Seven Canyons’ investors are not the only ones affected by its bankruptcy filing May 27.

Hans Epprecht and Billy Morley say they represent 254 “upset members” of the private golf club, located two miles north of West Sedona.

Foreseeing Seven Canyons’ financial difficulties in December, Epprecht, Morley and other club members formed 7C Group to help find a new owner who can fulfill promises made to Seven Canyons’ members.

Those promises include the completion of a clubhouse, build-out of private home lots and increased membership to keep the private golf resort financially solvent, according to Epprecht and Morley.

Joining Seven Canyons

Depending on the time they joined, Seven Canyons members paid a one-time initiation fee between $80,000 and $175,000, Morley said. There are three types of members:

• Some members live at 32 private home sites located in two subdivisions on the property.

Private homes and lots were listed between $950,000 and $2.5 million, according to a 2005 article in Phoenix Business Journal.Epprecht built a home on a lot in the Solitude subdivision.

• Other members bought into 24 2,500-square-foot time-share villas, where they each get four weeks.

A four-week time-share costs $405,000, according to Phoenix Business Journal. Time-share owners also pay as much as $14,000 a year in upkeep dues, Morley said.

• Other members own private golf club memberships, numbering 395 if all of them were sold.

As a golf club member, Morley said he pays membership dues of $700 per month.

Part of the appeal of joining Seven Canyons, Morley said, was if members left the club, they would receive a return of 70 percent of their up-front cost.

Bankruptcy Filing

The promises to the members hit a roadblock when the Club at Seven Canyons and its parent company, Sedona Development Partners, filed a petition with the U.S. Bankruptcy Court on

May 27 to restructure its finances and take advantage of Chapter 11 bankruptcy protection from its creditors. Both are owned by Scottsdale-based Cavan Real Estate Investments.

Morley said Sedona Development Partners’ primary lender, Specialty Financial Corp., was scheduled to foreclosure on Seven Canyons in bankruptcy court on May 28.

Specialty Financial loaned Sedona Development Partners $50 million — now amounting with interest to more than $70 million, Morley said.

According to a letter sent to members by Dave Cavan, Sedona Development Partners’ founder and president, Specialty Financial offered a 50 percent discount on the loan principal and elimination of interest for five years.

The deal was contingent on Specialty Financial receiving $3 million from Cavan up front, Morley said. The offer expired Dec. 31 and was not reopened, he said. Specialty Trust, a real estate lender managed by Specialty Financial, filed for Chapter 11 protection in Reno, Nev., on April 20.

An other project owned by Cavan was scheduled to be sold in a trustee sale April 16, according to Business Real Estate Weekly.

Two 149,000-square-foot buildings at the Raintree Corporate Center in north Scottsdale were collateral in a $59 million loan issued to another Cavan-affiliated firm, RCC North, in 2006. The affiliate filed for Chapter 11 in early April.

Clubhouse

Morley and Epprecht said one of the primary complaints among members revolve around the clubhouse, which has remained unfinished for years.

Morley said documents from early members of Seven Canyons state a 55,000-square-foot clubhouse would be built by April 2003.

By 2005, the size shrunk to 40,000 square feet, according to Phoenix Business Journal. Cavan Real Estate Investments said it planned to invest $100 million into the project, providing a high-end spa, recreational village, restaurant, golf pro shop and clubhouse.

Dave Cavan formed another company, 7C Clubhouse Lenders, which raised $6 million from investors to complete the clubhouse — but only $1 million has been spent, Morley said.

Morley and Epprecht contend fees paid by members were supposed to be held in escrow to complete the clubhouse. Neither the clubhouse nor the $100 million ever materialized, Morley said, and the building plan has since shrunk to 25,000 square feet.

Today, it remains an unfinished cinder block structure.

Golf Course

Epprecht said the course suffers major problems with irrigation and has pulled two well pumps leaving rye grass on many fairways dead or dying.

The lack of working irrigation equipment and fertilizing demonstrates the “endless story of cutting corners,” Epprecht said.

There is also a credit hold on Seven Canyons’ finances, meaning needed groundskeeping is unlikely to arrive in time to save the fairways, Epprecht said.

Management & Staff

Sedona Development Partners’ public relations firm said Tuesday, June 1, the resort has no plans to lay off staff nor change management.

However, Morley said Seven Canyons already laid off 18 employees in the last few months, including the club’s manager and several golf professionals.

Morley also said Scottsdale Golf Group took over Seven Canyons’ management in January.