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The developer of an upscale, scenic mountaintop community in Draper filed for Chapter 11 Bankruptcy late Friday.
SunCrest LLC. and its parent company, Dallas-based developer Terrabrook, plan to look for buyers to take over the Traverse Ridge project, which is one-third built and includes plans for a 3,000-home build-out. A Texas-based bankruptcy attorney says there should be no impact on current residents.
Meanwhile, Salt Lake City-based attorney Bruce Baird called the situation that precipitated the bankruptcy "a perfect storm."
The housing-market slump was one issue, but the development also was being built on steep slopes peppered with ancient landslides. That, plus it had been sued more than a dozen times. Many of the suits sought claims for allegedly unpaid bills, and one alleged city-developer collusion that damaged neighboring property. Some of those claims will disappear, but suits relating to the land - such as a suit that sought to prevent expansion of a detention pond - likely will remain.
"It just came to the point where it didn't work for the current developer," Baird said Friday.
"But it's a viable project in the long term, and we're working cooperatively with the bank and with SunCrest's parent company to make the best out of a difficult situation."
Draper staffers have acknowledged in past weeks that potential buyers are interested in the property, and the developer has hired Gary Nelson of Highland Commercial to oversee the sales process.
Jeff Shields, attorney for Zions Bank, said the bankruptcy could fetch a higher price than the alternative state-foreclosure process. He acknowledged that Zions Bank will continue to fund the project's operations and restructuring costs until a buyer is found.
"We're still very excited about this project," Shields said.
"We're disappointed this has happened and the current owners have elected to throw in the towel, but we think there's a lot of interest."
SunCrest's Texas-based bankruptcy attorney, Bill Wallander, said everybody wants the project to do well.
Wallander said vendors, employees and homeowners have been told about the bankruptcy.
The development likely will be put up for auction and a buyer would likely take it over June 4. The new owner would have the final say over what happens to an unfinished recreation center and whether the neighborhood grocery store would remain.
Said Baird: "The filing of the bankruptcy should not change in anyway the day-to-day operations of what's going on up there."
Since its inception, SunCrest has spent in excess of $65 million to purchase land and develop infrastructure. It has also spent $39 million-plus on subdivision construction and more than $8 million on amenities, including parks, a market and an unfinished club.
Zions Bank put SunCrest on notice two months ago after the developer defaulted on $58 million in loans. Draper City followed suit last month, noticing the developer it was in default on a master-development agreement.
SunCrest had also long struggled with Draper over how best to mitigate concerns that ancient landslides running beneath Traverse Mountain could reactivate, possibly sending infrastructure and homes careening down the hillside.
The two sides also had been at odds over who should pay for repairs beneath SunCrest Drive. Portions of the road are crumbling, and an independent engineering study showed the street is supported by substandard materials.
The developer built the road, but it insists the city had accepted, patrolled and received state money for it. Not so, say Draper officials, who counter that the developer has not yet laid the final layer of asphalt.