Melrose Resort bankruptcy leaves cloud of uncertainty over Daufuskie Island

While the recent bankruptcy filing by the owners of Daufuskie Island’s Melrose Resort is not expected to have an immediate or direct impact on other property owners there, islanders are concerned the move will give the outside world a negative impression of their remote slice of paradise.

“We have high, high concerns about these developments,” Deborah Smith, Daufuskie Island councilwoman and owner of the Daufuskie Rental Group, said Tuesday. “But we have been hoping for the best, and we will continue hoping for the best.”

The major concern expressed by island officials and residents is that the bankruptcy filing — the second on the property in less than a decade — will cast an unwelcoming shadow on the rest of the island and give vacationers who may be interested in renting property on Daufuskie pause.

“Our biggest concern is that this is going to create the perception that (the island) isn’t worth coming to,” Smith said. “But there is so much more to Daufuskie than any one resort or any set of amenities.”

Affiliates of Utah-based resort developer Pelorus Group, which purchased the Melrose Resort property in 2011, filed for Chapter 11 protection earlier this week and stalled an impending foreclosure sale.

The companies — whose island holdings include a restaurant, beach cottages, an inn, a ferry landing and a golf course — owe creditors nearly $35 million, according to court documents.

Columbia-based attorney Rick Mendoza said Thursday the bankruptcy filing is aimed at giving the property’s ownership group time “to try to finalize another financing package” that would pay down debt and allow them to make improvements at Melrose.

Resort spokeswoman Asenath Horton said in a statement Thursday, “Sometimes the best business decision doesn’t look like a good one at all to everyone else.”

But the resort “is expecting to fully capitalize the project within the summer months,” she said.

Pelorus Group owner J.T. Bramlette vowed to breathe new life into the property after taking over and renaming the bankrupt Daufuskie Island Resort and Breathe Spa, telling The Island Packet and The Beaufort Gazette in 2011 the company was “going to revitalize this entire project.”

But the restaurant is shuttered, the inn and beach cottages vacant, and the greens and fairways at the golf course are empty.

Beaufort County-supported ferry service remains active at the Melrose boat landing.

“I don’t think (the bankruptcy filing) has any immediate impact (on ferry service), but it’s something we are going to keep an eye on,” deputy county administrator Josh Gruber said Thursday.

Bramlette and the Pelorus Group are no strangers to controversy.

Last year, the company and its affiliates owed Beaufort County nearly $500,000 in unpaid property taxes.

In 2015, the S.C. Department of Health and Environmental Control discovered two underground tanks used to store gasoline and diesel fuel at the boat landing were not in compliance with state regulations. A Pelorus Group subsidiary was hit with a $35,000 fine.

Bramlette is personally listed as a defendant in at least four Beaufort County civil lawsuits since 2013.

“That Pelorus outfit has hurt a lot of people,” author and long-time Daufuskie resident Roger Pinckney said Thursday. “I wish they would just go away.”

But despite the issues at the Melrose Resort, “we’re doing fine here on the island,” he said.

Daufuskie Island Councilman Steve Hill agreed.

The resort “might be bankrupt, but we’re not bankrupt,” he said. “We are a thriving community.”

Smith said, “We have a robust rental business, and people are still coming to the island.”

“We have concerns, of course,” she said. “But there is a resiliency here — we have enough confidence in the island that people will continue to come here.”

This story was originally published March 9, 2017 at 3:45 PM with the headline "Melrose Resort bankruptcy leaves cloud of uncertainty over Daufuskie Island."