Jay Peak is officially for sale – will it be able to get the $250M to pay back investors?
News from Burlington Free Press and WCAX
After years of turmoil due to one of the biggest frauds to ever have hit the federal EB-5 program, Jay Peak Resort is now for sale.
Ariel Quiros, former owner of the resort and his partner Bill Stenger, allegedly as per the U.S. Securities and Exchange Commission misused $200 million in foreign investor funds, with Quiros pocketing personally some $50 million.
The investors have put down $500,000 each in order to receive a green card for themselves and their families. The Miami-based federal receiver Michael Goldberg said that of the 540 investors in Jay Peak, only six have received conditional residency and moved to the United States. About 160 are waiting for their permanent residencies to be approved.
Investors have not received their money back but will they? The answer depends on whether Jay Peak could be sold for $250 million.
Michael Goldberg pointed out that investors from China and other Asian countries, Latin America and Europe were never guaranteed their money back, but the 35 investors in Jay Peak’s Tram Haus Lodge have been repaid in full.
Goldberg said “This was not a loan, it was an investment, and it’s quite possible that these individuals made a bad investment. Basically, the resort will be worth what it’s worth. The fact is, even if there was no fraud, they may not have gotten their whole money back.”
New York’s investment banker Jeffrey Altman of Houlihan Lokey was hired by Goldberg to help sell Jay Peak. Altmann declined to comment the price in which he things the resort can be sold. He was involved in the recent sale of Stowe to Vail Resorts, advising the seller which was the insurance giant AIG.
Mike Krongel of Mirus Resort Advisors, located in Burlington, Massachusetts, explained that a ski resort’s value is estimated as some multiple of its EBITDA (earnings before interest, taxes, depreciation and amortisation).
He has helped people to buy and sell ski resorts for 30 years. He says that the usual range for multiples is between six and 10 times a resort’s profit. Jay Peak has recorded a profit of about $10 million in 2017, more than five times the previous year’s profit of $1.8 million under the management of the former owner Quiros and Stenger.
Goldberg hasn’t yet released the resort’s profitability for 2018, but Krongel guesses it was better than in 2017, perhaps $12 million. Goldberg declined to confirm the number, but said he is “happy with the direction the resort is taking.”
Under the best-case scenario, using the conventional method for valuing a resort, that would put Jay Peak’s worth at somewhere between $60 million and $100 million. Krongel said Stowe sold at the top of the scale — 10 times profits — to fetch a price of $50 million from Vail.
What disadvantages has Jay Peak?
Jay Peak cannot be considered a conventional resort so maybe determining its value through a conventional method is not applicable. The resort was entangled in a fraud of gargantuan proportions and is now run by a federal receiver.
A federal judge will have to sign off on the sale of the resort.
How much could Jay Peak sell for?
Will it be possible for Jay Peak to sell for 25 times or more than its $10 million profit in 2017, for a price tag of $150 million?
Jeffrey Altman of Houlihan Loki says that there is a ‘price per pound’ theory. Jay Peak is more than a ski resort – it has a water park, golf course, a hockey rink and soccer fields, more than 700 owned hotel rooms – all of this rises up the price per pound.
Michael Goldberg said “.”There’s a lot of value outside the normal ways you quantify value for a ski resort. We expect that we will do better than the EBITDA multiples.”
Top resort operators will also look that Jay Peak has been run very badly until Goldberg took over and increased profits by more than five times in one year.
Goldberg sustains that a seasoned ski resort operator will be able to do a better job at running Jay Peak and increase its profitability than himself, a lawyer sitting in Miami. He doesn’t even ski. Goldberg has spent a ‘fortune’ in capital improvements, including the finishing of a construction and the fixing of the aerial tram for $5 million.
Goldberg said “We’ve got a hotel with amazing infrastructure and beautiful brand-new buildings. (Buyers) are going to know we have more than $200 million into it.”
Altman agrees, and says there’s already a lot of market interest.
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You may want to read the interview we made last year to Coco Torres, former Head of Operations at Valle de Las Leñas on how to control avalanches in this high -prone avalanche area.
We have already covered many news due to this latest spat of snow storms in Europe, as the hotel that was hit by an avalanche of 300 meters of width in Eastern Switzerland. And two ski patrollers got killed setting avalanche control charges in the French resort of Morillon in the Grand Massif.
Recently a British skier was killed after suffering a cardiac arrest on a chairlift falling 32 feet to the ground in Méribel resort in Les Trois Vallées. You can see our recent article on how avalanches claimed two lives in Switzerland the past week. And read more what is the real risk of avalanches. Three Germans have been killed by an avalanche near Lech and a fourth is missing.