and several thousand slope-side condos and town houses.
ARS officials could not be reached for comment after the auction. The firm's president, John Kruse, said this summer that, because the ski resort was the company's only major asset, the company would be dissolved if FSLIC foreclosed on the property.
The project slipped into financial difficulties two years ago when its lead lender, San Marino Savings and Loan of Orange, Calif., was taken over by FSLIC.
FSLIC lent the developer $17 million for the Silver Creek project on top of $17 million lent by San Marino before the thrift was taken over by FSLIC. Last spring, however, FSLIC decided to stop lending money to the project and initiated a foreclosure.
ARS filed for bankruptcy under Chapter 11 in June to derail FSLIC's foreclosure attempt. U.S. Bankruptcy Judge Rufus W. Reynolds lifted the protection of the court several weeks ago, however, after determining that ARS did not have equity in the project or funds to continue operations.
ARS built three wings of a five-wing condominium named the Lodge at Silver Creek and had sale contracts on 255 of the 350 finished units. ARS was unable to take the contracts to settlement, however, because FSLIC and several of the subcontractors on the job had filed liens totaling $40 million.
The court order requires FSLIC to pay off a $1.5 million debt to McDevitt & Street of Charlotte, N.C., the contractor for the project, and a $100,000 debt to Sno-Engineering Inc. of Lyme, N.H., according to a schedule set by the court. FSLIC also has promised to pay $400,000 to the court for disbursement to other minor creditors.
DeFrancia said that the foreclosure of the project automatically releases $2.5 million in earnest-money deposits kept in escrow by the developer. Those deposits will be returned to the prospective buyers -- some of whom signed purchase contracts more than two years ago -- within the next few weeks.
The court order includes a provision that allows those prospective buyers to purchase their units at the original price, if FSLIC decides to sell the finished condo units at the project sometime before next June.
"As potential investors, we are relieved the battle is over," said David Litsey, chairman of a committee formed by the 255 prospective purchasers. "Everybody has been very nervous over the status of their deposits, and I think everybody just felt relief."
Litsey said that most of the purchasers were planning to wait and see how FSLIC managed the resort before deciding whether or not they will purchase units there if given that opportunity in the future.