Jay Peak Resort announced on Friday the company will give its first set of EB-5 investors an additional $10,000 each this year. A total of $350,000 will be split among the 35 former limited partners in the resort’s Tram Haus Lodge.
Each investor also received about $21,500 at the beginning of the year in an installment toward an IOU for their original $500,000 investments. By making that investment, all 35 have received green cards through the EB-5 immigrant investor program.
Jay Peak officials said in a statement that less than 1 percent of EB-5 projects in the United States have started a payout strategy.
Bill Stenger, president and CEO of Jay Peak Resort, said he is “proud of the fact that our first group of investors will have their investments returned to them in full.”
The offer, however, has not allayed the fears of discontented limited partners who say they are worried about the return of their $500,000 investments.
Twenty of the 35 investors say they were blindsided when resort management unilaterally converted their ownership stakes in Tram Haus Lodge into unsecured loans on Aug. 31, 2013, without their knowledge or consent. They didn’t receive documentation from the transaction until May.
Stenger has said he did not need to consult with the 35 limited partners in the Tram Haus before he dissolved their shares in Jay Peak Hotel Suites, LP, because the resort management had the legal right to do so under the limited partnership agreement with the investors. The resort now owns the hotel. The limited partners received unsecured IOUs for their $500,000 equity investments. Jay Peak says the limited partners “were transitioned from an ‘at-risk’ class to being fully guaranteed the 100 percent return of their money.”
Investors wrote to the state to complain about the equity-to-loan conversion. VTDigger obtained copies of more than a dozen letters from a state employee, and tracked down the investors for comment. The investors have asked not to be identified, for fear of retaliation.
Stenger said he regrets not communicating better with both investors and state officials, and he takes full responsibility.
“I made a mistake in not communicating with the investors, and I should have,” Stenger has said. “And I’ve apologized to them, rather profusely, that it was my oversight in not reaching out to them in August when that decision was made. And I was wrong. It was not intentional.”
Stenger had extended an offer of a $10,000 dividend to several of the 35 limited partners that a spokesman for the investors describes as a “side deal.” Typically, limited partnership agreements require that all investors be paid back equally, with no priority given to one over another.
Stenger told VTDigger in an email on Friday that “the dividend discussion is ongoing.” He said the payments were always intended for all investors, and that he would deal with the transaction “in the private manner it warrants.”
The dissolution of the limited partners shares in the Tram Haus ended annual profit sharing payments to the investors. In a press statement released Friday, the company said “many investors continued to believe they would be receiving their annual dividend check.”
Stenger says he has apologized to investors. “I have made it clear that I would have approached this differently if I had it to do over again,” Stenger reiterated in a email on Thursday. “I have stated that directly to the partners.”
In the press statement released on Friday, Stenger acknowledged that the company’s communication between the investors in its Tram Haus Lodge was poor. The company “failed to notify the partners of the redemption in a timely manner.”
“At the end of the day, we missed the chance to showcase the fact that we are one of only a handful of EB-5 centers to have an active payment strategy in place to return 100% of investor funds,” Stenger said in the statement. “That’s out of more than 500 in this country. It’s a great story for Jay Peak; a great story for Vermont, and great story for the EB-5 initiative.”
