This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Zions Bank now owns the 3,000-plus acre SunCrest project atop Draper's Traverse Ridge.
A judge late Thursday afternoon approved the bank's $25.3 million bid for the bankrupt property despite a long list of concerns from an attorney who argued that the property could garner more cash and better repay its investors.
Though he acknowledged that the mountaintop project's value has likely declined in the midst of a bad housing market, creditors' attorney David Leta argued SunCrest had surely not lost $25 million over the six months since a December 2007 appraisal, which pegged the scenic property at $51.6 million.
Leta represented a group of lenders that, like Zions Bank, loaned the now-belly-up SunCrest LLC developer millions of dollars to buy and develop a master plan for the scenic community. He asked Judge William Thurman to reject the sale and pursue a foreclosure sale process, saying the whole Chapter 11 sale has been "questionable" and "hasty."
SunCrest consultant Bruce Baird testified that a foreclosure sale could mean the SunCrest Clubhouse would never open, the SunCrest Market would close shop, and it could mean the demise of the entire mountaintop project.
Leta added that the Zions purchase price was not a fair-market value and it allows the bank to flip the property and make money for itself while leaving out other lenders.
Leta also alleged that Zions Bank acted as an insider and received preferential treatment. The bank saw the two competing cash bids before making its $25 million offer and had the purchase contract changed both on and after the auction day. That change sweetened the deal for Zions, said Leta, because the bank inherited the developer's legal claims against the city of Draper, which could be used as leverage for negotiating fixes in the master development agreement.
SunCrest attorneys said they were following bankruptcy guidelines when they changed the contract.
The developer's Dallas-based bankruptcy attorney Bill Wallander said nobody is pleased that the sale did not cover the debts, but he praised property marketer Gary Nelson's 71-day effort to attract bidders.
Wallander said the bank's $25 million credit bid was a good offer, given the poor housing market and the unwelcome baggage that came with the SunCrest property in the form of a slew of pricey disputes with Draper over infrastructure issues.
"We're not just selling an asset," said Wallander. "With that goes a very complex and highly litigious situation to date. Perhaps Zions will have better luck."
Zions does not plan to develop the property itself, said spokesman Rob Brough.
"It's likely to take a bit of time for that to happen," Brough said. "But now that the judge has ruled and the sale is final, our primary objective is to get it sold. We'd like to do that as quickly as we can."
* Zions purchase bid: $25.3 million plus $450,000 for lot 60, which includes the SunCrest Market and an unfinished clubhouse. The bank also assumes the Master Development Agreement with the city of Draper.
* Remaining Zions loans not relieved by the bank's credit bid: $18 million. *
* Highest cash bid: $7 million by R&B SunCrest.
* February 2005 appraisal of SunCrest value: $70 million.
* December 2007 appraisal: $65 million.
* May 2008 Zions Bank-commissioned appraisal: $25 million (with a window of six months or less for a sale); $40.5 million (with 12 to 18 months for a sale).
* The median value of a SunCrest residential lot is down 14 percent to 19 percent since the second quarter of 2007.
* Note: It could cost between $11.6 million and $20 million to correct the development agreement with Draper. The price would include building promised parks and trails as well as repairing roads and other infrastructure.