Almost a decade after a Texas developer began creating a village atop Traverse Ridge in Draper, an embattled relationship between the city and the developer is taking its final breaths.
The village is now home to everything from mansions to townhomes and retirement homes, but it is only about 30 percent complete. The site offers breathtaking views of two valleys, but it came with a slew of geological problems.
SunCrest, along with neighboring South Mountain, also has been heavily criticized for interrupting views from the valley and for struggles with heavy winter weather and school busing.
The developer of SunCrest filed for bankruptcy in federal court Friday, listing unmet loan obligations of about $58 million. SunCrest and its master developer, Dallas-based Terrabrook, were issued notices of loan default in late February. Terrabrook is managed by the investment firm WB Land Investment.
"We tried our best to make the project work," said an attorney for SunCrest, Bruce Baird, who has been hired as an independent representative.
SunCrest hopes to sell in early June. Draper already is speaking with interested buyers, said its attorney, Doug Ahlstrom. SunCrest also has started talks with eight to 10 potential buyers, Baird said, but no details have been made public.
SunCrest has about 2,500 home sites in the neighborhood, as well as a market and an unfinished community recreation center. It already has spent $65 million to purchase the land and provide infrastructure, according to documents filed in bankruptcy court.
That money will be lost in the bankruptcy, Baird said.
In 1999, SunCrest took out loans of about $58 million from Zions Bank. About $41 million of that sum remains unpaid. SunCrest also owes money to a group called Protera, the previous owner of the Traverse Ridge land, plus property taxes and mechanics' liens for the recreation center, according to the filing.
"I fully expect that the buyer of SunCrest at the right price with the ability to ride out this little storm we're in could make a lot of money on it," Baird said, saying the developer so far has done a first-class job.
SunCrest has been sued at least 17 times and is in default with Draper in its Master Development Agreement. The lawsuits primarily concern alleged unpaid bills and storm-water drainage problems that have affected nearby property owners. All have been automatically put on hold pending resolution of the bankruptcy, Baird said.
The Chapter 11 bankruptcy declaration won't seriously affect current homeowners in the mountaintop community, a neighborhood group there said Monday.
SunCrestResidents.org has not received any information from the developer about the bankruptcy but has been expecting Terrabrook to leave Utah for several months, said spokeswoman DeLaina Tonks.
A homeowner's association also has received little information from SunCrest, though the company fills the majority of seats on its board. The association will continue functioning as normal, said community manager Tod Bean.
The bankruptcy won't affect Draper city anytime soon, either, Ahlstrom said. However, any buyer who takes over for SunCrest will have to work with the city on myriad issues.
Draper city is a co-defendant with SunCrest in several pending court cases. The city also has asked SunCrest to repair roads in the development that were constructed poorly, at a cost of $25 million. In addition, a new buyer may have to renegotiate development agreements and will be required to build under a strict geological hazards ordinance enacted in December 2007.
Beyond that, Draper doesn't know what to expect, Ahlstrom said.
A preliminary hearing on the bankruptcy is scheduled for Wednesday. If all goes as planned, the property will then be advertised for sale. Until the SunCrest property is sold, Zions Bank will manage it, according to the filing.
"We're encouraged by the interest in the project, and we look forward to getting a good, new buyer," Baird said.
E-mail: rpalmer@desnews.com