Lake Lawn Sale

(10/12/10 Update: The Lake Lawn property is being marketed now by a commercial hotel broker. If you’re interested in buying this place, it appears as though the asking price is somewhere around the $19.97MM that it was offered for at the sheriff’s sale. Not my listing, but please inquire to dave@genevalakefrontrealty.com)

The death throws are over, and Lake Lawn has gone silent. Well, not really silent, as lawsuits and finger pointing are sure to follow, but as of yesterday morning, the property is officially scheduled to be taken over by Anchor Bank sometime this fall. The sheriff’s sale was yesterday, and with no other bidders willing to even nip at the property, Anchor Bank was left holding the bag. As the sole bidder (they don’t really bid, they just set the bid price), they now await the closing when the sheriff’s deed will be transferred into their name. This, as you can guess, is not good. Many people are confused by sheriff’s sales, insomuch as they don’t understand what exactly they are and how they are different from the plethora of other real estate auctions that take place around the country on any given day. The huge lumped REO auctions that you see advertised in Chicago are many times not really sheriff’s sales, instead they are just that, bulk auctions of bank owned properties. If you want to understand a sheriff’s sale better, take a look at this video of the sale from yesterday where Anchor Bank became the unfortunate owner of last resort.

What this epic failure means for the community is obviously not yet known. What it means for the hundreds of owners who bought condominium units and condotels here is also unknown. I have a feeling it will get very ugly, as owners grapple with the reality that they own a hotel room inside of a shuttered hotel. If what I’ve read is correct, the resort will cease to operate as of 11/30. Reservations are being canceled as we speak, and the only people who benefit from this are the good folks behind the Abbey Resort and The Grand Geneva, as they siphon off conference business and resort rentals. In the failure of Lake Lawn, there is plenty of opportunity for others. As foreclosures go, this is true for all of them, whether they’re residential or commercial properties. If a homeowner is over their head and the bank takes back a $300k property and sells it for $150k, it’s unfortunate for the owner that couldn’t make the payments. The silver lining is there for the buyers who are now able to purchase that home for fifty cents on the dollar and begin their own venture into home ownership. What this means for the hundreds of employees at Lake Lawn is another thing entirely, as the closing of the resort will unfortunately mean many lost jobs.

What happens to Lake Lawn moving forward is anyone’s guess. Anchor Bank will hunt for a buyer, hoping to recoup as much of their $52MM+/- basis in this property. On paper, the development is strong. There’s a huge hotel with conference rooms and restaurants, private marina on Delavan Lake, thousands of feet of lake frontage, an airport, a golf course, and many reasons to think some buyer will find value in this property. There’s also reason to think that no one will want to touch it. Resort income has to be down across the country, and I can’t imagine a scenario where some investment group buys this property right away. Instead, anyone with interest will likely wait in the weeds, hoping the property deteriorates to a point where any sale is unlikely at best, and when things appear without hope, then a buyer will emerge. It’s like John McCain said when quoting Mao, “It’s always darkest before it’s totally black”.

I would guess that foreclosures on the individually owned condominiums at the resort will sky rocket, as owners opt for strategic default in favor of retaining ownership of a hotel room inside of a shuttered hotel. I would also guess that lawsuits will be piling up, as owners sue the investment group, their banks, and anyone else they think might have led them or the development astray. I say these things without fully knowing whether or not they’ll actually happen, which is why I prefaced this with “I would guess”…. Even so, it is reasonable to expect huge amounts of legal action here, and the mess that results from this failed attempt at rekindling the once popular Lake Lawn Lodge may be so horrific that even the worst current projections will end up looking ideal. The resort could also be bought quickly by some investment group, but if I were a potential buyer, I’d wait this thing out. If banks hate owning residential real estate, I can only imagine how they feel about owning a massive, soon to be closed, resort.

This is all based on my opinion of the events, and should not be considered anything but that. Factual deadlines and details have been gleaned from a Janesville Gazette article.