Lenders defend Summit Village foreclosure action
EDEN — Lenders accused by Summit Powder Mountain of defrauding the resort have alleged in turn that the Utah development is in clear project loan default and is taking unfair advantage of foreign investors.
At issue is Summit Village, the planned centerpiece of a high-end resort expansion meant to attract corporate titans, big thinkers, entertainers and other A-list people. Summit Mountain Holding Group, created by the founders of the Summit Series when they bought the former locally owned ski resort, began a $207 million project in 2016 to build Summit Village. The venue could include commercial, restaurant and retail spaces, some high-density housing such as condos or town houses, plus hotel and event space.
Summit on Aug. 4 sued two lender groups, Summit Village Development Lender 1 and Grand Canyon Development Holdings 3, in U.S. District Court in Salt Lake City, alleging they failed to deliver on a $120 million loan package and committed fraud in doing so.
The suit came two weeks after the lenders filed a notice of loan default against Summit. In a response to the suit filed Aug. 26, the lenders said the $120 million loan matured on June 28, so they commenced “a non-judicial foreclosure of the mortgaged property to take over the unfinished project.”
The lender entities say they are made up of 81 Chinese nationals who, by contributing to U.S.-based projects under the federal EB-5 program, may acquire permanent green cards. An individual must invest $500,000 in a U.S. project that creates jobs.
Investors are “in pursuit of the American dream” and the attendant visa and they expect only nominal profits, the lawsuit response said.
The 81 investors “are seeking to leave the People’s Republic of China for a better life in America,” and their investment helped create new jobs, the document said. Summit Powder Mountain, on the other hand, it said, “is a high-end property developer constructing a luxury ski resort for several hundreds of millions of dollars and seeking to populate it with some of the world’s celebrities, millionaires, and billionaires.”
The lenders say the requirements of the loan package are unambiguous and that Summit’s suit “is a desperate effort to avoid its absolute, unconditional, and irrevocable obligations.”
Under terms of the loan, according to both sides, the loan called for $120 million from the investors and more than $87 million in equity contributed by Summit toward the project. They disagree about how the loan has played out.
The lenders said they paid $42 million into the project but contributed no more because Summit allegedly did not live up to its obligation to funnel funds representing the equity requirement as the project proceeded.
In the suit, Summit alleged the lenders raised the $120 million — aided by Summit’s securing an appearance at an investors’ event by basketball star Kobe Bryant — but spent most of the sum on other projects.
“Because the borrower was relying on those funds to complete Summit Village, the borrower was never able to do so,” the suit said.
Summit Powder Mountain general manager Mark Schroetel said recently that the group was seeking other financing for the Village project and the loan dispute would not impede the project’s success.
In their Aug. 26 court filing, the lenders said the loan agreement contained a balancing requirement that “lets the lender decline to advance loan proceeds” whenever the remaining amount of the loan, together with the borrower’s equity contribution, “is not sufficient to fund all remaining costs to complete the ($207 million) project.”
The purpose of the balancing requirement is to ensure that at all times there is enough money to finish the project, the lenders said. During the course of the loan, Summit contributed only about $36 million toward the minimum equity requirement, they said.
But in the suit, Summit said the equity requirement “has always been to mitigate risk to the lender” and “was never intended to guaranty the payment obligations of the borrower.”
Summit contended that by the time the lenders had paid $42 million, the loan agreement required Summit to contribute $30.5 million in equity. Summit said it actually contributed $35.9 million, consisting of $29 million in the land value, $3.6 million in sales proceeds and $3.3 million in other contributions.
However, Summit said, because the lenders stopped making contributions, the borrower “did not have the proceeds necessary to repay the $42 million.”
Had the loan money been delivered, Summit argued, the village would have made $25 million in sales each of the last two years. The suit said the loan default demand is interfering with Summit’s effort to land a new $150 million round of financing.
The default notice that the lenders served on Summit demanded $51 million and Summit’s suit asks for the same amount.
Summit has a separate, 20-year bond package with Weber County, for $17.9 million, to pay for Summit Village infrastructure. County Treasurer John Bond said recently Summit is current on its $1.5 million annual bond repayments.