Blue Mountain Mall property auction canceled

An emergency bankruptcy filing has put off the potential sale of the beleaguered property until mid-August.

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WALLA WALLA -- A sale of the Blue Mountain Mall property was canceled this morning in the latest twist for the marooned retail development.

The commercial property was headed for auction on the courthouse steps this morning after the lender for the $10.5 million acquisition foreclosed for failure to pay.

However on Thursday the owner of the mall property filed for emergency bankruptcy protection, a move that grants an "automatic stay" for the time being, attorneys say.

A small crowd of about 15 people gathered in front of the courthouse dissipated within seconds after what was expected to be a 9:30 a.m. auction start time. Instead a representative of the lender announced the auction has been reset to Aug. 13.

The change is another arc in an already complicated ownership saga that has confused even attorneys working on a resolution for the once-thriving commercial property.

In the last two years, construction on a massive redevelopment of the mall between Rose and Polar Streets at Myra Road has stopped, contractors went unpaid and a previous foreclosure took place. Since a new limited liability company took possession more than a year ago, the property remains in a standstill with the remnants of a major demolition and partial new construction surrounding the lone businesses on the property: Sears, Shopko and Pizza Hut.

Several names have remained linked to the property despite the foreclosures and company changes. But getting any relief at the property and answers from the owners has become difficult, local officials have said.

The development company that bought the land in 2008 was known as Blue Mountain Plaza LLC. That organization tore down the mall and began construction on new buildings at the property but defaulted on payments to contractors and lenders. They were foreclosed on more than a year ago.

In February 2009 the mall was put up for auction. But the ownership firm that purchased the property, Walla Walla Holdings I LLC, apparently includes some of the same owners from Blue Mountain Plaza LLC. City officials have said Western Washington residents Winston and Jason Bontrager were both involved. Though Walla Walla Holdings I purchased the mall, an ownership change at the property took place in November of last year. The ownership company, according to the Walla Walla County Assessor's Office, is now Walla Walla Town Center LLC.

Walla Walla Town Center's manager, Jason Bontrager, signed Thursday's Chapter 11 bankruptcy petition, which was filed in King County.

Walla Walla Attorney James Hayner of Minnick Hayner Attorneys at Law said the bankruptcy filing is not an unusual move if the property owner believes there's some equity. Hayner has been retained by Sears and was at this morning's meeting as a representative of the retailer. What is unusual, he said, is how intertwined the lenders and borrowers have become in the mall property.

The who's who of borrowers, lenders and owners has made it difficult to communicate about work on the property, as well as money owed. He and local officials, as well as retailers, continue to be hopeful the land will eventually be redeveloped into the thriving retail space it once was.

"(Sears officials) still have an operating store and still want to see some good come out of this," Hayner said.

Vicki Hillhouse can be reached at vickihillhouse@wwub.com or 526-8321.

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