At the Lake: City awaits property's future

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At the Lake: City awaits property's future

Provided by Tahoe Daily Tribune
March 13, 2007

Diamond Resorts’ intended $700 million buyout of parent company, Sunterra, may place the city’s eyes back on Lake Tahoe Vacation Resort’s southwest corner of Ski Run Boulevard and Highway 50.

The Las Vegas-based vacation ownership resort company is in the midst of developing a site behind the former Embassy Vacation Resort to make room for more units in Sunterra’s $10 million expansion plans. There, the company is ahead of its construction schedule.

But the lot the city’s most interested in is across the highway where 2.3 acres of prime land valued at about $2.5 million, according to El Dorado County Assessor’s figures, represents Phase 5 in the resort developer’s ambitious plans. Sunterra plans to add another 24 units and 13,000 square feet of retail space, but no construction has transpired.

The city sent a letter to Sunterra Executive Vice President Keith Maib six weeks ago requesting a firm intention to follow through with its proposal to develop the property located in the local government’s redevelopment zone.

The developer agreement allowed Sunterra a decade to complete the project. But following a bankruptcy filing, stock market delisting, management restructuring and other corporate challenges, the date lapsed in May 2006.

If the company doesn’t satisfy the city’s 1995 agreement requirements, the local government has the legal right to yank the property to make money off of it.

“Of particular concern is a $300 million lien held by Merrill Lynch Mortgage Capital, Inc.,” the letter drafted by City Manager and Redevelopment Director Dave Jinkens said.

First, the city needs to see a measure of good faith — which is what Maib said the company plans to do in a letter to be sent in response within a week.

“Our intent is to work with them, but that’s a prime parcel,” said Mayor Kathay Lovell, who also sits on the city’s redevelopment agency board with the other council members.

Lovell wants to see at least 10 percent in a non-refundable deposit of the assessed value from the company to show it’s serious about developing the lot. While vacant, no sales or transient occupancy tax can be generated — and the city may view that as a loss

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Customer service enhancements promised

Diamond Resorts to buy Sunterra: Company owns Lake Tahoe Vacation Resort at South Shore; customer service enhancements promised

March 13, 2007

A Las Vegas-based private resort firm announced Monday its plan to buy Sunterra Corporation, a publicly owned vacation ownership company that owns Lake Tahoe Vacation Resort in South Lake Tahoe.

Sunterra's deal with its rival Diamond Resorts amounts to $700 million in cash and liabilities, the latter part making up over half the transaction. At $16 a share, it's expected to close by the end of the next quarter.

With two decades under its belt, Diamond Resorts International LLC operates a group of affiliated companies that develops, operates and markets vacation ownership resorts in the western United States. Formerly known as International Resort Group, Diamond Resorts' closest property is the Polo Towers located off the Las Vegas strip.

In turn, Sunterra manages 100 timeshare resorts in 13 countries, primarily in North America, Hawaii, the Caribbean and Europe.

Diamond Resorts' intention to purchase Sunterra gives the company an opportunity to move into the Lake Tahoe market, expand its timeshare offering and move the publicly traded Sunterra into a private standing. The business practice is common among companies trying to avoid the multitude of regulations, including Sarbanes-Oxley legislative restrictions that came about as a result of WorldCom and Enron financing scandals.

"The benefit is we won't have to deal with Sarbanes-Oxley, and this will allow us to expand," Chief Executive Officer Stephen Cloobeck told the Tahoe Daily Tribune in a conference call Monday.

Cloobeck said no changes in staffing are expected.

"We anticipate no demonstrative changes in our Northern California assets except there will be more of a customer service enhancement," he said. He gave as an example the standardized upscale bedding Marriott has formalized. Marriott, which runs two time-share hotel properties near Stateline, is one of its primary competitors.

"This is all to deliver a consumer experience," he said.

South Lake Tahoe Mayor Kathay Lovell said she was surprised by the news, but was comforted in knowing the experienced firm would be taken over, given Lake Tahoe Vacation Resort's expansion plans in the heart of South Lake Tahoe's redevelopment zone.

In evaluating whether to proceed with the formerly named Embassy Vacation Resort plans on lots on both sides of Ski Run Boulevard and Highway 50, Cloobeck said he's unfazed by the growing list of competitive units going in or offered in recent years on the South Shore. In particular, the latest to be built at the 12-acre site where a $410 million convention center complex come May left Cloobeck slightly unimpressed based on his opinion of hotel condominium projects.

"I don't think they work," he said sharply.

Inherent risks to investments aside, the two companies are seeking a smooth transfer of ownership despite Sunterra's history of bankruptcy, U.S. Securities and Exchange Commission inquiry, Nasdaq stock market delisting and the firing of its chief accountant, Grant Thornton. A new accountant has been hired.

"We're still subject to the SEC's inquiry and the shareholders' lawsuits. We just don't know how it will play out. We're working through that," Sunterra's interim Chief Executive Officer Jim Weissenborn said.