The historic Heritage House resort on the rugged Mendocino Coast is closing today and is scheduled to be auctioned off Friday in a foreclosure sale.
The exclusive getaway, located just south of the seaside town of Mendocino in Little River, has been in financial turmoil for months. It is currently operating under court-ordered receivership.
In addition, the Mendocino County District Attorney's Office has stepped up its prosecution of one of the resort's co-owners, David Wilk, on tax evasion charges. Prosecutors allege Wilk stole $380,000 in bed taxes owed to the county.
The sale of the 37-acre Heritage House resort would bring an end to a relatively brief but troubled chapter in its storied history, which began more than 60 years ago with the conversion of an 1877 farmhouse into one of the Mendocino Coast's first inns.
It has since grown into an acclaimed seaside getaway with 66 units featuring upgraded cottages with stunning coastline views, manicured lawns, fine dining and a spa. Recent rates ranged from $299 to $650 a night.
The resort was purchased in mid-2005 by Duane Werb and David Wilk under the name Lantana Mendocino LLC.
The purchase and renovations were funded by loans from a German bank totaling $24 million. But after a series of management changes, the resort got behind on its property taxes and "bed taxes" collected from guests.
After the county got a judgment in 2007, the group paid the county about $250,000 in back taxes, said tax collector Shari Schapmire.
Then in February the bank, WESTLB AG, sued Lantana Mendocino in U.S. District Court in San Francisco, alleging it defaulted on the $24 million loans.
Last month, the court appointed Nicholas Clayton, president of the Los Angeles-based Kor Hotel Group, to run the property as receiver. Court documents say the receivership will end after the foreclosure sale of the property scheduled Friday.
The resort's special events manager sent out an e-mail stating the facility would close today. The resort manager did not return calls for comment. A voice-mail greeting on Wednesday evening indicated it is "closed indefinitely."
A Los Angeles attorney who represents Lantana Mendocino in the federal court litigation did not return a telephone call seeking comment.
Schapmire said she was surprised to hear the resort was closing. She said she understood the bank planned to run the inn until the market improved.
The property is scheduled to be auctioned at 10 a.m. Friday on the courthouse steps in Ukiah for a minimum bid of $27 million. But she doubts the bank will get that much.
"I don't think that it's worth $27 million, especially at this time," Schapmire said.
She now fears it make take some time for Mendocino County taxpayers to get their $400,000 back.
"I think at some point we'll get our money, but I don't think it'll be any quick process," she said.
The closure is unlikely to end Wilk's legal troubles.
Last month, Mendocino County Deputy District Attorney Timothy Stoen added money laundering to the charges against Wilk. The county now alleges the inn owes $380,000 in bed taxes and another $38,000 in taxes to the Mendocino County Lodging Business Improvement District, which pays for tourism programs. It has accused Wilk of theft and embezzlement of tax revenue owed to the county.