AT A GLANCE
• What: Canyon Ridge
• Size: 430 acres
• Golf course: 160 acres for a 18-hole course
• Other amenities: 3,000 square-foot pavilion, swimming pool, tennis courts
• Single-family homes: 67 homes built in gated community from 130 lots that were sold
• Available land: More than two-thirds of the site is still available for other residences and lodging facilities
• Proposed hotel: Developer Duane Horton organized Scenic Land Co. to build 150-room Starwood luxury hotel, spa and conference center, projected to cost $100 million, on a 41-acre site below the pavilion.
• Principal owners: Wells Fargo Bank owns most of the site; Darryl Mims owns the Canyon Ridge Golf Course
Walker County Commissioner Bebe Heiskell is eager to capitalize on the tourism bounty all around her county.
Walker County boasts the second-largest population among the six counties in the Chattanooga metropolitan area, but it has the fewest hotels.
When Canyon Ridge began flourishing as a residential and golf course community on Lookout Mountain five years ago, Heiskell thought she had found a way to fill the county's lodging void.
"We don't have a hotel in Walker County, period," she said. "We really need a hotel and conference center."
Adjacent to the luxury homes, condos and an 18-hole golf course at Canyon Ridge, a Chattanooga investment partnership proposed building a $100 million hotel and conference center to be operated by Starwood Hotels and Resorts Worldwide Inc. It would have been the costliest hotel and conference complex in the Chattanooga region.
But after three years of talk and applications for special bond financing and county backing, plans for the proposed mountaintop facility appear to have fallen off the cliff.
Faced with the real estate downturn and the end of federal stimulus funding for low-cost financing, the hotel project never got off the drawing board. The developer of the proposed hotel is suing the bond underwriter and a former partner, claiming they fraudulently tried to undermine the original hotel plan by pursuing a rival project that also failed to get under way.
"It hurt the county," Heiskell said of the collapse. "When that didn't happen, all the property values went kerplunk."
Heiskell long has wished for more hotel space in the county and called the development a "beautiful idea." She said there are two motels in LaFayette and one in Chickamauga, along with a handful of bed-and-breakfasts.
But if the county is going to get a hotel, it will have to be with private dollars. Heiskell said she has no plans to back any other hotel developments and that she was "drug through the coals" by residents angry about the development.
"I do pray that somebody will actually see the value and build it," she said.
The developer of Canyon Ridge, Randy Baker, said the hotel resort represented one of the last, best hopes for him to prop up his struggling development after the market for luxury second-home resorts collapsed amid the credit crisis four years ago.
The millionaire entrepreneur was forced to give up the last of his dream project after he ran out of money trying to sustain the stalled development.
Baker agreed in March to give up most of his holdings at Canyon Ridge to avoid a foreclosure sale. He filed for personal bankruptcy in June and sold his remaining interest in the Canyon Ridge golf course two weeks ago.
"That made the most sense in the end, and it will allow the golf course to continue to operate and the project to go forward," he said. "It was just unsustainable for me."
Baker said he once owed nearly $50 million on Canyon Ridge and his other holdings on Lake Norman near Charlotte, N.C.
"Ours was like everyone else -- watching an ice sculpture melt in the desert," Baker said. "Once values began to slide, they just never stopped."
DREAMS STUCK IN THE ROUGH
Standing on the ridge of Lookout Mountain overlooking Chattanooga Valley for the first time in 1998, Baker envisioned a far different outcome for what became the largest development on the mountain in North Georgia. He recalls being captivated by the site's scenic view and development potential.
"It was truly one of the most beautiful places I had ever stood, and as I looked out at it I said, 'We've got to buy this place,'" Baker recalled. "It took us less than 15 minutes to agree to buy it."
With the millions of dollars he made selling his successful NASCAR souvenir and marketing business, the then-39-year-old North Carolina entrepreneur decided to move to Chattanooga and try to develop the biggest residential and resort complex on Lookout Mountain by reviving the stalled Tauqueta Falls development under the Canyon Ridge banner.
Looking at the growth of baby boomers nearing retirement who were anxious to relocate to golf course and resort settings, Baker began investing in luxury, second-home complexes in the Carolinas and North Georgia.
"Real estate looked like a golden opportunity back then," he said. "I literally woke up one day and had assembled more than $20 million of debt to start the development business. I didn't start small time."
Baker began by making loans to other developers, including the Tauqueta Falls project on Lookout Mountain. When the original development stalled, Baker took over the project in 2000 "as a reluctant developer" to protect his investment.
1998 Carolina Development Resources, a Hendersonville, N.C.-based venture headed by Kent Smith, launches Tauqueta Falls on undeveloped site along Highway 157 with investments and loans from Randy Baker and others.
February 2000 Baker converts loans to equity, takes control of the project in a partnership with Bud Sims and pays off $2 million in debt.
2000-03 Roads and utilities put in place and work begins on golf course.
June 2005 Eighteen-hole championship golf course designed by Rick Robbins opens to the public.
October 2007 Canyon Ridge golf course goes private as developers anticipate more residential sales and private memberships grow to 160.
March 2008 Scenic Land Co. proposes building hotel and conference center on 41 acres bought from Baker.
2008-10 Scenic Land seeks county assistance and federal Recovery Zone Facility bonds for tax-exempt bond financing to help pay for proposed $100 million hotel, spa and conference center under franchise with Starwood Hotels and Resorts Worldwide Inc. The project never gets off drawing board, however, and bond commitments expire.
August 2010 Baker is ordered to pay nearly $3 million to home builder John Wise in a dispute over houses Wise built at Canyon Ridge.
March 2011 Baker gives up most of the land at Canyon Ridge to Wells Fargo Bank in lieu of a foreclosure.
June 2011 Baker files personal bankruptcy petition in Chattanooga.
September 2011 Canyon Ridge golf course is sold to Darryl Mims, head of Lookout Links LLC.
"While I sold off a lot of my other holdings in North Carolina, I sort of became attached to Canyon Ridge," he said.
Baker built a championship 18-hole golf course on nearly a third of the 430 acres at Canyon Ridge and sold nearly 100 residential lots for single-family homes and condos before the market came to a virtual standstill.
Unlike the failed Rarity golf course communities in nearby Marion and Meigs counties in Southeast Tennessee, Canyon Ridge completed its 18-hole golf course and built dozens of homes and villas ahead of the housing downturn.
Baker estimates about $35 million of property was sold, although many of those lots were later foreclosed upon by lenders. Baker said 67 homes are now in the gated Canyon Ridge development. Most of the homes are occupied only part of the year, but there are nearly a dozen year-round residents.
During the heyday of the project in 2005, buyers came from 18 states and lot prices soared on some undeveloped properties to more than $400,000 each. Founding memberships were sold for $1 million.
But when banks shut off the financing spigot for speculative and second-home purchases, Baker said Canyon Ridge home sales stalled with most of the 400 residential lots unsold, the condos in the Canyon Village Villa still empty and the golf course unable to turn a profit.
"In October 2007, we were sitting on about $5 million in purchase contracts for lots when Bank of America pulled the plug on financing and we didn't sell a single one of those lots and every contract fell through," Baker said.
Like many developers, Baker expected the market eventually would recover.
"Financing just 100 percent dried up, and it just didn't come back," he said.
Baker brought in a new builder to try to keep adding homes to Canyon Ridge. But Chattanooga home builder John Wise later sued Baker over disputed properties and contracts at Canyon Ridge, and Baker was ordered to pay Wise nearly $3 million. Baker, in turn, sued his attorney, Chattanoogan Fred Hanzelik, over what he said was inadequate legal representation.
RESORTING TO COURT
The latest legal fight at Canyon Ridge pits Chattanooga developer William "Duane" Horton against Baker and the bond underwriters for the proposed Starwood hotel resort.
In a 28-page lawsuit filed in Hamilton County Chancery Court, attorneys for Horton's investment group -- Scenic Land Co. Inc. and its affiliates -- charge that Baker and Horton's bond underwriter, Sterne Agee & Leech, undermined the hotel project last year through "fraudulent, malicious and reckless conduct" by pursuing another hotel for Canyon Ridge. Horton is seeking to recover his investment, plus punitive damages.
Dallas attorney Robert Manley charges that Baker was "desperate for funds" and recruited Sterne investment banker Ed Wall "to develop a project more lucrative to himself" in violation of his agreement with Horton. That helped to block what a consultant for Horton, Paul Wischerman, claimed would be a highly profitable Starwood resort.
Through his Scenic Land Co. Inc., Horton attracted investors, obtained a franchise license with Starwood Resorts and began working with architects and consultants for the hotel and conference center at Canyon Ridge two years ago. Baker, who agreed to provide more than 40 acres for the resort, was a partner in the project.
Horton convinced Walker County to seek tax-exempt Recovery Zone Facility Bbonds to help finance part of the project.
Developers initially had planned to use two types of bonds -- Build America bonds and Recovery Zone Facility bonds -- to finance the project. But the opportunity to use the bonds, which were regulated through federal programs, expired Dec. 31 before they could be sold.
In January, Baker told the Chattanooga Times Free Press the project team still had access to $21 million in Recovery Zone Facility bonds but not at the attractive tax-exempt rate they originally offered.
In November, the Georgia Department of Community Affairs announced it would give Walker County $15 million in recovery zone bonds through stimulus funding for the hotel. At the time, officials had said the development would create more than 250 jobs and open a new economic sector for the area.
But during a public hearing last November, about 50 residents blistered officials for the what they saw as backing the hotel with taxpayer dollars.
Officials told residents they would not be on the hook for any of the $15 million in federal stimulus money, but later revealed that a property tax increase could be levied on residents to make up $36 million in bonds backed by the county if the development went bankrupt.
Baker insists he wanted the Starwood project to succeed to help the rest of Canyon Ridge and pursued another hotel only when the other project faltered.
"The decision by Duane Horton to file a lawsuit on behalf of our partnership reveals the ultimate fruition of the same incompetence that impeded the progress of the project for two and a half years," Baker said.
CHANGING OF THE GUARD
In March, Baker was forced to give up most of his Canyon Ridge holdings in lieu of foreclosure to Wells Fargo Bank, which acquired the loan through its purchase of the former Wachovia Bank. Three months later, Baker filed for personal bankruptcy.
To settle part of Baker's debts, a Shelby, N.C., businessman and son of one of his investment partners recently took over the Canyon Ridge golf course.
Darryl Mims, the 48-year-old head of Lookout Links LLC, said he is working to "get the course back into top shape" and profitable as a stand-alone business.
"We're continuing to operate what I think is a truly unique, mountaintop course, and we're working hard to get the golf course back to where it was," Mims said. "Mr. Baker did a great job surviving as long as he did."
Dade County took over the sewer system for Canyon Ridge when the homeowners association was too small to maintain the facility. Dade County's water and sewer authority previously guaranteed the sewage treatment facility and supplied water to the site even though most of the project is in Walker County.
"We're operating it with the fees the homeowners are paying, and right now it is paying its own way," Dade County Executive Ted Rumley said.
Rumley said he expects Walker County eventually will buy the plant along with the 166 miles of water lines Dade County now operates in Walker County.
"We've been negotiating with Walker County for almost a year," Rumley said. "It's in their hands now."
Rumley said he is confident Canyon Ridge ultimately will be developed.
"It's simply too good of a piece of property not to ultimately be successful," he said.
"It still surely will happen at sometime," she said. "I think it would have turned out very, very well."