Jay Peak Sale ‘Ground To A Halt’ Due To Covid-19 Pandemic
Michael I. Goldberg, in his capacity as receiver of Jay peak has filed his Eighth Interim Report covering the period from October 1, 2019 up to and including February 29, 2020. perhaps not unexpectedly due to Covid 19, it's not all been roses.
During the period covered by this report, the Receiver, along with his professionals, continued to focus on operating and marketing the Jay Peak Resort for sale. The Jay Peak Resort's operations and sales process have been affected by the Covid 19 pandemic. The Jay Peak shut down in mid-March to protect its customers and employees and the sales process has substantially slowed down. The Receiver and his professionals continue to monitor the situation closely.
The Receiver has also sold several stand-alone properties and placed the proceeds of such sales in trust. The Receiver has continued to pursue claims against third parties who may be liable to the receivership estate for their pre-receivership conduct. Finally, the Receiver has continued to provide investors with the information they need in order to have their I-526 and I-829 petitions approved by USCIS and has negotiated an agreement with USCIS to start ruling on pending petitions.
The Receiver, with the assistance of the court-approved management company, Leisure Hotels, LLC (“Leisure”) continues to operate the Jay Peak Resort and the Burke Mountain Hotel.
Jay Peak Resort’s General Manager, Steven Wright and Burke Mountain Hotel’s General Manager, Kevin Mack also play an important role in the management of the resorts. The Receiver confers with the Leisure management team, Steven Wright and Kevin Mack on a regular basis to monitor the hotels. Both the Jay Peak Resort and the Burke Mountain Hotel were shut down in mid-March due to the Covid 19 pandemic which has similarly affected all hospitality businesses.
To that end, most employees at both the Jay Peak Resort and the Burke Mountain Hotel have been laid off in an effort to keep the hotels economically viable. The Receiver and his professionals are analyzing the situation to determine the optimal time to reopen these properties once the government permits them to reopen. The closing of the Jay Peak Resort and Burke Mountain Hotel in March, which is usually one of the most profitable months of the year for ski resorts, will have a substantial impact on their finances.
Prior to the Covid 19 pandemic, the Jay Peak Resort (Phases I through VI) operated profitably and its net operating income continued to increase.
The Burke Hotel continued to lose money, however, such a loss is expected for a new hotel. The operating losses have diminished year after year since the date that the Burke Hotel opened in September 2016. It is hopeful that the Burke Hotel will soon operate at a breakeven level or even generate a small profit.
The Receiver continues to work with Houlihan Lokey (“HL”), the investment bank retained by the Receiver to assist in the sale of the Jay Peak Resort. HL has been actively marketing the Jay Peak Resort to potential buyers. To that end, commencing in the Spring of 2019, HL contacted 142 potential purchasers, including potential strategic and financial buyers, located throughout the United States, Europe and Asia. Of that group, 48 potential buyers executed Non-Disclosure Agreements (“NDAs”). Of that group, 9 potential buyers have submitted initial Indications of Interest.
Three additional potential buyers have expressed interest and provided informal initial pricing guidance, but did not formally submit a bid. The Receiver expects that at least one of this group will ultimately submit a bid.
HL and Jay Peak’s management team have hosted 6 groups for site visits at the Jay Peak Resort and meetings with the Jay Peak Resort’s management team. Seventy-one potential investors who executed NDAs have formally passed on the opportunity following a review of the offering materials. The Receiver and HL continue to work with the remaining potential buyers to resolve potential issues and attempt to structure a potential transaction that will maximize the recovery for the Phase II through Phase VI investors.
The sales process has ground to a halt due to the Covid 19 pandemic. The Receiver is hopeful it will begin again once business returns to normal. The Receiver is unsure when a transaction will close. The Receiver wants to assure all investors that he and his professionals are doing their best to obtain the highest possible price for the resort by conducting a vigorous and fully transparent sales process. 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
The Burke Mountain Hotel was also shut down in mid-March due to the pandemic. Since the Burke Mountain Hotel has not yet generated sufficient jobs for all of the investors in the project,the Receiver has not yet marketed the Burke Mountain hotel because the sales price based oncurrent financial performance would be extremely low. However, the Receiver has sold other land adjacent to the Burke Mountain Hotel that is not necessary for the operation of the hotel and ski area. The Receiver may continue to market those stand-alone parcels prior to the sale of the Burke Mountain Hotel.
