Luxury resort owners default on huge loan
SARANAC LAKE – One of the Adirondacks’ most luxurious resorts is in foreclosure after its owners defaulted on a multi-million dollar loan they used to buy the property.
The Point, located on Upper Saranac Lake in the town of Santa Clara, is now being managed by a court-appointed “receiver” while the foreclosure proceedings brought by Lehman Commercial Paper Inc. are pending. If the foreclosure moves ahead, the resort could be put up for sale at a public auction or sold off as a private residence, according to Julian Hutton of Merlin Hospitality Management, which ran the resort until it was ousted this week.
“Lehman’s attorneys have advised The Point’s owners that they intend to go through with the foreclosure process which will be concluded with a public auction of the property,” Hutton wrote in a letter Thursday to The Point’s roughly 40 full-time employees. “If there is no buyer at the price to satisfy Lehman’s loan, they have said they intend to hold on to it until there is or sell the property as a private home.”
The attorney representing Lehman in the foreclosure proceedings didn’t return messages left at his office Thursday and Friday. However, The Point’s general manager, Cameron Karger, told the Enterprise the resort won’t be auctioned off and that it will continue to operate as normal until a new owner can be found.
“The plan is to take care of The Point, pay the bills, pay the staff and keep everyone happy until we can find a proper owner for it,” Karger said Friday.
Originally built as a private retreat for William Avery Rockefeller in the early 1930s, the great-camp-style resort is located on a 75-acre peninsula. It has a large main lodge and 11 rooms that rent for between $2,000 and $3,800 per night.
In 2007, the Vermont-based Garrett Hotel Group sold The Point to a group of investors involved with Everlands, a high-end club. Everlands promised its members, for a one-time $1 million membership fee, exclusive access to dozens of unique, conservation-oriented properties. The Point was one of only six resorts actually owned by Everlands, with the purchase bankrolled by Lehman Brothers, before both foundered amid the economic meltdown of 2008-09.
The former Everlands investors who had bought The Point had taken out a $12.5 million loan through Lehman Brothers Holdings Inc. to cover part of the purchase price. The mortgage was renegotiated in 2010 and reduced to $10 million. It was later transferred from Lehman Brothers Holdings to Lehman Commercial Paper Inc.
Earlier this year, however, The Point’s owners defaulted on the mortgage. Documents filed in Franklin County State Supreme Court show they owe, as of Feb. 13, a total of $11,763,099 in principal and interest. On March 11, attorneys for Lehman Commercial Paper began foreclosure proceedings.
Susan and David Carusi, who live on Long Island, are part of the 20-member investor group that owns The Point. Susan Carusi said Thursday that the resort was impacted by a drop-off in the luxury travel market that followed the economic downturn, but the owners strived to keep it operating at the same standards its guests had come to expect.
In the last few years, however, Carusi said the owners had been looking for someone to buy them out. She said they were willing to sell it for a price that would just cover the loan, “even if we didn’t get paid back any of our money.
“At one point, they found some people who were willing to pay $9 million, which would have been a discount from what the mortgage was, but Lehman was just unwilling to do it,” Carusi said.
“Unfortunately all of these potential purchasers had the same concern that the size of the Lehman loan was too high to make it a viable concern,” Hutton wrote in his letter.
With no buyer on the horizon and a deferred interest payment of more than $500,000 due in February, Carusi said the owners weren’t willing to sink any more money into it. They defaulted on the loan.
“Basically the amount that was due was beyond the ability of any of the investors to step up and do it,” she said.
The owners can contest the foreclosure proceedings, but Hutton told the Enterprise he doesn’t believe they will. Carusi said that conversation hasn’t happened yet.
Not long after the foreclosure proceedings started, Lehman asked the court to name a “receiver” to oversee the property until the process is complete. Last month, state Supreme Court Judge John T. Ellis granted the request, hiring a receiver Lehman had recommended based on his experience in similar resort foreclosures in the past.
Lehman and the receiver subsequently fired Hutton’s company and have now hired Denver-based Providence Hospitality Partners to run the resort. Hutton contends that neither Providence nor the receiver has the necessary experience to manage a resort with as “high standards and unique aspects” as The Point. He also said he’s concerned foreclosure might drive away customers and hurt employees.
“I just hope that Lehman will continue to be good to them and keep them employed,” Carusi said. “As a guest, I want to make sure The Point still exists in the way it has. It’s very special. There’s nowhere else quite like it in the United States.”
Karger says he is comfortable with the new management company, which he’s worked with before, and says Hutton is just trying to incite “a public uproar” because his firm was let go, which Hutton denied.
“He’s very upset, and he’s been making a lot of phone calls to various places trying to talk about how the place is going to go downhill because they’re not here,” Karger said. “Nothing’s changing with The Point. I’m still the general manager, and I’m running things at the same standard that it’s always been. The only difference is the paychecks are coming from a different management company.”
Karger said the same thing has happened with two other Everlands properties Lehman took control of, which had also been managed by Hutton’s company: Bristol Bay Lodge in Alaska and Lone Mountain Ranch in Montana.
“Lehman has had them for several years now,” he said. “They’re not interested in closing the properties. They’re not interested in selling them to the highest bidder. What they’re interested in doing is keeping them running as usual until the value increases to the point where they can sell it when the economy turns around. It’s the same thing with The Point.”
Asked about Lehman’s reported rejection of the $9 million offer from a potential buyer, Karger said it’s “further proof that they’re not just selling it to the highest bidder.
“There’s no auction going on,” he said. “If someone wants to bring in a low-ball offer, they’re going to say no. They’re going to make sure the property is taken care of and that someone is wiling and able to pay a decent price for the property.”
Contact Chris Knight at 518-891-2600 ext. 24 or email@example.com.