November 23, 2008 - Vineyards Property LLC, Yakima WA

Unable to obtain financing for the $100 million, 500-acre Vineyards Resort because of the nation's economic woes, developers have filed for bankruptcy protection but insist that the project remains viable.

The Chapter 11 petition for reorganization of assets was filed Thursday in U.S. Bankruptcy Court in Spokane by Vineyards Property LLC to avoid a forced sale of the property northwest of Zillah in the lower Yakima Valley, said Rich Barnes of Avon, Colo., co-managing partner.

"No banks are lending. Zero," Barnes told the Yakima Herald-Republic. "There is no commercial lending market out there."

Vineyards Property, which also includes Gary Scott of Ellensburg, the other managing partner, and Craig Schultz, a Yakima builder and developer, was formed to develop nearly 600 home sites, an 18-hole golf course, clubhouse, hotel, recreation center and Tuscan-themed village as a destination wine country resort.

A foreclosure sale, set for Friday because the developers failed to maintain payments on a $12.9 million bridge loan that was obtained to get the project started in 2006, was called off because of the bankruptcy filing.

The foreclosure battle began a week after groundbreaking in September. Developers later obtained additional financing to proceed with work and to begin repaying the bridge loan held by Stark Financial, a hedge fund in Milwaukee.

After an initial payment of $800,000 staved off foreclosure last month, the spigot ran dry.

"We are very disappointed that our lenders will not fulfill their commitments," Barnes said in a news release. "This move is about protecting an asset that will someday become the keystone platform for Washington wine country."

The bankruptcy filing did not list total assets and liabilities or secured creditors. Among the 20 top unsecured creditors, the largest debt is $1.4 million owed to Selland Construction of Wenatchee for site development.

A meeting of creditors is tentatively scheduled Dec. 18 in Yakima.

"This puts the project in better shape than it otherwise would have been. We will continue to work the project," Barnes said. "We are working to discover other sources of stabilized financing."

About 30 people who made $250,000 financial commitments for some of the 230 single-family housing lots in the project are protected because their payments are in escrow and will be returned if the lots aren't created, members of the development group have said.

Bob Hall, a Yakima automobile dealer who is one of the initial buyers or founding members, said Friday he was confident about the future of the project.

Original story - SeattlePI.com