Jay Peak photo of one of the crown jewels of the resort: The Pump House indoor water park.
by Timothy McQuiston, Vermont Business Magazine Jay Peak Receiver Michael Goldberg received permission on Monday to retain an outside financial firm to help him sell the resort. The Miami court authorized Goldberg to retain Houlihan Lokey Capital, Inc. Houlihan Lokey is a financial firm specializing in, among other things, mergers and acquisitions. It’s an international firm based in Los Angeles. The agreement is only for Jay Peak and not Burke Mountain Resort. There is no timeline for the sale, which could take a couple more years.
The court documents state that: “The Receiver believes the time has come to market the Jay Peak Resort for sale. All construction has been completed and the Receiver believes that all necessary jobs for EB-5 purposes have been created. Furthermore, the Receiver has gained control of the Jay Peak Mountain and completely eliminated any interest defendant Ariel Quiros has in the resort. Last year, the Jay Peak Resort achieved record profit and is off to an even better start this year. In short, the Jay Peak Resort is very stable and the Receiver believes it is time to place the Jay Peak Resort for sale in order to monetize the Jay Peak Resort for the investors.”
In exchange for Houlihan Lokey’s services, the Receiver has agreed to the following fee schedule:
(a) Houlihan Lokey’s fee for a transaction valued up to $100,000,000 will be the greater of 1.5% of the transaction value or $1,000,000 minimum fee, whichever is greater.
(b) If the value of the transaction exceeds $100,000,000, then Houlihan Lokey’s fee for the first $100,000,000 will be $1,500,000 plus 3% of the transaction value above $100,000,000.
For example, if the ultimate purchase price is $150,000,000, Houlihan Lokey will be entitled to a total fee of $3 million (1.5% of the first $100 million plus 3% of the next $50 million which equals a total percentage of 2%).
While a sales price of $100,000 million or more might seem optimistic given recent ski resort acquisitions, Jay offers amenities other resorts do not. For instance, along with the skiing, there is the water park, golf course, and hockey rink, as well as the real estate and lodging facilities.
By comparison, Vail Resorts acquired Okemo (Vermont), Sunapee (NH), and Crested Butte (Colorado) for $82 million in 2018. Vail acquired Stowe Mountain's ski operations for $41 million in 2017.
Goldberg said in the court filing that Houlihan Lokey specializes in, among other things, the sale of ski resorts and has been involved in many major transactions involving the sale of ski resorts in one capacity or another.
Under the terms of the proposed agreement, Houlihan Lokey will be retained as the Receiver’s exclusive financial advisor and will provide financial advice along with investment banking services in contemplation of a possible transaction involving the sale of Jay Peak Resort.
Houlihan Lokey will be responsible for assisting the Receiver with soliciting prospective buyers and preparing information memoranda providing pertinent information about Jay Peak Resort to such potential buyers.
Grim-faced state officials announce charges against Ariel Quiros and Bill Stenger on April 14, 2016. From left, DFR Commissioner Donegan, Governor Shumlin, AG Sorrell and Commerce Secretary Moulton. VBM photo.
This is the optimal time to market the Jay Peak Resort for sale. The Jay Peak Resort has been ahead of its sales budget due primarily to favorable snow conditions and is significantly below budget in payroll and operating costs due to implementation of major labor and cost control initiatives.
The Receiver has reached the point in time where the Jay Peak Resort is operating smoothly and most importantly, all jobs necessary for every investor in Phases I through VI to qualify for I-829 approval have been created.
Goldberg was appointed April 13, 2016, and the next day the Jay Peak fraud committed by Ariel Quiros, as owner, and Bill Stenger, as president, was revealed in a tumultuous press conference. The Security & Exchange Commission and the state Department of Financial Regulation both charged Quiros and Stenger with a “Ponzi-like” scheme to defraud foreign investors of over $200 million.
Goldberg on Thursday settled all ownership claims with Quiros, which will prevent Quiros, who resides in Miami, from any asset claims. The court order also bars any investor or creditor involved in the Jay Peak and related cases (Burke, AnC Bio in Newport) from filing further claims against Quiros.
Goldberg intends to sell Jay Peak Resort by private sale in an “arms’ length” transaction to individuals or an entity with no prior relationship to the receivership case. The Receiver believes that the sale of Jay Peak Resort is consistent with carrying out his obligation to put the property to its highest and best use and realize the best value for investors.
The proceeds of the sale will, in part, be distributed to the Phase II – Phase VI investors on a pro rata basis. Phase I was paid off before the fraud case was revealed.
Goldberg, with the assistance of the court-approved management company, Leisure Hotels, LLC and Jay Peak Resort’s General Manager, Steven Wright, have operated the Jay Peak Resort since the civil suit brought by the SEC was unsealed in Miami on April 14, 2016.
The Receiver only seeks authorization to retain Houlihan Lokey to represent him in connection with the sale of The Jay Peak Resort. The Burke Hotel is not the subject of this motion because the employment requirements of the EB-5 process have not been met. Without reaching those targets, the EB-5 foreign investors would not be able to attain their “green cards.”
On April 13, 2017, a day short of the one-year anniversary of the fraud revelations, a more jovial Receiver Goldberg, Governor Scott and new DFR Commissioner Pieciak announce a $150 million settlement with Raymond James, which will pay for most of finances to make most of the EB-5 investors whole and complete the rest of the condo projects. VBM photo.
Houlihan Lokey will assist Goldberg in marketing the Jay Peak Resort and running a sales process. The Receiver is not seeking authorization to approve the sale of the Jay Peak Resort to any particular purchaser or to distribute the proceeds of the sale of The Jay Peak Resort to any particular creditors. The Receiver will file a motion seeking authorization with respect to these issues at the appropriate time.
In November, Jay peak Spokesman JJ Toland told VBM that it will likely be another two years before Jay has a new owner.
“We haven’t had anyone play scratch and sniff with us so to speak and there’s still a number of things that still have to fall in place for us to be officially on the market,” he said.
But now that the court has approved retention of a marketing firm, the process can begin in earnest.
Since Goldberg took over, Jay Peak Resort expended approximately $2 million on various upgrades and replacements out of operating cash flow generated during the ski season that enhanced a positive customer experience and resulted in cost savings. Management has expanded the rental check-in process to add a second location to minimize check in service times and provide enhanced customer satisfaction; overseen completion of the waterpark duct sock modification to increase the safety of customers; and added new horizontal water lines for snowmaking purposes that expanded capacity into new areas and resulted in cost savings due to more direct flow of water.
The Tram, which is a Jay Peak Resort hallmark within the area, incurred significant mechanical and electrical system upgrades. The Tram now operates faster and carries significantly more people on each ride and has been favorably received by Jay Peak Resort’s customers.