Bankruptcy filing brings end to family's mall plan.

Byline: Development Report by The Register-Guard

MAULED MALL: A Eugene family's six-year effort to create a factory-outlet mall near Albany has foundered, and the family's development firm, Schulenberg Joint Venture, has filed for bankruptcy liquidation.

The move caps years of fighting between the Schulenbergs and several lenders.

Schulenberg Joint Venture, whose members are Eugene residents Virgil and Nola Schulenberg and their son, Mark Schulenberg, cited $980,500 in debts and $1.7 million in assets in their filing in U.S. Bankruptcy Court in Eugene earlier this month. The venture's sole asset is 20 vacant acres of commercial-zoned land at highways 99 and 34 in Tangent, two miles west of Interstate 5, and about eight miles south of Albany. While the filing values the property at $1.7 million, an attorney for one of the creditors said the land is probably worth less than $700,000.

The land was long owned by Eugene lumberman Ehrman Giustina, who gave it to the University of Oregon Foundation in 1995. The foundation sold the land - at that time 26 acres - to the Schulenbergs for $774,000 that same year.

In 1996, Tangent changed its planning rules to permit large commercial buildings on such land, opening the door for the Schulenbergs' factory-outlet concept. At the time, Mark Schulenberg told The Register-Guard that he envisioned a 230,000-square-foot center that would employ up to 300 people.

The plan sparked debate in Tangent. Some said it would be a boon. Others worried it would bring traffic that would clog roads and cause accidents.

As it turned out, opponents had little to fear.

In 1997, the Schulenbergs sold six acres, for $650,000, to an adjacent business for an expansion, according to the bankruptcy filings.

But the factory-outlet plan fizzled. In filings, the Schulenbergs said they failed to keep up with payments on high-interest loans they had taken out that were secured by the 20 acres. They also said they had trouble lining up tenants and were unable to get a construction loan.

The two biggest debts tied to the land are about $250,000 in principal and interest owed to a Eugene investment group, Regents Capital LLC, and about $550,000 in principal and interest owed to Lynx Communications, a Salem company. Both firms have been trying to foreclose on the land for several years, but have been thwarted by the Schulenberg group's bankruptcy filings. The Schulenberg group in May 2000 filed for Chapter 11 reorganization, and in December 2000 a judge approved the family's plan to sell the land and pay off the debts. But no sale materialized, prompting Regents and Lynx to resume foreclosure efforts. Then, with foreclosure imminent, the Schulenberg group filed the liquidation petition earlier this month.

The court filings don't explain what happened to the proceeds from the sale of the six acres, and to the loan money from Lynx and Regents.

Eugene attorney Dean Kaufman, who represents Regents, said the land is valuable because it has good exposure to a busy route - Highway 34 - between I-5 and Corvallis. A few months ago, Regents figured the land was worth $600,000 to $700,000. "But that was before the economy cratered. Who knows what it is worth today at the trough of the market," he said.

The Schulenbergs and their attorney did not return calls from The Register-Guard.

By business editor Christian Wihtol.