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December 17, 2008 - Carefree Resort and Daufuskie Island Resort, Carefree AZ; Daufuskie SC


Daufuskie Island Resort and Breathe Spa has laid off almost all its employees in the past three weeks, according to fired workers. In addition, a hotel owned by the resort's owners in Arizona - Carefree Resort has filed for bankruptcy. Carefree Resort
Full Story - Below
Update March 19, 2009 Daufuskie now Bankrupt & Closed Up

The Struggling Daufuskie Island Resort and Breathe Spa Lays Off Almost All Employees

Owners Bill and Gayle Dixon Trying to Sell Parts of the Sprawling Resort

The struggling Daufuskie Island Resort and Breathe Spa has laid off almost all its employees in the past three weeks, according to fired workers. In addition, a hotel owned by the resort's owners in Arizona has filed for bankruptcy.

Edward Douglas, a longtime employee and Daufuskie resident, said all but eight hourly staffers were fired from the resort, which employed more than 100 people.

The former employees also say they have not received compensation for working extra days for which they accrued compensation time. Because they never took the comp time, they say they should be paid for those hours.

"A lot of us have mortgages to pay, rent to pay, bills to pay, and they're saying they don't have enough money to pay us," said Douglas, who had worked at the resort since 2002, when Bill and Gayle Dixon of San Francisco bought it.

Officials with Atlanta-based West Paces Hotel Group, the resort's management company, didn't return phone calls seeking comment Tuesday. The resort's personnel manager said he couldn't comment because of legal issues and referred questions to the Dixons' asset manager, who also didn't return calls. The Dixons didn't respond to e-mails sent Tuesday.

S.C. Department of Labor, Licensing and Regulation spokesman Jim Knight said the agency has received complaints from resort employees regarding compensation pay. Knight said the state is investigating West Paces over the workers' claims.

"It's not fair. This is Christmas and these people are not getting their money, and it's criminal," said Douglas, who managed Jack's, a restaurant and bar at the resort that has closed down.

With most employees gone, remaining resort officials have closed down the Melrose Inn and the spa, according to employees. The resort still is accepting guests at vacation cottages, but the reservation work has been contracted out to Hilton Head Rentals & Golf.

The Dixons have been trying to sell parts of the sprawling resort for months, including the inn and the ferry service, arguing that the sales would allow them to turn around the unprofitable resort. In October, resort members sued the Dixons, saying members should be involved in any attempt to sell all or parts of the resort.

Members pay yearly fees in exchange for privileges, including access to golf, tennis and a beach club as well as ferry rides and restaurant discounts.

Alexander Beard, a Mount Pleasant attorney representing the members, said Tuesday that "what we're doing is simply protecting the members' rights and benefits."

He said the lawsuit did not cause the firings.

Nick Piccola, a Hilton Head Island resident who worked as a bus driver at the resort before being fired, said the economy contributed to the tough times at the resort, but workers still felt like "we were caught in the middle of the dispute."

"Normally we'd have a bad three weeks in January," he said. "But this year, with the economy and everything else, different companies canceled their group bookings, and we weren't doing any weddings."

The Dixons also own two other resorts, both managed by West Paces, that have run into financial troubles.

Carefree Resort & Villas in the Sonoran Desert of Arizona declared bankruptcy in November. Court documents show that West Paces is the second-largest creditor in that case.

The Dixons also are part-owners of the Ocean Place Resort & Spa in Long Branch, N.J. The city of Long Branch is suing over missed payments on a $1.3 million loan for a redevelopment project that would have upgraded the hotel and the city-owned pier.

Original Story - Hotel-Online

Update 12/30/2008

State of South Carolina Fines Daufuskie Island Resort $6,900 for Failing to Pay 69 Laid-off Employees $130,000 In owed Vacation Time

A state agency has fined the Daufuskie Island Resort & Breathe Spa $6,900 for failing to pay 69 laid-off employees more than $130,000 they are owed in vacation time.

Jim Knight, S.C. Labor, Licensing and Regulation spokesman, said a citation was sent last week to the resort, one of Daufuskie's largest employers.

The agency investigated the resort after a number of laid-off workers complained they didn't receive accrued vacation time.

In addition, several vendors said they haven't been paid for providing services at the resort. Bob Rindt, who owns Lowcountry Outfitters, which provided pots, pans and dishes to the resort, said if he can't recover the $8,000 he claims he's owed, "it's going to hurt me badly."

Russ Brown, chairman and CEO of RBC Enterprises, which develops and sells real estate for resort owners Bill and Gayle Dixon of San Francisco, said the money problems are "real," adding that the debts were a temporary result of a management overhaul that ultimately will make the struggling resort profitable.

Hotel management company West Paces Hotel Group had been managing the golf, tennis and fitness facilities, a spa, an equestrian center, restaurants and the Melrose Inn since 2005.

But after years of losing money, the Dixons decided they needed to scrap their management structure, said Brown.

Under the plan, the Dixons will sell off various pieces of the property, including the inn and the tennis facility, to other companies that have experience running those types of properties, said Brown.

Meanwhile, more than 100 employees have been laid off. In a normal winter, the resort reduces staff, but this year laid-off workers aren't sure they'll have jobs at the resort when tourist season picks up in the spring.

Brown said the jobs will be back.

"There will be job opportunities," he said. "They're going to need people with experience on Daufuskie."

As far as debts to resort employees and vendors, Brown said those can be taken care, too, as long as litigation between the resort's owners and its members can be resolved.

Members of the resort have sued the Dixons, arguing a contract the Dixons signed when they bought the resort in 2002 prevents them from selling the resort's assets without consulting the members. The courts have prohibited such sales until the lawsuit is resolved.

It makes it so "you can't pay the bills," Brown said. "But it just takes one strategic sale," and that would be enough to take care of the debts, he said.

Meanwhile, the Dixons are negotiating with possible buyers of the inn and other assets in the hopes an agreement with resort members can be reached, said Brown. He said a hotel group is touring the inn today, and he's confident the Dixons will be able to find a buyer.

Updated Story - Hotel-Online

Update January 21, 2009

The Owners of the Daufuskie Island Resort File for Chapter 11 Bankruptcy; Lists $88.2 million in Liabilities

The owners of the struggling Daufuskie Island Resort & Breathe Spa filed for bankruptcy Tuesday, leaving uncertain the fate of one of the island's largest employers and a list of more than 400 creditors.

The filing follows layoffs of more than 100 resort employees at the end of last year.

"The resort is a huge contributor to our economy," said Cathy Tillman, who writes the Front Porch, a Daufuskie newsletter. "But we have been through this before, and we weathered it," she said, referring to 2002 when the resort's previous owner was forced to sell because of bad economic conditions.

In a news release, an official at Daufuskie Island Properties LLC, which owns the resort, said the tumbling stock market and a lawsuit brought by a group of resort members led to the company filing for Chapter 11 bankruptcy. The company plans to try to reorganize and sell off parts of its business. It has not ruled out selling the entire resort, according to the release.

"Like so many others, we, too, have had to respond and react to the extreme fluctuations and confusion in the markets. We have had to lay off more employees than usual in our winter season, long-time employees that we care about, and that has been a difficult and emotional process," said Tim Foley, asset manager for Daufuskie Island Properties, which is owned by Gayle and Bill Dixon of San Francisco.

The filing shows that revenue at the resort dropped sharply from $27.5 million in 2007 to $17.3 million last year. The company lists $88.2 million in liabilities and $97.1 million in assets in the filing.

But Foley was optimistic that bankruptcy would allow the company to reorganize and to stay in business.

"We look to this as an opportunity to regroup and reset our strategy for the future success of our Daufuskie Island assets and to open our 2009 season in March as planned," Foley said.

Foley said in a phone interview Wednesday that bankruptcy proceedings also will allow the company to resolve the resort members' lawsuit faster.

The Dixons have said the suit, which prevents them from selling off assets, stands in the way of the resort's profitability.

Arguing that the sales are needed to turn the resort around, Gayle Dixon wrote on her Web site that the resort couldn't continue under its traditional management structure, where diverse pieces of the resort, including two golf courses, tennis courts, several restaurants, the Melrose Inn, and an equestrian center, were run by a single company.

"I have 23 years of data... that shows annual operating losses in the millions of dollars," she wrote. The Melrose Co. built the resort in 1980s, and the resort has changed hands numerous times, most recently when it was purchased by the Dixons in 2002.

Alexander Beard, an attorney for the resort members, has said they want a seat at the table during any sale discussions to ensure their privileges at the resort are not curtailed. Beard told The (Charleston) Post and Courier he could not comment about whether the litigation was a factor in the company's decision to seek bankruptcy protection.

Foley said a speedy resolution to the suit is best for both parties.

Russ Brown, chairman and CEO of RBC Enterprises, which develops and sells real estate for the resort company, said the sale of a major resort asset could allow the company to pay off its creditors.

Updated Story - Hotel-Online

Update - March 19, 2009

Daufuskie Island Resort & Breathe Spa Lays off Remaining Staff, Closes Doors

The Daufuskie Island Resort & Breathe Spa closed its doors this week, laying off what was left of its skeleton staff.

A bankruptcy judge ruled Tuesday that a trustee will be appointed to manage the resort, which could lead to a reopening. A trustee has not yet been named.

"It could be two days or two weeks until a trustee is picked and the resort's back in business," said Russ Brown, chairman and CEO of RBC Enterprises, which develops and sells real estate at the resort.

Brown said owners Bill and Gayle Dixon of San Francisco shut down operations and relinquished control of the club, the latest twist in a complicated bankruptcy case that started in January.

As a result, the Melrose Inn, the Melrose golf course/club house, and ferry operations from Salty Fare on Squire Pope Road on Hilton Head Island have been closed.

In another development, the bankruptcy judge ruled last week that the Dixons could not sell or lease portions of the resort without the consent of a select group of resort members.

Rich Silver, a member involved in a lawsuit against the resort, and Brown both said a lender was willing to loan the Dixons money but only if the bankruptcy judge allowed them to sell or lease its assets freely. The judge would not allow that.

"As a result of this ruling, the one lender that was willing to lend (the Dixons) monies to keep operatingis no longer willing to make that loan," wrote Silver.

Brown said that after the lender pulled out, the Dixons agreed to let the court appoint a trustee.

Brown said having a trustee manage the resort is good news for everyone involved, including the Dixons' creditors.

"It means an independent party, not tied up emotionally, is selected to move forward the resort, which allows the best possible chances for the creditors ... to be paid back," he said.

Brown and Silver said they hope to see the resort, and in particular the popular Melrose golf course, open once a trustee is selected.

"Hopefully, a trustee will be appointed immediately and that trustee can take over very quickly and ensure that at least minimal operations are resumed," Silver wrote.

Brown said the sooner the trustee is named, the better.

Neither the resort members' attorney, Alexander Beard, nor the Dixons' bankruptcy attorney, Ivan Nossokoff, returned phone calls seeking comment.