Jay Peak and Burke

First half of VTDigger article:

Receiver plans to sell Jay Peak by next summer, hits brake on Burke sale
By Alan J. Keays
Aug 13 2018
Jay Peak is expected to be in the hands of a new owner next summer while the sale of Burke Mountain is now indefinitely on hold.
That’s according to Michael Goldberg, the court-appointed receiver overseeing the two Northeast Kingdom ski resorts at the center of a massive EB-5 scandal that has been playing out for the past several years in the northern mountains of Vermont.
Burke Mountain’s sale is on hold, Goldberg said, as it continues to lose money and has failed to generate the required jobs needed for EB-5 immigrant investors to obtain the U.S. residency they hoped for when they each put $500,000 into building a hotel there.
In February this year, Goldberg told VTDigger he planned to market the two ski resorts, Burke and Jay Peak, together as early as this May with the expectation of selling both by this ski season. But he has said little in recent months about the resorts, or why they had yet to hit the market.
However, Goldberg late last week filed his latest report on the status of the resorts, essentially a state of the state on his receivership and accompanying efforts to recoup money for the more than 800 defrauded foreign investors.
In addition to the information about the sale of the resorts, the filing also takes a look back at the previous ski season at the resorts and looks ahead at a another possible roadblock for EB-5 investors seeking permanent U.S. residency.
The report was filed in federal court in Miami because that’s where Ariel Quiros, the former owner of Jay Peak and Burke Mountain, resides.
According to separate lawsuits brought in April 2016 by state and federal regulators, Quiros and his former business partner Bill Stenger, the former CEO of Jay Peak, misused $200 million of more than $350 million they raised from EB-5 investors.
Regulators said Quiros alone “looted” more than $50 million for himself for personal expenses, including buying a luxury condo in New York City.
Both Quiros and Stenger have since reached settlements — neither denying nor admitting fault — with the U.S. Securities and Exchange Commission and state regulators in the cases.
As part of Quiros’ $81 million settlement with the SEC reached last year, he agreed to turn over his interests in both Jay Peak and Burke Mountain. Stenger’s SEC settlement involved him paying a $75,000 penalty to the federal government.
Michael Goldberg, the court-appointed receiver in the EB-5 fraud case, speaks at a Statehouse news conference Thursday. Photo by Michael Dougherty/VTDigger
Goldberg wrote in his latest filing that much of the property title work associated with putting Jay Peak up for sale is now complete. He added that he expects the sale of Jay Peak and its hotel complexes, condos and water park to be finished by sometime next year, after this season ski.
But, before putting Burke and its 116-room hotel and conference center on the market, the receiver wrote he is “considering additional construction to increase job creation.”
The receiver doesn’t say what that “additional construction” may be, or how it would be paid for. The filing also does not specifically say by how many jobs the Burke project fell short.
Goldberg did not return phone and email messages Monday seeking comment.
More than 130 EB-5 investors put in a total of $67 million into the Burke project. For an investment of at least $500,000 in a qualified project, an EB-investor becomes eligible for permanent U.S. residency if that investment can be tied to the creation of 10 jobs.
“Originally,” the receiver wrote in his recent filing of Burke, “it was intended that this project would consist of a hotel and conference center, an aquatic center, a tennis center and a mountain bike facility.”
Goldberg added, “However, as of the commencement of the receivership, only the hotel and conference center were completed.”
As for the resort to Burke’s north, Jay Peak, the receiver is moving forward with its sale.
Goldberg wrote he has negotiated an agreement with a “prominent investment banker” who specializes in sales transaction involving ski resorts to represent the receivership in the marketing of Jay Peak.
Goldberg wrote that he expects to file a motion with the court soon seeking approval to “engage” that banker’s services. The receiver added that he expects several potential buyers to visit Jay Peak throughout the fall and winter to see the resort in action.
At the end of the “diligence phase,” Goldberg wrote, interested buyers will submit offers. The banker and receiver will then review those offers to narrow them down before submitting the “best possible offer” to Judge Darrin Gayles, who is presiding over the receivership, for final approval.
“The Receiver is hopeful that this process can be completed in the summer of 2019,” Goldberg wrote.
The receiver wrote that he anticipates all the Jay Peak investors will share in its sale. “Although the Jay Peak Resort was built in phases, in reality, it is a single resort. It has common accounting, marketing, management and operations,” he wrote.
“It is impossible to separate the financial performance of one phase from another as, in many cases, the assets are physically combined,” Goldberg added. “Moreover, no single phase owns the mountain and its improvements (i.e.… ski lifts, tram, etc…), without which, they are essentially worthless.”
He wrote that in his opinion the “most equitable way” to split up the proceeds of the sale is on a “pro-rata basis,” with each investor receiving an equal percentage of the sale proceeds. How much the resort will fetch on the market remains unknown.

Comments

  • Not surprised by this at all. Jay has a potential big revenue stream with all of the work while Burke just doesn't have that potential at all. It's not big enough for a destination resort and lacks ability to open new terrain to get there.
    "Making ski films is being irresponsible with other people's money, in a responsible sort of way..." 
    Greg Stump
  • Any speculation on who the top bidder will be? My money is on Tenney Mountain Development group...
  • hope they didn't discard all the Q-logo gear...you just never know ;)

  • The ski academy will buy the training hill and snowmaking to serve it, at the very least. They own the new t-bar.
    Would be surprised if they'd buy the whole resort, but who knows.
  • BMA did own the ski area at one time...it was a rescue mission.
  • bmwskier said:

    Not surprised by this at all. Jay has a potential big revenue stream with all of the work while Burke just doesn't have that potential at all. It's not big enough for a destination resort and lacks ability to open new terrain to get there.

    Big enough? Yes. They are 2K vertical - but they suffer from the same problem as Saddleback: too isolated. From NY and the mid-Atlantic area, it's tough to bypass the Rte. 100 areas - and coming from New England, one has to bypass the Ski 93 grouping and drive another hour or so. And like Saddleback, I don't think there are a lot of beds near Burke.
  • Jay may feel isolated for us south of the border, but don't forget, it's only 1.5 hours away from one of Canada's largest cities. I took the kids up to the waterpark on Monday thinking it would be a really quiet day. Was really surprised at the amount of people up there...my guess from seeing plates in the parking lot and hearing quite a bit of french being spoken, that half the people there were from Canada.
    Burke on the otherhand, does suffer from the fact that you have to drive by quite a few I-93 ski areas before you get there. I worry for Burke. I've been up there in the summer and it is just really darn quiet. Have not been skiing there for years...hope to remedy that this winter.
    Location: Greater Burlington, VT
  • Betsy said:

    Jay may feel isolated for us south of the border, but don't forget, it's only 1.5 hours away from one of Canada's largest cities. I took the kids up to the waterpark on Monday thinking it would be a really quiet day. Was really surprised at the amount of people up there...my guess from seeing plates in the parking lot and hearing quite a bit of french being spoken, that half the people there were from Canada.
    Burke on the otherhand, does suffer from the fact that you have to drive by quite a few I-93 ski areas before you get there. I worry for Burke. I've been up there in the summer and it is just really darn quiet. Have not been skiing there for years...hope to remedy that this winter.

    I'm always amazed at the number of Canadians who bypass the Eastern Townships to go to Jay Peak. Would they go the extra distance to Burke?
  • Ahhh good ole Burke, one of the few resorts that gives you that classic New England feel. Shame that all that investment fraud turned into a sticky situation. Check out his old photo Credit to New England Ski History.

    burke.jpg
    800 x 528 - 125K
    ~Rich~
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