ASC President: Redevelopment right on track
Gloomy financial reports for the American Skiing Company won’t harm the company’s borrowing power for real estate projects slated for South Lake Tahoe this spring, ASC’s president said.
“Right now we feel very comfortable that we’re going to meet our financial commitments,” said ASC President Leslie Otten. “We can point back to ASC history and see that every real estate venture has been completely successful and we’ve never needed help in any of our projects.”
A deterioration in ASC’s financial scores on Friday with Moody’s rating service was caused by poor quarterly earnings projections for ASC in its second quarter and company plans to increase capital expenditures despite reporting a loss in 1998.
One of ASC’s largest capital expenditures is set for South Lake Tahoe this spring.
ASC, which owns Heavenly Ski Resort and eight other ski areas and real estate properties across the U.S., is the lead developer in the $150 million Park Avenue Redevelopment Project. The project area, located along U.S. Highway 50 near the state line, calls for construction of a new gondola leading to Heavenly’s upper elevations, a quarter-share hotel resort, movie theaters, an ice rink, retail shops and restaurants.
The city of South Lake Tahoe has propelled the project with the use of eminent domain power in 1999 to secure the 13 properties on the block. Relocation of the 39 businesses in the redevelopment area is under way and demolition is expected to begin in April.
Upon final loan approval, ASC plans to buy the property from the city in May.
“The project in my mind is completely secure but we’re not in charge of everything. There are a large number of things that need to be in place to provide final loan documentation,” Otten said. “But we are on track for a May 15 start date.”
Councilman Bill Crawford, who also serves on the South Tahoe Redevelopment Agency, wants more proof than words of the company’s ability to pay for its development plans.
Crawford, who holds a consistent dissenting voting record on redevelopment issues, asked at last week’s agency meeting to see documentation of the company’s financial viability.
Article 2.1(f) of the Disposition and Development Agreement signed by the six proponents of the project states that prior to the city’s sale of municipal bonds, the developers must “present to the Agency evidence of sufficient equity or firm commitments for financing from reputable lenders … .”
Crawford said, even though $33 million of city bonds were sold in November, he has seen no such documentation.
“As of last Friday, the redevelopment agency board has not seen a scrap of evidence that the developers have their financing in position for Park Avenue,” he said. “I have worked for the last three weeks, with some agitation, to get that evidence and so far it is not there.”
A copy of a loan commitment from a lender that is addressed to ASC rests in the hands of Mark Northcross, the city’s financial advisor, and attorney Karen Tiedemann, who advises the city on redevelopment issues.
Tiedemann refused to comment on the situation but Northcross confirmed that he received the copy of the letter in October.
“The purpose of the commitment letter was to see if ASC was able to get the loan – the primary condition was the unit sales and that they have a site and building permit,” Northcross said. “It looked fairly good but I raised a few questions, not so much on the conditions but on the language.”
The Redevelopment Agency hasn’t been able to view the letter because it is confidential, ASC said.
“There are two confidential documents in this – the draft loan documents and the purchase price for the gondola,” said Stan Hansen, ASC’s vice president of real estate.
Otten said the lender backing the company in the Park Avenue Project is the same institution that provided recent financing for ASC’s Grand Summit real estate projects in The Canyons, Utah and Steamboat, Colo.
So far, the letter’s condition of unit sales, a secured site and building permits that have been drawn out by the lender is being met by both the city and ASC.
About $45 million in sales and more than 50 percent of the units in the South Lake Tahoe Grand Summit Resort have already been reserved, Hansen said.
On the city’s side of the deal, Redevelopment Manager Judith Von Klug said acquisition of the land by the city will likely be complete by April 19. Building permits hinge on reaching an agreement on one of the project’s last loose ends – a parking management agreement.
“I feel confident that we’ll have the agreement by April 1,” Von Klug said.
Crawford, who must make decisions regarding the city’s financial liability, is still looking for evidence on the paper trail.
“It would be so simple if they would just show the agency board the documentation,” he said. “I could be wrong but we’ll never know until the 11th hour if they have this in place or not.”
While most of the hotel construction will be paid for through unit sales, Otten said the approximately $35 million for the gondola has already been secured through the $150 million that was infused into ASC by the privately owned Oak Hill Partners in 1999.
ASC has until April 28 to show proof of financial commitment before the agency draws on a $5 million letter of credit placed by ASC as a sort of deposit to on the project.
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