The Bend-based company that owns a portion of Bend’s Tetherow resort entered into the earliest stages of a $16 million foreclosure last week on 29 lots adjacent to Broken Top Club.

The lots are part of Arrowood Development LLC’s Crescent development, the highest priced of the company’s three groups of lots at Tetherow, said Don Bauhofer, a partner in Arrowood.

Umpqua Bank filed a notice of default and election to sell Jan. 9 and will take ownership May 18 unless Arrowood can sell the lots, according to Deschutes County records.

About half of the Crescent lots border Broken Top and give buyers membership at Broken Top Club, Bauhofer said.

To date, Arrowood has sold 21 lots among the company’s three groups of development parcels, with an average sales price of roughly $620,000, Bauhofer said.

“Sales have been slow and we are trying to get through the process,” Bauhofer said. “… The bank is in a position where they cannot extend the loan. In this market, that means you need to go through the foreclosure process.”

The preforeclosure is the latest real estate-related challenge for Bauhofer and Arrowood.

“It is just one of those things,” he said. “I am not putting my head in the sand, but dealing with it while I can. It’s slow. It’s going to take awhile.”

In October, Arrowood announced plans to delay opening Hotel Tetherow, a four-star, 150-room hotel that had been planned to open this spring.

Last spring, the company transferred ownership of Tetherow’s semi-private golf course and clubhouse to Eugene-based Spring Capital Group, which also has an ownership stake in 160 remaining lots at the resort.

Bauhofer has been named in a lawsuit filed in October by LibertyBank over more than $13 million in real estate-related construction loans. Most of those loans were taken out to develop 220 homes at the former site of the Bend Trap Club in southeast Bend, but development never began after costs to rid the site of lead exceeded projections and the housing market slumped.

Arrowood still has other ownership stakes at Tetherow and plans to build 48 lodge-like homes and 210 townhomes, Bauhofer said. Sales and construction have not yet begun on those homes, he said.

Sales also are slow for Spring Capital, said Bill Bernards, the company’s spokesman and owners’ representative.

The company has more than $500 million invested in several development projects in California, Oregon, Arizona and Hawaii, including Tetherow, Bernards said.

Spring Capital has sold 57 lots since sales began in October 2007, with prices ranging from $375,000 to $700,000, but has sold two of those in the last 45 days, Bernards said. Those lots, which were good news during an otherwise slow time of year, were sold in the mid-$400,000s, he said.

The firm is well-capitalized to handle the downturn, Bernards said.

“We still believe very strongly in the location and attributes that make Tetherow unique,” he said. “Obviously, there is a hiccup now, and we have got to work through that, but it will take time.”

Another Tetherow developer, Bend-based Proterra LLC, has sold 10 of its 68 lots, Bernards said.

A foreclosure at the Crescent lots could lower prices throughout Tetherow, depending on Umpqua Bank’s plans for the property, Bernards acknowledged.

“The potential impact is unknown,” he said. “We don’t know what (the bank’s) plans are. But those (Crescent) lots don’t have proximity to the golf course and membership to Tetherow Golf Club” like the Spring Capital-owned lots do.

Selling lots will be difficult in an environment where 40 lots priced between $500,000 and $650,000 were listed for sale in northwest and southwest Bend on Wednesday, said Sheree MacRitchie, principal broker at Steve Scott Realtors in Bend.

“Lots, in general, are not selling — period,” said MacRitchie, who is president-elect of the Central Oregon Realtors Association. “People are afraid to build with the fees the way they are. There is such a supply of existing homes. They can purchase something less expensively than they can build a new home.”

Tetherow also faces challenges because it has not yet developed a community feeling that some people want, MacRitchie said.