Anguish grows as lot owners see Valley of Lakes dream
The once-posh housing
development, now in
financial difficulty, will be
By LISA SCHEID
Times Leader Staff Writer
HAZLE TWP. - For Valley of Lakes resident Cindy Irvin,
the American Dream of a single-family home with a two-car garage has gone
In 1989, the lot and the then-15-year-old house she
owns with her husband were appraised at $92,000.
This year, when she went to a local bank to refinance
her home and lower the interest rate on her mortgage from 10 to 8 percent,
an assessment set a value of $68,000 for her property.
The refinancing was denied, and Irvin blames her troubles
on the financial woes of her housing development.
Like the mountains that surround Valley of Lakes and
Eagle Rock Resort, persistent financial troubles have loomed for years
over the once grand and posh development that spans four townships in lower
Luzerne and upper Schuylkill counties.
Irvin and other residents of the 4,004-acre resort
trace the problems of Valley of Lakes to what they say are a string of
broken promises from the development owner, Frank Cedrone who is principal
owner of CBG, Ltd.
Among those problems:
- Support businesses - restaurants, ski slopes and an
equestrian center - have closed for lack of CBG financial support.
- Road, water and sewer maintenance has been sporadic
- Residents who purchased property and homes, buying
not only a place to live but the expectation of a luxurious style of living,
have received far less than expected.
Now the development's owners owe $23 million to First
Because of that debt, the development is scheduled
to be auctioned Friday to the highest bidder who can pay off the bank loan.
As uncertain as the prospect of a sheriff's sale is,
some residents say one they have now.
Cedrone, of Marlton, N.J., purchased the property in
1986 for between $2.5 million and $3 million. In a July 1989 interview
published in The times Leader, Cedrone said he planned to clean and refill
Lake Algonquin and repair its dam by the end of 1989.
Today, Lake Algonquin remains dry, and residents such
as Hazleton Environmental, have lakefront property without a lake.
In the interview Cedrone also said he planned to open
an Arnold Palmer-designed golf cours by 1991.
Today, the course remains unfinished and residents
such as Ray Dongelewicz, who retired to Valley of Lakes to be a short walk
from the fairway, still can't tee off.
Cedrone maintains the lake and golf course were planned
but not promised by those dates. And plans, he has told residents, change.
Especially when the economy and his financial backer - First Eastern Bank
- don't cooperate.
"If the bank had not become troubled, we wouldn't
be in trouble," Cedrone said Friday.
Cedrone said a deal is being worked out with an out-of-state
investor to satisfy a portion of the First Eastern debt - enough, he hopes,
to stave off the sheriff's sale.
Friday, Frank Hoegen, Cedrone's lawyer, said a letter
of financial commitment still has not been signed and he could not release
the name or names of potential investors.
But, Cedrone vowed if he can play a role in Valley
of Lakes after it emerges from reorganization, the resort will return to
its heydays with active ski slopes, equestrian center and restaurants.
"One way or another it's going to be resolved,"
said Greg Lyon, an attorney in the U.S. Trustee's Office, which oversees
Lyons said the debt of Valley of Lakes is one of largest
bankruptcies in the U.S. Trustee's Office Middle District, which includes
Either the bank will proceed with Friday's foreclosure
sale or the U.S. Trustee will force refinancing of the debt. There is no
equity in the property, so CBG cannot tough it out, he said.
Hoegen is forthright about the development's financial
As beautiful as the Valley of Lakes scenery is and
as much potential profit as a resort promises, the development is not an
attractive investment, Hoegen said.
Because of the size of the debt and the size of the
property, only a few developers are in a position to invest in the resort.
Hoegen said he's been talking to anyone who says they have the capital
to invest in such a large undertaking.
"It hasn't been easy, and we've talked to every
kook out there," Hoegen said.
Three years ago George Morris gave up his truck-driving
job in New York and retired to the Valley of Lakes development expecting
to enjoy the amenities of "Northeastern Pennsylvania'a premier resort."
Now that the resort has been in bankruptcy for more
than a year[***]
Since declaring bankruptcy in March, 1992, the resort's
11 ski trails and lodge, two restaurants and equestrian center have been
club opened for a few [***]
day. the summer of 1992, it was closed completely - the first such shut-down
in 15 years.
According to bankruptcy court documents, CBG had six
smaller businesses operating in Valley of Lakes development: Trachele Inc.
and Chez-Rael Inc. ooperated the two restaurants; Eagle Rock Ski Area ran
the ski slopes and [***] Equestrian Center,
and Oneida Water Co. operated the water ssytem.
Franzosa Trucking is one of several local unsecured
creditors left hanging without remuneration. Unsecured creditors are businesses
owed money for service or materials as opposed to secured creditors who
have an interest in the property. CBG owes Franzosa more than $56,000.
CBG also owes RP Construction RP Construction of Paterson,
N.J. $718,164 for construction; Arnold Palmer Golf Management of Cleveland
$489,373 for design of the golf course; No. 1. Contracting Corp. of West
Pittston $340,982 for construction; and Chiara Associates of Philadelphia
$921,122 for advertising.
CBG owes a total $216,514 in property taxes to the
four townships - Black Creek, Hazle, East Union and North Union - and $146,202
to the Internal Revenue Service for federal withholding taxes.
The total secured and unsecured debt of CBG and its
affiliates totals about $38 million.
So far, CBG has not submitted a refinancing plan that
is required by law and must be approved by the bank and approved by the
federal bankruptcy court.
Not the first time
This is not the first time CBG has edged toward a foreclosure
sale. Cedrone avoided a scheduled sheriff's sale in September by saying
he had a deal nearly sealed. But the undisclosed deal, with an investor
from outside the country, fell apart.
The bankruptcy and possible sheriff's sale of Valley
of Lakes is old news to the resort's residents. Residents remain skeptical
of Hoegen's announcements of deals and near deals to stave off foreclosure.
"This whole situation forms a pattern," said
resident Ray Dongelewicz,. A retired executive, Dongelewicz came to the
Valley of Lakes to find peace and quiet. Instead, he said he found problems.
He and other residents worry about the values of their
homes, maintenance of the development's roads and water and sewer systems.
They wonder how long they will have to wait for a lake
and a golf course that was scheduled to be built years ago.
They wonder how long they must wait for the reopening
of the ski slopes, restaurants and equestrian center that lured them to
buy property at what once was touted as the "premier resort of Northeastern
"Our big concern right now is the money we pay
in maintenance fees and the (operation of) water and sewers," said
Morris, the 47-year-old truck driver who moved to Valley of Lakes three
years ago. "I understand they have no money left for maintenance."
But Hoegen said fears such as [***] Morris'
are ill-founded. Hoegen said the roads have always been maintained and
CBG has done its best to maintain the water and sewers.
Yet residents still are [***]
In 1980, before Cedrone purchased the resort, the Valley
of Lakes Civic Association newsletter described the development as having
roads that were impassable, garbage that had piled up and frequent interruptions
to the water service.
The financial picture was so dismal the civic association
members took turns volunteering as [***] holidays because
the bank could not pay for guards.
Cedrone bought the development in 1986 and improved
conditions at Valley of Lakes. Cedrone employed more than 200 people who
ran the equestrian center, ski resort and restaurants. He added sewers
and upgraded the water system. Residents were pleased.
But the resurgence of amenities was short-lived.
Not able to get satisfaction locally, some residents
have called on state authorities to investigate the development's problems.
J.P. McGowan, deputy attorney general in Scranton said
he is investigating residents' complaints about liens placed against their
property for refusing to pay $35,000 in contractor's fees to clean up damage
from failed sewer pumps.
Last spring contractors helped repair and clean up
damage when sewer pumps failed around four residences near the resort's
Lake Choctaw. Residents contend CBG should be responsible for the repirs
to four residences near the resort's Lake Choctaw.
McGowan said the attorney general's office plans to
ask the Luzerne County court to drop the lien against the four homeowners.
He said he is waiting to see if a new owner of the 4,004-acre resort will
address residents' complaints before a lawsuit against the operator of
Valley of Lakes, CBG Ltd., is filed.
Four other residents complained directly to the Public
Utility Commission that water service had been interrupted "at worse
on a daily basis" since the bankruptcy was announced in 1992.
One of those residents, George Morris, had complained
to PUC prior to the bankruptcy. He said his home was without water for
as long as four hours as many as two days a week.
Susan Jin Davis, an attorney for the Office of Consumer
Advocate, said her office took up the four residents' cause because it
was likely more people in the community were affected by the water shut-off
An engineer whose opinion was sought by Davis and presented
to PUC, said a $5,000 device would prevent water pressure problems.
"But to a company in bankruptcy, $5,000 is ridiculous,"
Hoegen said CBG is working to fix the problems.
On Monday, the PUC hearings on the water service complaint
against Oneida Water Co. will end. Davis said the PUC decision will probably
be released mid-January.
Residents have struggled with fluctuating property
values. Few are willing to talk about the problem for fear discussion of
property values will only drive values lower.
A member of the resort's civic association who is an
executive at a Hazleton company said Valley of Lakes property values have
declined about 30 percent since Cedrone declared bankruptcy. He said [***]
sold for as much as $100,000 for three-tenths to four-tenths of an acre,
the size of most Valley of Lakes lots. The property owner contends those
properties have declined becuase the amenities promised are not completed.
In 1980, the Valley of Lakes Civic Association successfully
sought a reduction in property [***] are again considering seeking
a reduction in assessments.
There are about 300 homes either built or under construction
in Valley of Lakes. Some lots do not have accessible roads or sewer hookup.
The total number of lots in Valley of Lakes is 6,400.
VOLCA vs. Cedrone
Many of the residents complaining to PUC and to the
Attorney General's office have memberships in VOLCA, the Valley of Lakes
From the day Cedrone announced plans to revive Valley
of Lakes, VOLCA members say he declared he would not recognize the association.
Since then, the relationship between Cedrone and the association has deteriorated.
This summer state police were called to break up a
VOLCA pig roast, which Cedrone said, was held without proper permission
from Valley of Lakes management.
The 10th annual pig roast, held at the picnic pavilion
was a fund-raiser and provided an opportunity for the approximately 400
VOLCA members to talk about the bankruptcy. In a newsletter prior to the
pig roast, the association suggested residents try to gain position in
the bankruptcy negotiations.
Although police took no action at the pig roast, CBG
representatives removed tables, took apart the grill, turned off electricity
and locked the public bathrooms near the picnic site.
CBG then revoked priveleges from VOLCA board members
to use common areas in the resort.
In letters to all residents, Cedrone called VOLCA an
"organization of dissidents whose goal is the demise of CBG."
He called the group adversarial and disruptive.
In a letter sent to Cedrone, the association blamed
Cedrone for the development's problems.
"It could be argued that your reasons for not
recognizing VOLCA can also be attributed to CBG Ltd., which itself is directly
responsible for the anguish and suffering of many people owning property
in Valley of Lakes."
VOLCA members, as an organization, declined to discuss
at length their dispute with Cedrone. The organization released this statement
"VOLCA would really like to see every property
owner get what they paid for. After years of unsuccessful attempts at refinancing
it may be time that a new buyer come forward with enought money to complete
this development. We want our development finished. A lot of great people
live here and we would welcome the opportunity to help a new buyer finish
"The place sells itself. It's a gorgeous place,"
Morris said. "I hope to stay here. The way things are going, I don't