Commercial Real Estate
Under the Yakima Sun
By By George Finch March 31, 2010
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The vision for the Vineyards Resort was of a Tuscan-themed |
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 Valleyand 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. Its just great for golf, and a stones 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. Hadnt 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 regions
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 wasnt 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 nations 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 thats 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.
Thats 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? Its anyones 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 judges gavel.