An auction earlier this month of the Gilman Property, 6,000 acres of land adjacent to the Vail ski resort that a judge once called "some of the most valuable real estate in the state, if not the world," came off as scheduled--but not as expected.
Despite the advance hoopla, only two bidders were either willing or able to pony up the more than $30 million sought for the Eagle County property, which has been haggled over in bankruptcy court for several years. And the apparent winning bidder on September 3 was Glenn Miller, a cowboy who owned the land before going bankrupt. Miller showed up with new financial backers and even though his team offered less money, he has an edge on buying back the land he lost.
Although the property has been said to have enormous profit potential, it's had more than its share of environmental and financial disasters (see "Game of the Century," March 26). Miller bought the property in 1983 for roughly $15 million. In 1984, a large part of it was declared one of the state's first Superfund sites because of hazardous mining tailings and residue. In 1996 Miller went bankrupt and was thrown off the land amid accusations that Vail Associates was meddling from the sidelines. Lawsuits revolve around the property like a swarm of insects .
At one time, even recently, so did speculators. Bankruptcy trustee Joseph Rosania testified in court on May 13 that inquiries concerning the property were flooding in from exotic money bases such as the Bahamas, Switzerland and Saudi Arabia. But they all disappeared when it came time to put down money. Miller--who regularly appeared in bankruptcy court in cowboy duds, took frequent cigarette breaks during the proceedings and generally looked as if he didn't have two nickels to rub together--won out by forming a partnership with two newcomers from Tennessee, Ezon Incorporated and Belz Investco Inc.
But maybe it wasn't such a victory after all.
One insider who has followed the bankruptcy case says the other potential bidders may have dropped out for good reason. "I think they bought a pig in a poke," the insider says of the Miller team. "I'm shocked that anyone would pay that kind of money for that parcel. Sure, it's 6,000 acres next to Vail, but 4,000 of those are too steep to build on. And the places where you could build are at close to 10,000 feet. A retired couple from back East aren't going to want a luxury home at that altitude--not unless it's pressurized."
Some people involved in the bankruptcy case also question why the new group from Tennessee would include Miller in its plans when all he's had is bad luck with the Gilman property. The Tennessee developers couldn't be reached for comment. But Rosania says that perhaps a consent decree that Miller previously obtained from the federal Environmental Protection Agency, which is still in the process of cleaning up parts of the property, might have something to do with it.
EPA enforcement attorney Nancy Mangone says the consent decree gives the agency access to the cleanup site. Such a decree is an agreement with a property owner, she says, and isn't passed along when the property is sold. "We can do a couple things in that situation," Mangone explains. "First, we can ask the new owner politely for access. If that doesn't work, we have legal avenues we can pursue...I will say that we've enjoyed our relationship with Mr. Miller. We pretty much leave each other alone."
Miller's attorney, Jim Hahn, insists he isn't surprised that Ezon and Belz asked Miller to come aboard. "I think it's fair to say that they kept Glenn for business reasons," says Hahn. "And part of those business reasons would be his good standing with the EPA. I think they also believed that Glenn was entitled to be part of the process since he spent the last sixteen years trying to maintain the integrity of the project.
"We were very lucky to find these partners," Hahn continues. "It was like finding a needle in a haystack. But it doesn't surprise me that there were only two bidders. Basically, this project has so much breadth and depth that it doesn't lend itself to the auction process. If you were a prospective buyer, you've got to look at several things. There are all these questions about the property's environmental status, and there's still some ongoing litigation about a key 1,700-acre parcel. It's a piece of property that anyone in his right mind would have a lot of questions about. I'm sure several people went to the trustee and asked for more time to look it over, but he couldn't allow that."
But the deal isn't done yet. Representatives from Ezon and Belz spent last week huddled with Miller and Hahn trying to hash out the financial arrangements, which must be completed by September 24. As part of the deal, the Miller group put down a $1.7 million non-refundable deposit and has to figure out a way to come up with an additional $32.3 million.
If the deal isn't closed by the 24th, the trustee will have four working days to find another buyer or the property will be handed over to Turkey Creek LLC, a group of lawyers that purchased option rights on the property using money provided by Vail Associates and later foreclosed on Miller. If the deal is completed by the deadline, Turkey Creek will walk away with a cool $28 million.
But the sole other bidder, Gilman Investment Company, thinks the court owes it a new auction.
Both teams submitted bids that the bankruptcy trustee originally rejected as too low. But when no other bidders came forward and Gilman Investment failed to produce any hard cash for a deposit on the deal, federal bankruptcy judge Marcia Krieger ruled in favor of the bid from Miller and his two new partners from Tennessee. "It's miraculous that Miller ran into Belz and Ezon," says Rosania. "I left the office the night before the final hearing thinking that I still had no deal."
Gilman Investment's Rich Galvin claims that his group was intentionally shafted. "I feel like I got kicked in the groin and stabbed in the back at the same time," says Galvin. "This was a stealth maneuver by the trustee. We had $36.5 million cash and were ready to move, but the trustee changed the wire-account instructions on us the day before the transaction so we couldn't get our money in.
"This is far from over, as far as we're concerned. We've filed a motion to reconsider with the court based upon the trustee shifting the account and the fact that Miller's bid was non-conforming."
Bankruptcy trustee Rosania says he doesn't believe Galvin's excuse for not coming up with the cash in time for the auction. The money would have gotten to him even if Galvin's team had sent it to the old account, he adds.
"There was a definite deadline, and you either met it or you didn't," says Rosania. "Miller's bid was non-conforming because it wasn't for the amount that I wanted, and I got a 5 percent deposit instead of a 10 percent deposit. Gilman Investment Company was offering $36.5 million, but it had zero cash to post. We tried hard to work it out, and I don't blame them for being upset."
Jim MacDonnell of the auction house Sheldon Good & Company says Gilman Investment was given every opportunity to make the deal work. "I would have been happier with their bid, because it would have meant more money for us," he says. "But in a deal this big, to be jerking around at the last moment is ridiculous. They didn't have the money. Anything else is just B.S."
That wasn't the only B.S. during the drawn-out bankruptcy hearings. One of the most amusing claims to the Gilman property came in the form of a fellow named Jeff Tucker from Miami, who insisted that he had purchased the rights to 1,700 acres on the western part of the property.
Tucker showed up in court to testify last July 7 armed with little more than a cheap suit and a smirk. He claimed he bought the Battle Mountain Corporation, which once operated a mine on the 1,700 acres, for $1,000 in 1994 from the former head of Battle Mountain, Tom Nevis. Nevis currently resides in Lompoc Federal Penitentiary near Santa Barbara, California, convicted of conspiracy and fraudulent wire transfer of funds.
Tucker had no stock certificates or deeds to prove his ownership, but he did have some land deeds that many in the courtroom speculated were not authentic. Tucker was unable to identify many of the signatures on the deeds and refused to give the court a phone number or address where he could be contacted in Miami. His claim is currently being litigated.
Although Hahn sarcastically refers to Tucker's testimony as a "red-letter day" in the complex case, he admits that potential bidders may have been scared off by Tucker's claims.
Hahn says he's confident that the remaining legal issues will sort themselves out and Miller's group will be able to close the deal by the 24th. "Our confidence level is running pretty high," says Hahn. "And because the $1.7 million deposit is non-refundable, that gives Ezon and Belz added motivation. They're savvy enough businessmen to not just sneeze at that kind of money. We're all about closing this deal."
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Rosania has his fingers crossed that Miller's team can do it. Not only would the $34 million pay off Turkey Creek, but $6 million would be left to pay off everyone else. After other secured liens against the property were paid, Rosania, the Internal Revenue Service and Sheldon Good & Company would take their cuts. Finally, general unsecured creditors such as Miller's former attorney, Jim Lillie, would get some money. Anything left over would go back to Miller.
"I've spent a lot of sleepless nights trying to make this work," says Rosania. "But let's just say we've got a back-up bidder if this first deal falls through."
And if that doesn't work, Vail Associates, which has stayed out of the main part of the fray, gets the land as part of its option agreement with Turkey Creek, even though Vail has never openly inquired about or bid on the property.
When asked about that possible scenario, Vail spokesperson Paul Witt replies, "Oh, really?