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The Heritage House, a Mendocino Coast resort rated by affluent travelers as among the world's best, is mired in debt and facing foreclosure.

Operating under the name of Lantana Mendocino LLC, Heritage House's latest owner has defaulted on a $24 million loan. The default comes less than three years after a German bank agreed to finance Lantana Mendocino's purchase and planned upgrades to the 37-acre oceanfront complex at Little River, according to documents on file in U.S. District Court in San Francisco.

In addition, Lantana Mendocino owes the county of Mendocino about $200,000 in back property taxes and $243,758 in bed taxes collected from guests. Heritage House ownership could face criminal prosecution for withholding public tax revenue, tax collector Shari Schapmire said.

"We're watching this situation very closely," Schapmire said.

Owners Duane Werb and David Wilk -- an adviser to resort developments in Bermuda, Pebble Beach and Aspen, Colo. -- were not available for comment. Joe Eisenberg, a Los Angeles attorney who represents Lantana Mendocino in the federal court litigation, did not return a telephone call seeking comment.

In mid-2005, the Wilk group bought the Heritage House and turned to GHM Hotels, which operates luxury resorts and spas around the globe, to manage hotel, dining and spa operations. GHM also oversaw a project to upgrade about half of the inn's guest quarters.

In October, GHM canceled its management contract. Marco Perry, who was brought in from Miami Beach's trendy Setai Hotel to be general manager of the Heritage House, left for a similar position at the San Ysidro Ranch in Santa Barbara County.

Kaye Smith, current manager, said the Heritage House is "alive and well." She declined to discuss what might happen next, but said Heritage House would not close.

"We plan to stay open," she said.

The cash crisis is a reversal of fortunes for Heritage House, which has long held the reputation as an upscale haven for well-heeled travelers.

The 66-unit complex sprawls cross a wooded bluff between Highway 1 and the Pacific Ocean. It features upgraded cottages, manicured lawns and flower gardens, and some of the most stunning ocean views on the California coast. Even with a Web discount, Heritage House rates range from $299 to $650 a night.

The setting was made famous for a generation of Americans by the 1978 film "Same Time, Next Year" starring Alan Alda and Ellen Burstyn.

"People after all these years still call and ask how they can find that place in the movie," said Debra De Graw, director of the Mendocino County Chamber of Commerce.

Despite its money woes, Lantana Mendocino's bid to transform Heritage House into an even more exclusive retreat appears to have gained some traction.

The Robb Report, a publication targeting the nation's wealthiest, last July hailed the Heritage House for its "solitary refinement." The publication advised its readers they could land their private jets at nearby Little River Airport.

In January, the Heritage House was one of four posh places in the United States and Canada to be tapped for a 2008 Grand Award by Andrew Harper's Hideaway Report, a publication for connoisseurs of world travel.

But weeks ago, Mendocino Coast vendors began to suspect something was amiss when bills went unpaid and employees' checks began to bounce.

At one point, the Heritage House's telephone service was temporarily unplugged for nonpayment, Schapmire said.

Lantana Mendocino has defaulted on a $24 million loan package funded by WestLB AG, according to court documents. The German bank provided the original $19.5 million loan for the Heritage House purchase in 2005 and put up an additional $4.5 million in August 2007, according to court documents.

The debt-strapped owners do not plan to file a legal challenge to the default, Eisenberg said in court documents.

You can reach Staff Writer Mike Geniella at 462-6470 or mgeniella@pressdemocrat.com.

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