EDEN – Lenders accused by Summit Powder Mountain of defrauding the resort have in turn alleged that Utah development is in default and is taking unfair advantage of foreign investors.
The problem is Summit Village, the planned centerpiece of an upscale resort expansion meant to attract corporate titans, big thinkers, artists and other high-profile personalities. Summit Mountain Holding Group, created by the founders of Summit Series when they bought the former local ski resort, launched a $ 207 million project in 2016 to build Summit Village. The venue could include commercial, restaurant and retail space, high density housing such as condos or townhouses, as well as a hotel and event space.
Summit sued two groups of lenders, Summit Village Development Lender 1 and Grand Canyon Development Holdings 3, in Salt Lake City U.S. District Court on August 4, alleging they had failed to honor a $ 120 million loan. and that they had committed fraud in doing so.
The lawsuit came two weeks after lenders filed a notice of default against Summit. In a response to the August 26 complaint, the lenders said the $ 120 million loan matured on June 28, so they began “a non-judicial foreclosure of the mortgaged property to take over the unfinished project.” .
The lending entities say they are made up of 81 Chinese nationals who, by contributing to US-based projects under the federal EB-5 program, can acquire permanent green cards. An individual must invest $ 500,000 in an American project that creates jobs.
Investors are “in pursuit of the American dream” and the visa that goes with it and they expect only nominal profits, according to the response to the lawsuit.
The 81 investors “seek to leave the People’s Republic of China for a better life in America,” and their investment has helped create new jobs, according to the document. Summit Powder Mountain, on the other hand, he said, “is an upscale real estate developer who is building a multi-hundred million dollar luxury ski resort and looking to populate it with some of the celebrities, millionaires. and billionaires of the world “.
The lenders say the requirements of the loan program are unambiguous and that Summit’s lawsuit “is a desperate effort to avoid its absolute, unconditional and irrevocable obligations.”
Under the terms of the loan, according to both parties, the loan provided for $ 120 million from investors and more than $ 87 million in equity that Summit brought to the project. They disagree on how the loan went.
Lenders said they paid $ 42 million into the project but did not contribute more because Summit allegedly failed to meet its obligation to channel funds representing the equity requirement as it progressed. of the project.
In the lawsuit, Summit alleged that the lenders raised the $ 120 million – aided by Summit’s attendance at an investor event for basketball star Kobe Bryant – but spent most of the money on d ‘other projects.
“Because the borrower was relying on these funds to complete Summit Village, the borrower was never able to do so,” the lawsuit said.
Summit Powder Mountain chief executive Mark Schroetel recently said the group is seeking further funding for the Village project and the loan dispute will not hamper the success of the project.
In their August 26 court filing, the lenders said the loan agreement contained a balancing requirement that “allows the lender to decline to advance loan proceeds” whenever the remaining loan amount, as well as the borrower’s capital contribution, “is not sufficient to fund all of the remaining costs to complete the project ($ 207 million).
The purpose of the balancing requirement is to ensure that there is enough money at all times to complete the project, the lenders said. Over the course of the loan, Summit contributed only about $ 36 million towards the minimum equity requirement, they said.
But in the lawsuit, Summit said the capital requirement “has always been to mitigate risk to the lender” and “was never intended to secure the borrower’s payment obligations.”
Summit argued that by the time the lenders paid $ 42 million, the loan agreement required Summit to contribute $ 30.5 million in equity. Summit said he actually contributed $ 35.9 million, including $ 29 million in land value, $ 3.6 million in proceeds from sales and $ 3.3 million in other contributions.
However, Summit said, because the lenders stopped making contributions, the borrower “did not have the funds to repay the $ 42 million.”
If the loan money had been turned over, Summit said, the village would have made $ 25 million in sales each of the past two years. The lawsuit said the loan default application interferes with Summit’s efforts to land another $ 150 million funding round.
The default notice the lenders served on Summit demanded $ 51 million and Summit’s lawsuit is asking for the same amount.
Summit has a separate 20-year bond package with Weber County, for $ 17.9 million, to pay for Summit Village’s infrastructure. County Treasurer John Bond recently said Summit was up to date on its annual $ 1.5 million bond repayments.