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The Inn of the Seventh Mountain Near Bend, Oregon Facing Dissident Condo Owners
Following a Special Assessment of $17.7 million to Pay for Repairs to th
e Resort's Condo Buildings
By Jeff Manning, The Oregonian, Portland, Ore.McClatchy-Tribune Regional News

Dec. 25, 2007 - It wasn't the kind of Christmas card Shirl Benjamin expected from the Inn of the Seventh Mountain.

A bus driver for the Bend-La Pine school district, Benjamin got a bill early this month for $11,000, due and payable by Dec. 31, to cover her share of building repair costs. It was her first notice of the assessment.

"How do they expect me to come up with that kind of money in a month?" asked Benjamin, who owns a one-sixth interest in condo at the central Oregon resort. "That's half my annual salary."

Hundreds of other Seventh Mountain condo owners are in similar straits as the Association of Unit Owners board, which owns and oversees the resort, attempts to raise $17.7 million to pay for long-needed repairs to the resort's condo buildings. Owners of the largest condos were assessed for $108,000.

Giant special assessments have become a grim fact of life for many Oregon condo owners, typically to fund lawsuits against builders and developers of buildings plagued by leaks and other construction defects.

The Inn of the Seventh Mountain dispute is different. It more resembles a civil war within the board, pitting individual owners against the prominent Pape family of Eugene, that owns about 35 percent of the inn's commercial and residential units and controls the board.

The dissident owners have sued Jordan and Mary "Susie" Pape, who sit on the Seventh Mountain board, accusing them of putting their family's financial interests above their fellow condo owners. They also allege the Papes' stacked the condo board and timed the special assessment so that their share of the repair bill will be reduced by some $7 million. The suit names four other board members.

The Papes insist that they are only trying to get the repairs done, a task they claim prior association board members repeatedly ducked in recent years. They argue it's only fair their assessment is lower in recognition of the repairs and renovation they performed in 2003 on the restaurant, market and other commercial operations at the resort.

The dissident owners have scheduled a special election on Dec. 31 for all Seventh Mountain condo owners in an attempt to oust the Papes and their loyalists from the board. In response, the Papes have launched last-ditch efforts to buy more Seventh Mountain condos and add to their voting bloc.

For Benjamin, who once worked for the inn as a receptionist and housekeeper, the intrigue is overshadowed by the looming possibility of having to put her vacation home on the market just as demand for real estate has nose-dived.

"I'm wondering what is going to happen if I can't come up with the money," she said. "Am I going to lose my condo?"

The Pape family came to prominence on the success of its empire of heavy equipment and trucking dealerships, which stretch from northern Washington to Bakersfield, Calif. Randy Pape is the third-generation head of the privately held Pape Group.

The Seventh Mountain dispute marks the second time this decade the Papes have found themselves in the middle of fracas over a central Oregon resort. Randy Pape was president of Oregon skiing mecca Mt. Bachelor in 2001 when he got into a protracted and ultimately losing battle to maintain local ownership.

The Papes first bought into the Inn of the Seventh Mountain in 2003. A family company, INNspired LLC, signed a lease with the association board to take over the inn's restaurant, market and other commercial operations.

As part of the deal, the Papes plowed about $6 million into the facility, company officials say, which enlarged the skating rink and paid for other improvements.

The Papes currently own about 85 commercial and residential condo units at the resort, 36 percent of the total units. Jordan and Susie Pape, Randy's son and wife respectively, sit on the Seventh Mountain association board.

The family solidified its control of the nine-member board in October, when a slate of Pape loyalists got elected, providing a majority.

Two of the new board members have ties to Arrowood Development LLC, a Bend development company that is building 64 townhomes on 14 acres adjacent to the inn.

Dissident owners argue that Arrowood has reason to be loyal to the Papes as it cut a deal giving residents of an adjacent subdivision being built by Arrowood access to Seventh Mountain's amenities.

Dissident condo owners have since argued that the October election was improper as some of the new board members were write-in candidates, which association bylaws don't allow.

The newly constituted board's first order of business was the nagging issue of repairs to the residential units.

Both sides agree that exterior siding on all the residential units is badly deteriorated and leaking in spots, as are some of the roofs. Pipes routinely freeze in the winter because of lack of insulation.

For years the board believed the repairs would cost about $2 million. In 2004, it got bids ranging from $1.8 million to $2.2 million.

Board members also believed that the approximately $3 million from the sale of 14 acres to Arrowood was more than enough to pay for the work.

But the repair project was scuttled after the winning bidder's proposed solution -- installed on two buildings -- failed, according to Danny Hollingshead, vice president of Pape Properties.

More recently, the association brought in RDH Building Sciences, a respected Vancouver, B.C., engineering and construction management operation, to figure out a fix.

RDH's stunning conclusion: the buildings needed nearly $30 million in repairs. The deterioration had gotten so bad, the firm advised, that some of the buildings need to be stripped down to the studs and reskinned, according to RDH's report.

Shocked board members asked RDH to scale back the scope of repairs to reduce the cost, which got the price to its current figure -- $17.7 million. Rift develops on board

At that point, the board started to fracture.

The Papes remained determined to proceed. At their urging, the board notified condo owners that it would go ahead with a Nov. 25 special owners' meeting to consider a $17.7 million special assessment.

Other board members, led by Forest Grove medical doctor Peter Bours, wondered what the rush was for. In their opinion, it made no sense to proceed with a huge special assessment when the board had not gotten any bids from contractors, they said.

The rebel owners ultimately came to the conclusion that the Papes' urgency stemmed from the terms of their 2003 lease. If the Papes get the special assessment levied by the end of 2007, they ge1t a $6 million credit for the work they paid for in 2003. If the assessment is levied in 2008 or beyond, the Papes' credit plummets to $1 million.

The news enraged some owners, who figure the Papes are simply trying to jam through a special assessment in order to reduce their own share of the cost, essentially shifting the burden to everyone else.

They hired Portland lawyers Jim McDermott and Bruce Cahn, both veterans of the construction defect legal wars, to represent them. They filed suit on Nov. 19, accusing the Papes and their loyalists on the board of violating their fiduciary duty, putting the Pape family's financial interest over that of other owners.

Danny Hollingshead, vice president of Pape Properties, said the family is expecting only the credit it is due after paying for the earlier round of renovation. Disallowing the credit would force the Papes to pay twice, an unfair "double-tax," Hollingshead said.

Cahn, the lawyer for the dissident owners, noted that the Papes have never provided the association with a full accounting of the 2003 repair work.

With the special election about a week away, both the dissidents and the Papes are frantically politicking.

The Papes have also offered to buy out at least five condo owners, Hollingshead confirmed.

The terms of the offers, according to lawyer Cahn, require the owners to assign their condo voting rights to the Papes.

Hollingshead said the Papes recognize the financial hardship this represents for people. The association, at the Papes' direction, has said it will allow owners to pay their assessments over three years, at 4 percent interest.

Nevertheless, some rank-and-file owners wonder whether their days at their beloved resort are over.

"I think this thing is so bizarre, it can't actually take place," said Rick Nicholson, a Kirkland, Wash., consultant and native central Oregonian who is facing a $67,000 repair bill. "If we have to come up with the $67,000, we'll just sell the condo. But how do you sell a condo with a $67,000 lien on it? That won't be easy."

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To see more of The Oregonian, or to subscribe the newspaper, go to http://www.oregonian.com.

Copyright (c) 2007, The Oregonian, Portland, Ore.

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