Q Burke Hotel Opening Delayed For Months, Contractor Threatens Lien

The general contractor for a hotel at Q Burke Mountain Resort is owed $5.5 million and has threatened to put a lien on the 116-unit hotel unless he is paid this week.

Jerry Davis, principal and president of Peak CM Construction, which completed the construction of the hotel in January, holds the Certificate of Occupancy fire and safety permits through an agreement with Q Burke. Without the permits, the owners, Bill Stenger and Ariel Quiros, can’t open the hotel.

The postponement means the Q Burke Hotel may delay opening by nearly a year from what was originally planned, and the hotel may miss the summer wedding season. The hotel was originally slated to open Dec. 11, 2015. Now opening day could be as late as this November.

Davis says he won’t release the permits to the owners until he’s paid or receives sufficient assurances of payment. Davis is weighing other options as well, including litigation, which he said would not be good for Q Burke and the EB-5 immigrants who have invested in the hotel.

“If I don’t get an answer this week [starting Sunday, March 13], enough to pay for November, I have to deal with the next step and put a lien on the property,” Davis told VTDigger.

Subcontractors have already placed liens on the hotel because Davis has been unable to pay them.

Davis says Stenger and Quiros promised him payment six weeks ago. Then they told him he would receive payment two weeks ago, he says, and last week the word was “any day.” In November, Davis threatened the owners with a work stoppage in November for lack of payment.

In an email, Stenger said PeakCM will be paid this coming week for November invoices. “I am hopeful with the authorization and payment of the final construction invoicing that there will be no liens filed,” he wrote.

Stenger was recently in Vietnam soliciting EB-5 immigrant investors for the project, and he says they had “great success” in “welcoming the remaining Q Burke investors.” Each new investor brings in $500,000 in capital to the project.

“We have identified and are in the process of subscribing investors for the amenities portion of the project and the final portion of the hotel construction itself,” Stenger said in an email. “The amenities portion will be subscribed by mid-summer, I believe.”

All new money from investors is held in escrow by the state under a July 2015 agreement with Quiros and Stenger that was designed to protect investors and allow the development to move forward. All payments for construction must be approved by the Department of Financial Regulation.

Davis says all of the invoices should be paid because they are expenses that are outlined in the contract he has with Q Burke. “The owner agreed to the contract, the architect agreed to substantial completion and the state has refused to cooperate,” Davis says.

“The state hasn’t done its job and the owner hasn’t done their job,” Davis says.

Stenger said the Certificate of Occupancy is being retained by the construction company “until all invoice authorization is granted by the state and certain construction payments [are] made to Peak CM.”

“I am hopeful that the CO’s will be released to us ASAP, but [it] is subject to State authorization and funds being raised,” Stenger said.

About $4.3 million of the $5.5 million owed to PeakCM has been approved by the state under a special escrow agreement between the Q Burke owners and the Department of Financial Regulation. The remainder is in dispute. The state says it will not approve $1.28 million in invoices for equipment, travel, delay charges and interest fees for late payment, among other expenses. Davis says he imposed a 12 percent late fee to cover the cost of delays.

Pat Moulton, secretary of the Agency of Commerce and Community Development, says investors should not be paying for invoices that are not directly related to construction. The state agreement with the owners allows the use of escrowed investor funds for permitting and architectural fees, construction and furniture and fixtures.

“I think Mr. Davis needs to get with Bill Stenger on these issues,” Moulton said. “Our agreement is with Q Burke. The issue needs to be resolved between those parties. We have approved every requisition and invoice we have received with the exception of $53,000. As of today, it is our understanding and DFR is in agreement, there are no outstanding expenses beyond $120,000 [for architectural fees].

“Mr. Davis may be owed $1.2 million, but it won’t be paid through investment funds, per the July 15 agreement,” Moulton said.

Despite the ongoing financial wrangling, Stenger said, in an email to VTDigger, “I feel the hotel will open within 30 to 45 days of the Certificate of Occupancy being released. My hope is for an early summer opening.” Stenger said wedding parties that booked space in the hotel have been notified that the opening has been delayed until the certificate of occupancy “has been dealt with.”

Stenger told the Caledonian Record in an article that appeared on March 19 that the hotel could open as early as April 30.

Saturday, a reservation agent for the Q Burke Hotel, told VTDigger “Unfortunately, our hotel is not set to open until Nov. 15.”

THE STATE’S ROLE

Stenger and Davis have blamed the state for ongoing delays associated with payment approvals for the construction project.

State officials counter that the Q Burke owners, Stenger and Quiros, have been slow to provide documents for a financial review of the project. The Vermont Regional Center, which is part of the Agency of Commerce and Community Development, asked Stenger and Quiros to provide financial documentation of expenditures for all of the Jay Peak projects, Q Burke and AnC Bio in July 2014. The agency raised questions about the handling of EB-5 investments in the Tram Haus Lodge at Jay Peak and the sale of a headquarters in South Korea of a company affiliated with AnC Bio.

The state regional center suspended AnC Bio Vermont and the Q Burke expansion in August 2014 when Stenger and Quiros failed to provide adequate financial records to the Agency of Commerce and Community Development. The suspension prohibited the owners from marketing the projects to new investors.

The owners still would not provide the state with records, and the agency, which does not have regulatory authority to enforce state securities laws, asked the Department of Financial Regulation to take over the financial review of the two projects in January 2015.

In March 2015, the department lifted the suspension of AnC Bio and granted conditional approval. In May, the department also partially approved Q Burke on the contingency that the owners must provide the state with financial records. The partial approvals from the state meant that the owners could solicit funds from new immigrant investors.

On July 15, 2015, the Department of Financial Regulation issued the conditions for the approvals. Under the conditions, the owners are required to hold any new money from investors in a separate escrow account, and the funds can only be released after a third party administrator signs off on construction expenditures. Ultimate authority for payment approvals rests with Susan Donegan, the commissioner of the department.

The owners need to attract or “subscribe” a total of 196 investors to fully fund Q Burke. As of October, Q Burke had secured investments from 83 immigrants, or about $45.65 million, including administration fees. At the time, the developers extended the subscription deadline from July 13 to Dec. 31, 2015, in order to attract more investors, according to documents from the state.

Under conditions imposed by DFR, Stenger and Quiros were required to ask the original investors to sign new agreements. The developers also had to disclose to new investors that the Jay Peak projects are under review by the SEC.

As of Sept. 9, the Q Burke brokerage account had insufficient funds to cover the July requisition, or payment to PeakCM, according to documents from DFR.

Stenger said in an email to VTDigger that “escrowed funds for payment was never an issue and all needed funds were in the bank waiting to be authorized for release by DFR.”

https://vtdigger.org/2016/03/21/q-burke-hotel-opening-delayed-for-months-contractor-threatens-lien/

Mentions

• Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
• Bill Stenger
• Ariel Quiros

States

• Vermont