“The club doesn’t have enough cash to make its $600,000 monthly payroll for its 521 employees or to buy food for its restaurants, or for the electricity needed to operate the chairlifts at its storied private ski area.”

By Robert Franks, The Wealth Report,WSJ,, November 14, 2008, 10:17 am

On Tuesday, I wrote about the bankruptcy filing by the Yellowstone Club, the Rocky Mountain playground for Bill Gates and other billionaires.

But a bankruptcy hearing in Missoula, Mont., on Wednesday shows just how bad the club’s cash crunch has become. According to an article in New West by Robert Struckman, only $40,000 remained in the Yellowstone Club’s bank account last week.

The article states:

“The club doesn’t have enough cash to make its $600,000 monthly payroll for its 521 employees or to buy food for its restaurants, or for the electricity needed to operate the chairlifts at its storied private ski area.”

In other words, the private golf and ski club with more than 350 of America’s richest members couldn’t afford to buy burgers for the restaurant.

The history of how the club got into this mess is complicated, and involves a messy divorce, lawsuit, and – most importantly – the real-estate bust and credit crunch.

The question now is who will end up as the owner?

Credit Suisse, which lent the club $375 million, is in the driver’s seat, according to the article. But the creditor battle is complicated by CrossHarbor, a Boston private-equity firm that has been working with owner Edra Blixseth on its own funding plan. As it stands, it looks like the club will be able to keep going with another $4.4 million from Credit Suisse.

There are, of course, two other alternatives. Gates can just buy it and save the hassle of worrying about where to ski this winter. Or, Blixseth can declare the club a bank holding company and ask for TARP funding. I’m sure Congress would understand.

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A pattern has existed for quite some time concerning recreational/residential developments such as this – it doesn’t always hold for every situation, but it does hold often enough times to be called a pattern:

The first and the second owners eventually take bankruptcy – the third owner does very, very well.

It will be interesting to see how this one plays out.

Comment by Ed – November 14, 2008 at 10:36 am
“its $600,000 monthly payroll for its 521 employees” – that is an avarage of 1151,00 $ per employee / month. Even if we take part-times and kitchen-help into account, this seems to be very, very low costs per employee and month. I mean, there you work for the uber-rich and thats all you get?

Comment by schreibvieh – November 14, 2008 at 11:08 am
So who got the home in Palm Springs? I liked the golf course they have there.

Comment by Just curious – November 14, 2008 at 12:10 pm
Did you see that pic of Edra Blixseth? Boy, has she had one nip-and-tuck too many. Another bride of Wildenstein in the making..

Comment by London Guy – November 14, 2008 at 12:54 pm
I have both golfed and skied this amazing but far too exclussive property. Unfortunately, due to a wreckless developer and realestate melt down, whoever ends up with the YC will no doubt restructure the business and membership plan and will make lots of $$$. Or, the members will be able to step in and preserve their “cub”. That won’t happen………tough time to be a member of the YC!

Comment by David – November 14, 2008 at 1:26 pm
Schadenfreude

Comment by Hans – November 14, 2008 at 2:14 pm
The original article says 246,000 A WEEK for salary, that’s $472 a week, $1,888 a month and $22,664 a year in average salaries.

Comment by Jones – November 14, 2008 at 2:59 pm
Yes, the pay was miserable there. You work for the most exclusive company in the world and get bottom pay. Plus they treat their daily employees like dogs while the 20+ vice presidents bring in salaries FAR OVER the normal pay. Nothing line making 200-300K to play golf everyday. Just another example of Wall Stree in Montanan! I hope the places goes public!

Comment by Former Employee – November 14, 2008 at 4:59 pm
This place gives wealthy people a horrible name. It’s a total joke in Bozeman (where I live). My husband and brothers used to work up there and the wastefulness of the company is SHOCKING. The theft by employees is rampant as is the overspending by greedy people eager to be that close to billionaires. I’ve skied up there and the skiing IS great, but getting up there requires driving over pothole after pothole. And the security up there is a TOTAL joke. They check people in but don’t check them out. Someone could be up there for days and no one would know. And the construction going on there is ridiculous. I can’t believe anyone would even want a membership there. And I used to work for another company owned by the Blixseths. I can’t begin to tell you how corrupt these people are. And yes, Edra looks AWFUL up close!!! She should be the poster girl for NOT getting plastic surgery.

Comment by Montana Girl – November 14, 2008 at 5:32 pm
Forget Ford and GM, The Club needs a government bailout post haste. The Federal government should be shipping in lobsters and magnums of champaign right now! These poor rich people are starving, and the economy of Gallatin county depends on an operational fiefdom.

Please, Max Baucus and George W. Bush, if you read this … please help to bail out the club. Raise taxes on the middle class if you have to, just don’t let our economic opportunity to be indentured like a feudal serf fail.

They need Port wine and fine cheeses now.

If the government won’t do their job and do it, I hope somebody has a telethon.

Comment by bigskybum – November 14, 2008 at 7:27 pm
We in little old Roseburg, Oregon could have told all you rich folks at Yellowstone Club that dealing with Tim Blixseth would be your downfall. He cheated our school out of Thousands of Dollars for a pledge he made to the booster Club towards our new football field and now we are stuck with the bill. He grew up in Roseburg and believe me we have all snickered at his rise and fall in wealth. You live at this club, you bail yourself out…..suckers.

Comment by Roseburg High School Booster – November 14, 2008 at 9:04 pm
Despite all of the bad press the yellowstone club is still the most unbelievable place to ski and vacation any ski/golfer could ever want. The reality of a private 2500 acre ski hill with a high speed lift network and incredible pistes is more than most can comprehend. And being located adjacent to an additional 5000+ acres of world class skiing at Big Sky and Moonlight basin is truly remarkable. As soon as the financial crisis is resolved and a new management team is in place, the Yellowstone Club will resume its quite roll as the worlds most exclusive and best ski destination and i might think about returning there for a job.

Comment by Former employee – November 14, 2008 at 10:06 pm
In the Bozeman Daily Chronicle, February 07, 2007

Living in the Shadow of the World’s Most Expensive Spec House

Some of my friends and neighbors resent the prospect of living near the world’s most expensive spec house, a coming attraction in the Yellowstone Club. This is certainly not mere envy of the “haves” by the “have-nots,” for some friends are well-educated and well-off. Rather, they correctly anticipate the imposition of costs on innocent communities. It is this injustice they begrudge.

I find this proposed $155 million house a remarkable curiosity. I logged the site, or somewhere near it, four decades ago. Further, in the 1980s, I was offered that logged over land for about $10,000 per section—and the seller would carry the debt. Although the chairman of the holding company, Burlington Resources, was a friend, this wasn’t a sweetheart deal: the land was worth little.

Today the land I logged is beautiful. Evidence of logging, stumps and traces of skid and haul roads, can be found, but most people wouldn’t notice. However, I recall that as the area was being logged, Greens asserted that it was ruined forever. They claimed it would take time measured on a geological scale for it to recover any ecological or economic value. Since then, nature has restored the beauty of the sites and entrepreneurial magic has generated a huge increase in financial value.

Our world has changed a great deal in the past few years. I don’t regret my failure to anticipate the huge increase in the value of logged over land. An entrepreneur, financially far smarter and more ambitious than I, seized opportunities and capitalized on them. I do, though, regret any significant loss of habitat and am sensitive to the negative environmental, economic, and cultural spillovers from high end development. It’s our duty to care about these costs, and to ensure those who generate them pay them. The attractiveness of our area is a magnet for money, thus change is unavoidable. Our task is to help manage this change through smart growth, and to be alert to the shifting of costs.

One of the negative spillovers resulting from the development taking place in the Big Sky area involves the additional development required to house the service workers. It’s naïve to expect someone who owns a $155 million dollar house, or a $15 million, or even a $1.5 million home, to do his own lawn care, house keeping, and general maintenance. A few may enjoy puttering around on a lawn tractor for a couple hours, or playing with a toy chainsaw (but surely not a pro Stihl or Husky). But few, if any, are likely to clean windows, floors, etc. They hire people, who hire people to hire help. Where do these workers live? Surely not in the YC, but preferably nearby.

People who live in exclusive retreats normally off-load their helps’ housing to other areas. Workers from the Big Sky area find homes in communities around the Gallatin Valley. There are many negative impacts to the communities that host these workers. “High-density” development in formerly rural areas is rife with potential problems. Putting cultural differences aside, current residents face increased taxes to cover additional schools and public services. It is especially problematic if development is subsidized by federal agencies.

The mere distance and geography separating workers’ homes in the Valley from their jobs up in the Big Sky area also compounds the problem. The commute to Big Sky is dangerous, time consuming, and generates both CO2 and demands to widen the road up Gallatin Canyon. Mass transit is certainly not a viable solution here. Workers clock in at various hours at hundreds of different sites. This is not like hauling workers to a mine mouth. Increased road capacity will become a necessity. And since we can’t change topography, this will be to the detriment of the Gallatin River.

Fortunately, people who live in multi million dollar homes can easily afford to pay help enough to live comfortably in the Big Sky area. When the state permits the next gravel pit, could it require affordable housing on the reclaimed site, rather than more million dollar condos? Asking residents of the Valley to subsidize workers’ housing is an outrage. This, not wealth itself, really is something to resent.

Comment by Gateway timber faller – November 14, 2008 at 10:18 pm