Under the Yakima Sun

The vision for the Vineyards Resort was of a Tuscan-themed community with a golf course and easy access to Yakima Valley vineyards. The reality turned out to be something quite different.

It was just 500 acres across an elevated stretch of sagebrush hills where jackrabbits and rattlesnakes make their home. But the land came with a view overlooking the Yakima Valley—and a dream of sunny Italy.

From these clay-crusted grounds would rise The Vineyards, a Tuscan-style luxury community, complete with an upscale 18-hole golf course, a boutique hotel, retail and recreational facilities, and room for more than 500 homes. All in a microclimate that is warmer and less windy than the rest of the valley.

For a place in this future paradise, Yakima businessman Doug Picatti put down $250,000. “It’s just great for golf, and a stone’s throw away from great wineries,” says Picatti. “This is the place where I would like to build a home.”

Bob Hall, owner of one of the largest car dealerships in central Washington, was also an early investor in the project. He was drawn to the wide open, sun-filled skies, lush orchards, vineyards and distant views of snowcapped Mount Adams and Rainier.

The vision for the residential community was first put forth by a Seattle-based team of attorneys and the grower who owns the barren property. Then a second wave of investors expanded the vision to include vineyards and wineries. Every study they conducted suggested there would be huge demand for homes in this new community. Hadn’t the Suncadia resort, just off Interstate 90 near Cle Elum, become a booming success?

An increasing number of aging Baby Boomers was helping transform eastern Washington wine country into a major retirement destination, says Ellensburg-based developer Gary Scott, co-manager of The Vineyards. Wine industry people got on board, believing the resort would boost the region’s credentials as the Napa of the Northwest.

Scott partnered in 2004 with Craig Schultz, a Yakima contractor and developer, who had joined the project four years before. The Crested Butte, Colo.-based Eagle Resort Development, which manages a resort community in Los Cabos, Mexico and several throughout Colorado, soon teamed up with Scott and Schultz.

But Tuscany wasn’t built in a day. The developers needed to secure water rights, develop access roads, and create engineering and design plans.

As real estate prices boomed in 2006, developers obtained a $12.9-million bridge loan from Basking Ridge, N.J.-based First National of America Inc. (FNA), one of the nation’s largest golf resort investing firms. But the loan came with strings attached: developers would have to sell 32 of the lots before the organization would release the money.

Despite these conditions, the project went forward. Roads were built, water was secured, and engineers and designers went to work. The 32 initial buyers, now called “founders,” placed their bets. Because that’s what their investment really turned out to be: a gamble.

They lost. In 2007, economic windstorms created by the implosion of housing and financial markets swept over that dusty valley in central Washington. Things were tough, but the first buyers raised money and were ready to build their houses.

That’s when developers got the really bad news. Stark Financial, a Milwaukee-based hedge fund that had bought the loans for the project from FNA, decided it would not supply the additional money the developers needed.

The developers turned to Dincom, a multibillion-dollar commercial real estate financing firm based in Douglasville, Ga., for the money necessary to continue the work. On Sept. 9, 2008, they girded for what they said would be a $50-million project. But then the stock market crashed and backing from Dincom, which was made in installments, also dried up.

Developers filed for Chapter 11 in November. Will the project ever be completed? “It’s anyone’s guess in these markets,” says Scott.

But time may be running out. On May 1, Stark Financial filed a suit that would end the bankruptcy proceedings and allow it to take title of the land.

The original buyers stand to lose everything. However, they are holding on to their Tuscan dream. “This project is ready to go, with water, access paths, and completed architectural and engineering designs,” says Picatti

But for the moment, jackrabbits still romp across the again-abandoned land, unhindered except for snakes and idle bulldozers baking under the Yakima sun. Instead of construction crews working the grounds, the only work being done is by lawyers in the courts, where the founders’ hopes and dreams now depend on the fall of a judge’s gavel.

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