Stagnant sales and frozen credit markets have indefinitely delayed hotel construction at Tetherow, a 700-acre destination resort west of Bend.

The planned four-star, 150-room Hotel Tetherow had been slated to open in spring 2009 but will not be built until financing can be obtained, said Don Bauhofer, a partner with Bend-based Arrowood Development LLC, one of the companies developing Tetherow.

“The timing is still uncertain,” Bauhofer said. “We’re all sitting on our hands trying to be ready when the capital out there is ready to fund development. We’re still actively spending money, but we’re not prepared to start until the capital markets turn around.”

Arrowood — which put up a $16 million bond with Deschutes County to guarantee that overnight lodging will be built — is seeking $40 million to $50 million to build the proposed hotel, which would include a spa, meeting space and a restaurant, said Jason Eckhoff, a hospitality consultant for Bend-based Maryville Hotel Association, who consults for Arrowood.

The delay could force Arrowood to ask Deschutes County for an extension on a June 2007 agreement that requires the developer to build 198 overnight lodging units as part of the resort’s land use approval, Bauhofer said. State law requires 2.5 overnight units for each house, but the county only requires two.

Another Deschutes County resort, Pronghorn, has already had its deadline to build overnight lodging extended four times, according to the county’s legal counsel. The resort northeast of Bend, which opened in 2003, now has until 2013 to build all of its overnight units. It has cited a poor real estate economy as the reason it needs more time.

The Tetherow agreement allows the developers, who include Arrowood and Eugene-based Spring Capital Group, to build 379 homes at the resort. Since lot sales began last October, 55 homesites have been sold, but only five of those have been sold since June, according to Spring Capital Group.

Arrowood already sought financial help from Spring Capital in April when the private investment group and real estate company bought out its stake in the Tetherow Golf Club, including the 18-hole championship golf course and clubhouse.

Arrowood retained ownership of the land on which the hotel, townhomes, lodge homes, and several single-family homes would be built, Bauhofer said. The 48 lodge homes could be used for overnight lodging.

If the company cannot find financing for the hotel project, it might sell some of the land, Bauhofer said.

The delay of the hotel could mean fewer rounds played at the golf course, which opened July 25, according to Martin Chuck, PGA director of golf and club manager.

“Sure, it would be great to have a hotel there, but the golf course by itself will be fine,” he said. “As far as my operations, we’ll partner with the hotel and welcome it when it’s all said and done. It just might be a couple of years out.”

Arrowood has until June 2009 to meet the hotel agreement, but it could file an extension for up to three years, according to Anthony Raguine, senior planner for the county’s Community Development Department.

The county would have the option of cashing in the $16 million bond and building the hotel if the developers don’t build it by the deadline, Raguine said. But the county has shown no such inclination with Pronghorn.

Arrowood will likely apply for an extension with the county, Bauhofer said.

The county has granted four extensions to Pronghorn Resort, which originally had a three-year agreement with the county in 2003 to open a hotel by 2006, said Laurie Craghead, assistant legal counsel for the county. The resort, required to build 192 overnight units, has built 48 of them so far, according to previous reports in The Bulletin.

Pronghorn deposited $9 million with the county that is posted to ensure that two condominium hotels would be built, Craghead said. The two hotels would satisfy the requirement, she said.

“If (Arrowood) failed to make their deadline, the county could go and build the hotel,” Craghead said. “There’s always the option of extending the agreement. There’s no particular statutory guidelines that says yea or nay on extensions.”

The county’s enforcement of overnight lodging requirements has rankled some in the land use community, including Paul Dewey, a land use attorney for Central Oregon Landwatch in Bend.

Ambiguities in the law are giving resort developers too much leeway in their projects and creating subdivisions that are the size of small cities, Dewey said.

“Unfortunately, the message the county sends to these destination resorts when they keep granting extensions or change their plans is that whatever you need, we will accommodate,” he said. “There never is any enforcement.”

Tetherow has every intention of building a hotel, Eckhoff said.

“This is the one site that it makes sense to do overnight accommodations,” he said, referring to its proximity to Bend. “A hotel will be built on this site and it will be wildly successful.”

With Wall Street financing gone, Arrowood will most likely need to find a cash-based investor to build the $40 million to $50 million hotel, Eckhoff said.

“Clearly the financial world is working against us nationally,” he said. “We’re in a bit of a holding pattern.”

Arrowood also is seeking a new management partner for the hotel since Dolce International, a Montvale, N.J.-based global hospitality company, backed out of the project, he said.

Dolce would have brought its international management experience, which includes properties in Europe, the U.S. and Canada, but it also would have brought capital partners, Eckhoff said.

Meanwhile, Ankrom Moisan Associated Architects Inc., a Portland-based firm, has sued Arrowood, which owes the firm $711,348 for architectural design services for the hotel, according to a suit filed in Deschutes County Circuit Court last month.

“When you don’t have the money, sometimes you can’t pay the bills,” Bauhofer said of the suit. “Our financing fell through last summer as the market got worse.”