The Gaylord, Mich., resort, which emerged from bankruptcy in July, has shed most of its debt through the reorganization and may be ready to seek new financing for improvements and growth. The resort itself is on pace for nearly $13 million in annual revenue, with varying monthly income but averaging a few percentage points above break-even.

Treetops Resort in Gaylord, Mich., may be ready to seek new financing for improvements and growth after improving its balance sheet and unloading nearly $35 million in debt, Crain’s Detroit Business reported. 

Treetops Acquisition Co. LLC, owner of Treetops Resort, has been modestly profitable since 2011 but had been saddled with years of debt from a 2002 acquisition, followed by eight years of operating losses and some facility improvements. But resort General Manager Barry Owens said the company hopes to have more appeal to lenders for financing future improvements, after settling with all but one of its creditors, Crain’s reported.

In July, U.S. Bankruptcy Court Judge Daniel Opperman confirmed a reorganization plan in the company’s November 2014 bankruptcy, but a dispute with Otsego County Treasurer Diann Axford still lingers over past property taxes. The exit plan shed more than $30 million in debt and allowed six of its eight previous owners to gain full equity in the resort, Crain’s reported.

“We’re thinking we’re more positioned for bank financing, and a lot of that would be for improvements to existing facilities and to update things,” Owens said. “There’s nothing in the plan as massive as a new golf course, but we may look at a few new amenities like zip lines or climbing walls—stuff like that.”

The resort’s past struggles trace back to a 2002 acquisition by an investor group that included longtime golf pro Rick Smith of the Rick Smith Golf Academies at Oakland University and elsewhere. Smith, Robert Eaton, former DaimlerChrysler AG director and retired Illinois-Owens Inc. Chairman/ CEO Robert Lanigan and several others, put up $12 million in cash plus a $10 million bank loan toward the $26 million purchase. The group bought about 85 percent of the resort property, with the Melling family of Melling Tool Co. and Melling Resorts International keeping the remaining share, Crain’s reported.

But the resort reported eight straight operating losses through 2010, required more capital from the owners for improvements, became embroiled in a tax dispute with Otsego County over years of alleged delinquencies, refinanced amid bank pressure and struggled to keep up with interest, Crain’s reported.

“We recognized there were serious (property) improvements that needed to be made, and we were fortunate that these owners had the wherewithal to make them and did not need to take cash out of the operation at the time,” Owens said. “Often in bankruptcy cases like this, there’s a receiver appointed, but we always stayed in management, it never affected our employment or reduced our hours, and we were able to continue to operate.”

A majority of the resort owners in 2010 and 2011 bought out $14.3 million in acquisition debt then held by Citizens Bank, for $11.9 million, as members of a newly formed Treetops Acquisition Co. II or TAC II LLC. The bankruptcy exit plan allowed that entity to essentially convert the debt into Treetops equity. The TAC II owners are now full owners of the Treetops business, Crain’s reported.

“It was all resolved amicably. A lot of objections get filed in court to preserve your rights, even though you’re really actively negotiating. This was a very successful bankruptcy, and from day one there was always an active negotiation,” said Robert Mollhagen, partner at Varnum LLP and attorney for TAC II in the bankruptcy.

The reorganization plan submitted in June essentially swaps the TAC II debt claim for all of the equity. The resort itself is on pace for nearly $13 million annual revenue, with varying monthly income but averaging a few percentage points above break-even, according to Owens and income statements for November 2014 through June. Its debt was mostly related to the acquisition. Treetops owed its 20 largest unsecured creditors only a combined $1.3 million, and nearly half of that was to law firm Parmenter O’Toole, Crain’s reported.

The Otsego treasurer’s office contends Treetops owes about $590,000 in delinquent property taxes from 2007 to 2012, but the company contends it actually is owed a tax refund of about $41,000, Crain’s reported.

While ski and golf tourism are two primary revenue streams, Owens said, the resort also is building revenue through weddings, corporate retreats and other events. “A lot of resorts like Treetops have a good product, but it’s still a very discretionary spend. People will be planning weddings and golf outings more at places like that as all boats keep rising” on Michigan’s economic recovery, said Ron Wilson, CEO ofHotel Investment Services Inc.

Jason Bank, partner at Kerr Russell and Weber PLC in Detroit and attorney for Treetops Acquisition Co., said the next goal is to settle the tax dispute, Crain’s reported.

Bank and Joseph Sgroi, a partner at Honigman Miller Schwartz and Cohn LLP and attorney for the creditors committee in bankruptcy court, both said the settlement for Treetops does not involve Sigma Alpha Mu and Sigma Delta Tau at the University of Michigan. The resort sued the Greek organizations and more than a dozen UM students after a January 17-18 visit where guests allegedly destroyed nearly 50 resort rooms and caused more than $400,000 in damages. The lawsuit was later merged with the bankruptcy, but Opperman agreed in October to let it proceed separately again at Otsego County Circuit Court, Crain’s reported.

Treetops has already received $25,000 from the local chapter of Sigma Alpha Mu—which has since been dissolved by the national organization—and about $200,000 from its insurer, Philadelphia Insurance Co., to go toward those damages. Sgroi said that any payments that result from the litigation will go to the current resort company and its owners, Crain’s reported.