'The time has come,' Jay Peak to be sold for $58 million

Receiver Michael Goldberg (with Governor Scott and Financial Commissioner Pieciak) responds to a question following the announcement in April 2017 that Raymond James had settled for $150 million related to the EB-5 fraud. VermontBiz photo.

by Timothy McQuiston, Vermont Business Magazine A Park City, Utah, resort company has offered to acquire Jay Peak Resort for $58 million. Jay Peak Receiver Michael Goldberg will accept this bid for Vermont’s northern-most ski resort unless a higher bid comes in over the next month. Goldberg announced the bid by Pacific Group Resorts Inc in a filing to the US District Court in Miami on Monday. The court granted Goldberg's motion on August 4.

The Pacific Group bid is binding, according to Goldberg, regardless of any other bid.

“The time has come for the Receiver to sell the Jay Peak Resort. When the Receiver took over the Jay Peak Resort in April, 2016, it was on the verge of collapse having little money and making very little profit. In fact, the Receiver had many sleepless nights during the summer of 2016 wondering if he would be able to even make payroll.

“Now, after more than 6 years, the Jay Peak Resort is significantly more profitable and hundreds of jobs have been saved. The Receiver attributes this success to his top notch management team and the dedicated employees who work tirelessly to make Jay Peak one of the greatest ski resorts in the country.”

The “Ponzi-like” scheme that resulted in the conviction of resort owner Ariel Quiros, associate Bill Kelly and former president Bill Stenger was revealed on April 14, 2016, when federal agents raided the offices of Jay Peak and Burke Mountain resorts.

The fraud involved immigrant investors who provided some $200 million for the chance to receive a permanent “green card” for themselves and their families, plus a return on their investment through the federal EB-5 program.

It became the largest EB-5 fraud case in the US to date.

Burke Mountain is not part of the sale. Goldberg has been successful in resolving the EB-5 claims for the Jay Peak investments, but the Burke Mountain Hotel has not achieved the minimum requirements for the immigrant investors to receive their green cards.

The binding bid may seem modest given the previous investments, but Stowe Mountain Resort was acquired by Vail in 2017 for $41 million. While Stowe boasts more visitors, that deal did not include the Spruce Peak piece of the resort complex. The Jay Peak deal includes nearly all the real estate, including the popular water park, hotels, golf course, hockey rink and condos.

Jay Peak reported $21 million in revenue last year and $38 million in 2020. But those years included the COVID-19 pandemic, which also limited Canadian visitors vital to a resort near the Quebec border. In 2019 and 2018, Jay reported $52.2 million and $51.2 million in revenues, respectively.

Pacific Group is a much smaller firm than Vail or the Aspen-related Alterra, which acquired Sugarbush in 2020. Those resort firms have properties scattered across North America.

Pacific Group owns and operates a handful of resorts in North America, the best known of which is probably Powderhorn Mountain Resort in Colorado. More locally it also owns Ragged Mountain in Danbury, NH.

The Jay Peak deal is binding on Pacific Group, and another bidder will have 30 days to put in its own binding bid from the date of the court's approval granting Goldberg's request to move forward with an Asset Purchase Agreement.

Goldberg previously announced that, "The proceeds of the sale of the Jay Peak Resort when sold shall be, subject to the Court’s approval, distributed on a pro-rata basis to all investors in the Jay Peak Resort Phase II – Phase VI." Phase I is the Tram Haus Lodge.

The SEC’s complaint (filed April 12, 2016, in US District Court in Miami and unsealed April 14, 2016, at which time the offices were raided by federal agents) alleged that the Corporate Defendants misused millions of dollars of investor funds intended for EB-5 development projects. The complaint also alleged that investor funds were unlawfully diverted, or misused, between and among various EB-5 projects over many years. The fraud allegedly began when millions of dollars of investor funds intended for the first two EB-5 projects at Jay Peak – the Tram Haus Lodge (Phase I) and the Jay Hotel and Pump House (Phase II) – were used instead to purchase the Jay Peak Resort in 2008. Over the next seven years, investor funds were allegedly funneled through a complex web of accounts, which facilitated the misuse of funds among projects. In a typical EB-5 project, investor funds are raised and used to complete a specific project described in the project’s Private Placement Memorandum (PPM) or offering document.

Court Order

This matter came before the Court upon the Receiver’s Motion for Entry of Order (A) Approving Asset Purchase Agreement; (B) Approving Bid Procedures; (C) Approving the Assumption and Assignment of Certain Contracts and Leases; (D) Scheduling Final Hearing to Consider Approval of Sale (21 Days Out); and (E) Granting Related Relief (the “Motion”). [ECF No. 726]. The Court has reviewed the Motion, been advised that counsel for the Securities and Exchange Commission has no objection to the relief requested in the Motion, and finds that the Receiver has made a sufficient and proper showing in support of the requested relief. Accordingly, it is

1. The Motion is GRANTED.
2. The form of the Asset Purchase Agreement3 is APPROVED.
3. The Receiver is hereby AUTHORIZED to enter into the Asset Purchase Agreement.
4. The Bid Procedures are likewise APPROVED.
5. The assignment of certain executory contracts and unexpired leases identified in the Asset Purchase Agreement on the terms provided for therein is APPROVED.
6. The Receiver is further AUTHORIZED to sell the Jay Peak Resort pursuant to the terms and conditions of the Asset Purchase Agreement and Bid Procedures.

7. A final hearing to consider approval of the sale of the Jay Peak Resort is scheduled for August 26, 2022 at 11:00 a.m."

The order is signed by US district Court Judge Darrin Gayles in Miami.

If there are no other bidders, then Pacific Groups will acquire Jay Peak for that $58 million. The proceeds of the sale will be distributed to the Jay Peak EB-5 investors.

If there are other qualified bidders, an auction will ensue and then Goldberg will determine (with acceptance of the court) who ultimately owns the resort.

As Goldberg wrote in the August 1, 2022, court filing: “The Order appointing the Receiver vests title to all property of the Receivership Entities … in the Receiver. As such, the Receiver has the authority, subject to Court approval, to sell all Assets … constituting the Jay Peak Resort, subject to approval of the Court.

“Through this Motion, the Receiver seeks to sell the Jay Peak Resort to third party, Pacific Group Resorts, Inc (through an affiliate thereof), subject to a competitive bidding and auction process further detailed herein, for consideration totaling a minimum of Fifty-Eight Million Dollars ($58,000,000). The sale will be “free and clear” of liens, with liens attaching to sale proceeds, except as otherwise provided for in the Asset Purchase Agreement.”

“The Receiver believes the proposed sale to be in the best interest of the receivership estate as: (i) The Jay Peak Resort has substantial carrying costs; (ii) the Receiver and his professionals, including Houlihan Lokey, have been actively marketing the Jay Peak Resort for sale for 4 years, and the Asset Purchase Agreement memorializes the highest and best offer received to date; and (iii) the sale will enable the Receiver to make further distribution to investors.”

Goldberg stated that other parties have expressed interest in purchasing the Jay Peak Resort over the past few years, however, only Pacific Group has been willing to submit a binding bid.

Goldberg said in his filing that he “is hopeful that perhaps another bidder will surface at the auction.”

Goldberg seeks to sell the Jay Peak Resort in a competitive public bidding and auction process wherein he may “solicit higher and better offers.”

“Should the Receiver receive Qualified Bids, the Receiver will hold an Auction via Zoom as provided for in the Bid Procedures. Absent receipt of a Qualified Bid constituting a higher and better offer, the Receiver may deem Buyer’s (Pacific Group’s) bid the highest or otherwise best offer, and will proceed with the transaction as contemplated by the APA, subject to final Court approval.”

A final hearing to consider approval of the sale of the Jay Peak Resort is scheduled for August 26, 2022, in US District Court in Miami.

The Pump House water park. Photo courtesy Jay Peak Resort.