With most of the debt gone, Treetops can seek new financing
A popular Gaylord area resort with notable owners including formers Chrysler Corp. CEO Robert Eaton may be ready to seek new funding for improvements and growth after improving its balance sheet and paying off nearly $35 million in debt.
Treetops Acquisition Co. LLCowner of Treetops Resort and Spa in Dover Township, Otsego County, has been modestly profitable since 2011 but was burdened with years of debt from an acquisition in 2002, followed by eight years of operating losses and some facility upgrades.
But the resort’s general manager, Barry Owens, said the company hopes to have more appeal to lenders to fund future improvements after settling with all but one of its creditors.
In July, US Bankruptcy Court Judge Daniel Opperman upheld a restructuring plan when the company filed for bankruptcy in November 2014, but a dispute with Otsego County Treasurer Diann Axford still lingers over past property taxes.
The exit plan has eliminated more than $30 million in debt and allowed six of the eight previous owners to acquire the resort’s full equity.
“We think we’re better positioned for bank financing, and a lot of that would be used for improvements to existing facilities and updating things,” Owens said. “Nothing in the plan is as massive as a new golf course, but we could look at some new amenities like zip lines or climbing walls — stuff like that.”
The resort’s past troubles can be traced back to a 2002 acquisition by a group of investors that included longtime golf pro Rick Smith Rick Smith Golf Academies at Oakland University and elsewhere.
Smith, Robert Eaton, ex DaimlerChrysler AG director and retired Illinois-Owens Inc. Chairman/CEO Robert Lanigan and several others provided $12 million in cash and a $10 million bank loan for the $26 million purchase.
The group, along with the Melling family, purchased approximately 85 percent of the resort property Melling Tool Co. in Jackson and Melling Resorts International keep the remainder.
But the resort reported eight straight operating losses through 2010, needed more capital from owners for improvements, became embroiled in a tax battle with Otsego County over years of alleged defaults, refinanced under pressure from banks, and struggled to keep up with interest rates keep.
“We recognized that serious (property) improvements needed to be made, and we were fortunate that those owners had the wherewithal to make them and didn’t have to take money out of operation at the time,” Owens said.
“Often a bankruptcy trustee is appointed in bankruptcy cases like this, but we always stayed in management, it never affected our employment or reduced our hours and we were able to continue working.”
A majority of resort owners bought up $14.3 million in acquisition debt in 2010 and 2011 that was then held citizen bankfor $11.9 million, as members of a newly formed Treetops Acquisition Co. II or TAC II LLC. The bankruptcy exit plan allowed this company to essentially convert the debt into Treetops equity.
The owners of TAC II – Eaton, Lanigan, CEO D. Scott Luttrell of the investment firm LCM Group in Dallas, CFO Mark Ridenour of Heidtmann Stahl in Toledo, formerly Progressive Tool and Industries Co. Shareholder Al Wisne and Mark Melling of the Melling Companies – are now full owners of the Treetops business.
Rick Smith and another non-TAC II member owner of Treetops Acquisition, Bob Sierra SB General Partners, were in a separate class from owner-creditors and retain no interest in the resort. Smith is a noted golf course designer and former golf operations manager at Treetops.
It wasn’t clear how much stake they lost, but their companies each held more than 10 percent equity, according to a company statement in court.
Smith’s attorney, Lynn Brimer at Strobl & Sharp PC in Bloomfield Hills and Drew Carr as Business Manager Loyal sports group in Orlando, Florida would not comment on this story.
Sierra and an executive with him Sierra properties Florida real estate companies didn’t answer calls.
“There was no plan against anybody (owners). I don’t know why they didn’t get involved in the creation of the new entity,” said Robert Mollhagen, partner at Varnum LLP and counsel for TAC II in bankruptcy.
“And it was all resolved amicably. Many appeals are filed in court to protect your rights, even though you are really actively negotiating. This has been a very successful bankruptcy and there has always been active negotiation from day one.”
The restructuring plan presented in June essentially swaps the TAC II claim for the entire equity.
The resort itself is on track to generate nearly $13 million in annual revenue, with variable monthly revenue, but that averages a few percentage points above breakeven, according to Owens and the income statements for November 2014 through June .
His debts were mainly related to the takeover. Treetops owed its top 20 unsecured creditors a combined $1.3 million, and nearly half of that was owed to a law firm Parmenter O’Toole in Muskegon.
The Otsego Treasurer’s Office claims that Treetops owes approximately $590,000 in past due property taxes from 2007 through 2012, but the company claims that it is actually owed a tax refund of approximately $41,000.