Sunapee Lease Investigated

TomWhiteTomWhite advanced
in NELSAP Forum Posts: 429

State
calls for public meeting amid concerns over Mount Sunapee ski lease



By DAVID BROOKS 

Monitor staff

Wednesday, June 07, 2017

 

After bribery schemes in Africa led the U.S.
government to fine the new operator of Mount Sunapee Resort $412 million last
year – one of the biggest penalties ever issued under the Foreign Corrupt
Practices Act – the New Hampshire attorney general wants to hold a public
information meeting about plans for the resort.

The resort is part of Mount Sunapee State
Park, but ski operations are run by private companies under a lease. That lease
was sold recently by its previous owner, Florida-based real estate investment
trust CNL, to New York hedge fund Och-Ziff. The sale was part of a reported
$830 million deal involving a number of other ski areas, including Okemo in
Vermont and Sunday River and Sugarloaf in Maine.

News about the purchase circulated late last
fall, but the sale didn’t trigger a notification clause in the lease and the
state was not officially notified of it until March, Attorney General Gordon
MacDonald said Wednesday.

No plans have been announced to change the
operations of the ski area, which has thrived in recent years, according to
MacDonald and statements from the Department of Resources and Economic
Development.

But Och-Ziff’s recent history has raised
questions, leading to a push by the AG’s office and DRED to hold a public
discussion.

“The company is under a compliance agreement
with the federal government,” MacDonald said. “The suggestion is to get the
compliance monitor up here and engage the company directly.”

New Hampshire has owned Mount Sunapee State
Park for close to a century, and development on the ski area began in the 1950s
when the sport was starting to bloom. In 1998, the state leased management and
operations to the owner of the Okemo resort. In 2008 the lease was sold to a
subsidiary of the CNL trust, which hired the Okemo group, now called The
Sunapee Difference, to operate it.

The state lease was updated in 2016 and runs
at least through 2028.

Under the lease, the state must be notified
and give its approval if a change is made in the management group – that is, if
The Sunapee Difference no longer operated the ski area. But the lease does not
give the state a say if ownership of the lease changes hands, as has happened.

According to a memo from MacDonald and Jeffrey
Rose, commissioner of DRED, the state began to receive questions in March about
Och-Ziff, the new owner of the lease.

Och-Ziff is a sizable hedge fund, with a
reported $39 billion in assets under its management. It was founded in 1994.

According to news reports, the company became
embroiled in a major bribery scandal in several African nations, including
Chad, Niger, Guinea, the Democratic Republic of the Congo and Libya, to help
win mining rights. Och-Ziff subsidiary OZ Africa Management GP LLC pleaded
guilty in September to a criminal case in federal court in New York City.

News reports said Och-Ziff CEO Daniel Och
agreed to pay nearly $2.2 million to settle Securities and Exchange Commission
charges that he caused the violations, while the company will pay $199 million
to the SEC to settle civil charges of violating the Foreign Corrupt Practices
Act and pay a criminal penalty of $213 million.

Under the agreement with the U.S. Department
of Justice, the company agreed to a federal “compliance monitor” to oversee its
operations for three years.

No schedule has been set for any public
meeting concerning Mount Sunapee Resort.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com
or on Twitter @GraniteGeek.)

Comments

  • mapnutmapnut expert
    Posts: 781
    Bribery to secure mining rights in poor countries is about as corrupt and destructive as you can get.
  • bubblecufferbubblecuffer advanced
    Posts: 262
    Smells bad, however, the failure of notification may not have been intentional and rather a gross oversight.  This article is well written.
  • CannonballCannonball advanced
    edited June 9 Posts: 123
    I'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"
  • NJSkiNJSki advanced
    edited June 12 Posts: 269


  • mapnutmapnut expert
    Posts: 781
    Well, we can certainly blame hedge funds.
  • obienickobienick expert
    edited June 9 Posts: 853

    I'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"

    I'm against the leasing of Cannon. But the State messed up on this one. They could have easily prohibited transferring the lease in the RFP and lease documents. Or required that the lessee is the operator and cannot sublet the ski area like CNL did.
  • joshua_segaljoshua_segal expert
    Posts: 1,716

    I'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"

    Hey, this comment is sufficiently edgy that maybe, just maybe, rocket21 will feel obligated to comment :-)
  • CannonballCannonball advanced
    Posts: 123

    iI'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"

    Hey, this comment is sufficiently edgy that maybe, just maybe, rocket21 will feel obligated to comment :-)
    One can hope......
  • CannonballCannonball advanced
    Posts: 123
    obienick said:

    I'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"

    I'm against the leasing of Cannon. But the State messed up on this one. They could have easily prohibited transferring the lease in the RFP and lease documents. Or required that the lessee is the operator and cannot sublet the ski area like CNL did.
    This is absolutely true. Contracts are always improved by the failures of the ones that preceeded them. And there will always be failures in the next contract that inform the future.

    I'm actually on the fence about leasing Cannon. I see a complex list of pros and cons. That's why I'm constantly surprised when people suggest that there is no downside and no​ risk. The current situation at Sunapee is evidence to the contrary. It's something to learn from.

  • bobbuttsbobbutts intermediate
    Posts: 95
    At least Cannon is figuring out how to make snow.  I don't care who runs it much, more concerned about the quality of the "product" there.
  • tededetedede advanced
    edited June 12 Posts: 121
    Smells bad, however, the failure of notification may not have been intentional and rather a gross oversight.  This article is well written.

    Perhaps you overlooked the statement: 
    But the lease does not give the state a say if ownership of the lease changes hands, as has happened.    

    In the absence of a permission clause, there isn't a notification clause or the well-written article would have mentioned that timeframe.

    The only failure here is by the state's attorney that failed to add a sale/transfer permisson clause into the lease agreement.  

    If you lease a car you need permission from the lessee to reassign the lease. 

    Seems pretty shoddy that the state puts less care into the management of a ski area than your average bank would with a Camry, but looking at the way they run Cannon, it's not a surprise.

  • tededetedede advanced
    Posts: 121

    I'm bookmarking this thread for the next time private leasing of Cannon is brought up, and someone asks the question: "What's the risk of leasing?"

    Turning a profit?
  • CannonballCannonball advanced
    Posts: 123
    tedede said:


    Turning a profit?

    I'd consider that a potential benefit not a risk. A risk would be something like having a leasee wrapped up in a multi-million dollar, international bribery scandal.
  • tededetedede advanced
    Posts: 121

    I'd consider that a potential benefit not a risk. A risk would be something like having a leasee wrapped up in a multi-million dollar, international bribery scandal.

    Wrapped up, really?  412M in fines / 39B in holdings is 1.06%.  

    You should really be worrying about the state's lack of oversight on the property.
  • CannonballCannonball advanced
    Posts: 123
    tedede said:

    I'd consider that a potential benefit not a risk. A risk would be something like having a leasee wrapped up in a multi-million dollar, international bribery scandal.

    Wrapped up, really?  412M in fines / 39B in holdings is 1.06%.  

    You should really be worrying about the state's lack of oversight on the property.
    Paying fines equal to 1% of your holdings is not trivial to any company.  And $412M is not insignificant in any setting.

    I agree completely the state's lack of oversight is a VERY big concern. And should continue to be a VERY big concern for any future lease arrangement of any state property. 
  • tededetedede advanced
    Posts: 121



    Paying fines equal to 1% of your holdings is not trivial to any company.  And $412M is not insignificant in any setting.


    I agree completely the state's lack of oversight is a VERY big concern. And should continue to be a VERY big concern for any future lease arrangement of any state property. 

    So what's the worse that happens, Och-Ziff needs cash and sells off the lease to another hedge fund that also knows nothing about running a ski area?  

    Shouldn't be hard as NH has no say in the matter.
  • CannonballCannonball advanced
    Posts: 123
    tedede said:




    Paying fines equal to 1% of your holdings is not trivial to any company.  And $412M is not insignificant in any setting.


    I agree completely the state's lack of oversight is a VERY big concern. And should continue to be a VERY big concern for any future lease arrangement of any state property. 

    So what's the worse that happens, Och-Ziff needs cash and sells off the lease to another hedge fund that also knows nothing about running a ski area?  

    Shouldn't be hard as NH has no say in the matter.
    Sorry, I'm not following.  Are you saying you are OK with that?  Or are you agreeing with me that it's a problem and a concern?
  • tededetedede advanced
    Posts: 121



    Sorry, I'm not following.  Are you saying you are OK with that?  Or are you agreeing with me that it's a problem and a concern?

    I'm perfectly fine with the lease being sold off.   Did Sunday River, Sugarloaf, Okemo and Sunapee fail to operate this past season when the leases were sold from CNL to Och-Ziff.  

    It's a lease to operate a ski area.  You know these hedge funds don't actually run them?  Sunapee is operated by "The Sunapee Difference".  Changing that would require permission from the state.
  • davekdavek novice
    Posts: 9
    tedede said:




    Sorry, I'm not following.  Are you saying you are OK with that?  Or are you agreeing with me that it's a problem and a concern?

    I'm perfectly fine with the lease being sold off.   Did Sunday River, Sugarloaf, Okemo and Sunapee fail to operate this past season when the leases were sold from CNL to Och-Ziff.  

    It's a lease to operate a ski area.  You know these hedge funds don't actually run them?  Sunapee is operated by "The Sunapee Difference".  Changing that would require permission from the state.



    Much ado about nothing... as tedede mentioned, Och-Ziff doesn't operate Sunapee.  Unfortunately, this article makes it sound like they do.  Let's put it this way -- when you have a mortgage on your house, the bank owns a portion of your house, but they don't live in it.  CNL and Och-Ziff are like banks in that they have assets related to the operation, but cannot actually operate them by law.  The operators of Sunapee, aka "Sunapee Difference" are the Mueller family -- same family that operates Crested Butte and Okemo. Nothing changes with the operations --( just like nothing changes if one bank sells your mortgage to another. You still live in your house and pay the same mortgage amount.)


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