Public records reveal tension between Q Burke and state
The desperate struggle of Q Burke Hotel General Partner Bill Stenger to satisfy state regulators and open his hotel was revealed in documents released this week to the Burlington Free Press through a public-records request.
In an Oct. 17 text message to Pat Moulton, secretary of the Agency of Commerce, Stenger wrote: "If we don't finish in time and get to promote the opening correctly we are headed for financial disaster for the project and the partnership."
Disaster loomed Friday when Stenger was on notice from Jerry Davis, owner of PeakCM Construction, that if Stenger failed to pay the roughly $900,000 Davis is owed for a November invoice for building the hotel, PeakCM would file a lien against the property.
In an interview with the Free Press, Stenger said he had the money to pay Davis but was unable to send the funds because bank wire offices were closed for Good Friday. Stenger promised to pay Davis on Monday morning.
"That really doesn't work," Davis said in a separate interview.
Davis instructed his attorney, Sandy Fead, to begin the process Friday of filing the lien.
"If I don't do what I say I'm going to do, where do you draw the line?" Davis said. "I said I was going to do it. I told the subcontractors I was going to do it."
Davis added that he still has "absolute faith" that Stenger will come through.
"I have full faith they will resolve this," he said. "I understand the state has not made it easy on them."
For their part, state officials say Stenger has yet to provide all the documents needed for a full financial review of the project.
The Vermont Agency of Commerce and Community Development oversees the federal foreign investor program in Vermont that Stenger is using to pay for the hotel. The agency enlisted the Department of Financial Regulation to oversee the finances of the project. The money Stenger raises is placed into escrow until the DFR signs off on releasing it.
Moulton said Friday there were "many times" when Stenger said disaster was looming if funds weren't released by the Department of Financial Regulation. That contrasts sharply with Stenger's public persona, in which he invariably exudes confidence.
And as Moulton pointed out, "We've always managed to get the payments authorized."
As the Burlington Free Press reported Sunday, however, the completed hotel has yet to open, because Stenger owes PeakCM about $5.5 million —including the $900,000 for November — some of which he still needs to raise. PeakCM has refused to release the certificates of occupancy for the hotel until the firm is paid.
In a Feb. 12 letter to Stenger, Susan Donegan, commissioner of the Department of Financial Regulation, took Stenger to task for failing to provide the information required to complete a financial review of the hotel project.
"Unfortunately, that financial review has been a long and difficult task for a whole host of reasons, including the absence of a proper general ledger and other standard financial controls," Donegan writes. "In short, your failure to engage in best business practices has further prevented us from considering the removal of the escrow conditions to date."
Stenger rejected the characterization of Q Burke's business practices in Donegan's letter, telling the Free Press on Friday that the Q Burke Hotel project is "the most transparent project that we've done."
"We have very substantial (financial) controls," Stenger said. "The White + Burke reviews have absolutely confirmed that."
White + Burke is a Burlington real-estate-investment firm that has been retained by the Department of Financial Regulation to monitor work on the Q Burke Hotel project. David White, president and founder of the firm, said Friday that White + Burke's role is limited to verifying work has been done.
"It has not been our responsibility to review the financial controls on the project," White said. "We are not accountants or auditors. I can't offer any opinion on the financial controls."
The Agency of Commerce oversees Vermont's EB-5 Regional Center, a federal program that allows foreign investors to receive a conditional green card in exchange for a $500,000 investment in a project being built in a rural or economically depressed region. Caledonia County, where the Q Burke Hotel is located, qualifies on both counts.
After developers show a completed project created a certain number of jobs, investors receive a permanent green card and U.S. residency. Stenger is paying for Q Burke with EB-5 money.
The Department of Financial Regulation was brought into the EB-5 process after Stenger ran into trouble with investors at another EB-5 project at Jay Peak, when he changed the terms of their repayment without informing them. Stenger has raised a total of $400 million from EB-5 investors for projects at Jay Peak and Q Burke in addition to Newport.
Adding to Stenger's woes, Ary Quiros, CEO of Q Burke Mountain Resort, said Friday he believed there was only a "50/50 chance" the Q Burke Hotel would open for the 2016-17 season. Quiros is the son of Ariel Quiros, Stenger's general partner in the Q Burke Hotel.
The resort is a separate entity from the hotel, Ary Quiros said, but he had hired employees in anticipation of staffing the hotel, expected to open in November 2015. Quiros said he had to let go about 45 of those employees, giving them notice on March 20, in addition to the seasonal employees who were let go as a result of the ski season's ending. A total of about 180 employees were let go, according to Quiros.
Quiros said he had to prepare his staff for the possibility that the resort will open next winter without the hotel.
"The general partners could raise the money they need tomorrow and open it up in June, but I cannot give false hope to my team," Ary Quiros said.
Asked to respond to Quiros' comments, Stenger said, "The only thing I will say is, we are having significant success in raising funds, and I'm very encouraged."
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