Vacation spots face financial cloud

PARK CITY, Utah — With the developer forced into bankruptcy, Hugh Smith worries about the $1 million he and a partner sunk into bare lots at Promontory, a half-built, sprawling residence club in a post-Olympic town saturated with second homes for wealthy Boomers.

As Promontory began showing signs of distress a few months ago, Francis Najafi, chief executive of Phoenix-based Pivotal Group, gathered members together in an opulent timber-and-stone clubhouse and said he was in default and pulling out.

"He was telling everybody he was sorry for our troubles and blaming events beyond his control — the nation's real estate,” said Smith, who believes Promontory will bounce back in a year or two under new ownership. He still hopes to develop two lots with multimillion-dollar vacation homes for sale.

Promontory joins several other Western vacation spots facing financial uncertainty or worse, including Nevada's Lake Las Vegas golf resort, Idaho's Tamarack Resort and Montana's venerable Yellowstone Club. And sales are off at other resorts in the region, according to the Rocky Mountain Resort Alliance.

Around Las Vegas, a quarter of all housing sales on the market are listed as short sales, going for less than the loan taken out on them. On the Strip, plans for 24,700 condominiums are on hold or have been canceled, according to research firm Applied Analysis.

"Many of them were speculative projects to start,” said Brian Gordon, principal of Applied Analysis.

At the more exclusive resorts, the market had seemed recession proof, with buyers generally paying cash. They had nothing to do with the failing U.S. subprime loans that are causing market turmoil. But the turmoil is making banks less forgiving for resort developers who took out huge construction loans.

The Swiss investment bank