Jay Peak: Plan is to quadruple profits this year
Michael Goldberg blends in with the patrons at Hotel Jay, near the Canadian border, dressed in jeans, hiking shoes and a grey North Face fleece jacket.
But unlike the skiers filtering in and out of the spacious lobby, Goldberg, along with a federal court in Miami, holds the fate of Jay Peak ski resort in his hands. To ensure that fate is a good one, he expects to quadruple the resort's profits this year, and increase them again next year, before selling Jay Peak for as much as 10 times the profit number.
The Miami court appointed Goldberg as receiver of Jay Peak in April after the U.S. Securities and Exchange Commission accused the former owner, Ariel Quiros, and his partner, Bill Stenger, of perpetrating a Ponzi-like scheme on the foreign investors who paid to build this hotel and many other properties here and at Burke Mountain resort.
Stenger struck a deal with the SEC to resolve the case against him, but Quiros continues to fight his case in court, denying all charges.
Goldberg is well versed in this type of work.
Jay Peak resort.
"He's sort of the go-to person for the SEC on complex receiverships," Michael Pieciak, commissioner of the Vermont Department of Regulation said. "He's done something like 25. The next closest attorney has done maybe five. He's head and shoulders above everyone else."
Goldberg confirmed he has done between 25 and 30 receiverships.
$8 million in profit?
Nine months into the Jay Peak receivership, Goldberg appears as relaxed as his wardrobe, despite being responsible for selling two ski resorts and other properties formerly owned by Quiros. Hundreds of jobs in the perpetually struggling Northeast Kingdom also hang in the balance, along with the finances of roughly 825 investors who trusted Quiros and Stenger with $500,000 each for the chance to get a green card.
General Manager Steve Wright said Jay Peak alone has about 1,380 employees, about 400 of whom work full time, and that's after about a 10 percent cut in the workforce.
It is with those investors and jobs in mind that Goldberg and Wright are pushing to quadruple the profit at Jay Peak this year to $8 million.
Wright said the resort will get there thanks to a variety of factors: a more efficient workforce, better decisions on expenses, keeping an eye on the cost of goods, and most of all — good snow.
Jay Peak had received nearly 300 inches of snow as of last week, according to Goldberg. The resort hotel stayed at about 90 percent occupied over 700 to 800 rooms from Dec. 24 through Jan. 10, Wright said. Director of Communications JJ Tolland said skier visits were up 37 percent over last year, as of Feb. 1.
On Jan. 28, Jay Peak warned visitors on its Facebook page that there was no place to park: "Folks, as much as we'd like you to come spend the afternoon with us, our parking is completely full so maybe check back in the a.m. We just don't want you to drive up and be disappointed."
Goldberg declined to put a value on Jay Peak, or reveal how much revenue he expects the resort to generate.
"The resort's value will ultimately be set by the market," Goldberg said. "You solicit offers based on the financials. Anyone coming in here is going to spend at least three or four months ripping through our books."
Goldberg said he could be ready to sell the resort next year if he and his team are able to increase the resort's profits, and therefore value, even more. He also needs to resolve issues surrounding Jay Peak's Stateside EB-5 project, where 85 condos are partially finished, and a medical center and recreation center promised to investors haven't been started.
"Think about if we had rushed in here and sold this thing," Goldberg continued. "We would have gotten four times less money than if we sold it this year."
How much profit?
Win Smith, owner of Sugarbush ski resort in Warren, said an $8 million profit at Jay Peak would be "pretty incredible."
Jay Peak's profit last year was $1.8 million, Goldberg said.
"I'm not saying he can't do it, but it would be impressive," Smith said.
Smith cautioned that any potential buyer would look carefully at deferred maintenance at the resort and deduct those costs from the value, especially given the recent $5 million repair made to the resort's aerial tram. The state ordered the tram shut down in June until upgrades were made.
Now Jay Peak is facing major repairs with the ventilation system in the water park, according to Steve Wright. Goldberg hopes to get reimbursed by the engineering firm that designed the system. He stressed that in the meantime, the water park is "ventilating fine."
Mike Krongel, a principal in Mirus Resort Advisors in Burlington, Massachusetts, has been helping clients buy and sell ski resorts for nearly 45 years.
Krongel is skeptical Jay Peak would sell for a price equal to 10 times the profits. He said ski resorts generally sell for 5.5 to 6.5 times the earnings before interest, taxes, depreciation and amortization — unless it's a "trophy" property like Canada's Whistler Blackcomb, recently bought by Vail Resorts for $1.06 billion.
"Jay Peak is viewed as a long ways away, but great skiing, with the addition of a water park and golf and the ice rink," Krongel said. "I think the industry looks favorably on the opportunity there, depending on the asking price."
Krongel also points out that Goldberg is "a bit of a different seller." The sale is complicated by its connections to the EB-5 foreign investor program.
"This is a transaction under duress," Krongel said. "It is very rare when you have a stressed transaction that you get the highest value possible to achieve. The buyer is smart. He knows Mike (Goldberg) has to sell this and he doesn't have forever."
Krongel suggests Goldberg will have to lure "new and different" buyers to get the highest possible price for Jay. Those buyers could include Brits moving out of the Common Market, or "some wealthy Greek who is losing his shirt in the Greek economy."
Selling a hole in the ground
Jay Peak is not Michael Goldberg's only problem.
He's also responsible for selling Burke Mountain, which he said is further away from a sale than Jay, because of job creation requirements of the EB-5 program. Then there's the hole in downtown Newport, where a "Renaissance Block" of shops and hotels was supposed to go; and the nearby site of AnC Bio, the biomedical facility that Quiros and Stenger also promised to build. The partners collected more than $80 million from investors, but only built a fraction of what was promised.
Goldberg anticipates selling the lot in downtown Newport in six or seven months.
"I'll have that sold to somebody good who will build on it," he said. "That will just be a hiccup in the history of that downtown block."
AnC Bio is another matter. Because the state Department of Financial Regulation required Quiros and Stenger to put investors' money into escrow late in the project, Goldberg has $17.5 million connected to AnC Bio. He received permission from the federal court last week to return that money to 35 of the project's investors.
That leaves about $65 million Goldberg needs to reimburse the remaining investors. He plans on attempting to get the money from Quiros, among other sources, including Raymond James, the financial firm the SEC says Quiros used to illegally mix and match funds being raised from foreign investors.
"I sued Quiros," Goldberg said "He's got assets. He's got his condos, his house, all that stuff. I'm hoping to get that eventually. That could be $20 or $30 million right there."
Jay Peak resort summit.
Goldberg nods when asked if he believes he can recover all the money he needs to make the AnC Bio investors whole. He said he spent some 200 hours pushing for revisions to the EB-5 laws and other immigration issues to give these "unfortunate investors" a shot at receiving their green cards.
Vermont has a lot riding on how well Goldberg is able to resolve the mess at Jay Peak.
"Real skiers love Jay Peak, it's a real skier's mountain," said Win Smith, of Sugarbush resort. "But a lot of questions remain about the whole EB-5 issue."
- Vermont EB5 Regional Center
- Jay Peak - AnC Bio Vermont
- Jay Peak - Q Burke Mountain Resort, Hotel and Conference Center L.P.
- Newport Main Street Renaissance Block
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION
- Ariel Quiros
- Bill Stenger
- State of Vermont vs Bill Stenger & Ariel Quiros
- UNITED STATES SECURITIES AND EXCHANGE COMMISSION vs Ariel Quiros & Bill Stenger
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