DOVER – Undaunted by last year’s protracted, costly EB-5 experience, Mount Snow executives are forging ahead with the foreign-investment program – and they apparently intend to do so without the state’s help.
Dick Deutsch, an executive with the Dover resort and its parent company, Missouri-based Peak Resorts, recently outlined plans to pursue tens of millions of dollars in EB-5 investment to kickstart a massive housing expansion at Mount Snow.
He also told investors that the company is in the process of starting its own EB-5 regional center to pursue those projects. That would mark a split from the state-run regional center.
“What that gives you the ability to do is, instead of having to negotiate an agreement with the state of Vermont, which we did on this first [EB-5] offering, we can do our own thing and not have those added expenses and those added time delays,” Deutsch said in remarks videotaped during an “investors day” gathering held last month at Mount Snow.
A spokesman for U.S. Citizenship and Immigration Services, which operates the EB-5 program, said Thursday that he “cannot provide details regarding a potential regional center application before USCIS.”
The Mount Snow announcement caught a top state official by surprise. The Vermont Agency of Commerce and Community Development runs the Vermont EB-5 Regional Center, which is the only center in the state at this time.
Commerce secretary Michael Schirling would not comment except to say that “we have a great relationship with Mount Snow, and they are a member of the Vermont Regional Center.”
The federal EB-5 program allows foreigners to obtain visas and permanent United States residency by investing in job-creating projects. The Vermont EB-5 Regional Center, which is responsible for oversight of the program in Vermont, has come under federal scrutiny due to allegations of a $200 million fraud at Jay Peak Resort brought by the Securities and Exchange Commission and the Vermont Department of Financial Regulation.
Mount Snow was not connected to those allegations. But administrators had their own EB-5 troubles last year, as a delay in federal approval kept $52 million in foreign investment locked up in escrow.
In addition, the state center, in conjunction with the Vermont Department of Financial Regulation, has tightened up rules for spending EB-5 monies in the wake of the Jay Peak fraud allegations.
The ordeal slowed a long-planned snow-making and lodge upgrade at Mount Snow. It also caused financial headaches for Peak Resorts and spurred a lawsuit filed by a foreign investor against the federal government.
The reasons behind the long wait never were clear. But in December, Peak announced that the federal government had approved the first visa petition submitted by a Mount Snow investor, allowing the company to access its EB-5 money.
Peak administrators, in a conference call Thursday to announce third quarter earnings, said the EB-5 approval relieved tremendous pressure on the company.
“This allowed us to break escrow on $52 million that had been raised for this project,” said Timothy Boyd, Peak’s president and chief executive officer. “Additionally, this also enabled us to reimburse ourselves $15 million that we had already spent on the project.”
“Obviously, these two events significantly impacted our balance sheet and eliminated our previous liquidity issues,” Boyd added.
New projects underway
The EB-5-funded West Lake water project is moving ahead, with completion expected before next ski season. Administrators say it will give Mount Snow six times the current snow-making capacity.
The resort’s initial EB-5 offering also will fund a new, 36,000-square-foot Carinthia Ski Lodge. Speaking to investors last month at the resort, Deutsch, who serves both as Mount Snow Ltd. president and as a vice president for Peak, said lodge construction will start this summer and will take about a year.
“We expect to do more skier visits because of it, and much more food and beverage revenue because of the new facility,” Deutsch said.
But Mount Snow is not stopping there. Administrators say the resort’s state-approved master plan allows them to develop up to 900 residential units, and they plan to use the EB-5 program to do it.
When asked during Thursday’s earnings call about the possibility of a second EB-5 offering, Deutsch struck a cautious tone. He said Peak is “closely monitoring what the status of the EB-5 market is right now,” and he also said the program is set to expire in April unless Congress takes action to reauthorize it.
“We’re watching that very closely to see how much of that is going to be extended,” Deutsch said. “So that is dictating a lot of how we’re thinking about bringing out another offering.”
In last month’s investor meeting, however, Deutsch was much more expansive. He said the company’s next project would bring more than 100 new residential units to the resort’s Carinthia area, and it would be “financed primarily through the EB-5 program.”
“We hope to bring this offering out in June or July of this year,” Deutsch said. “We will be raising approximately $40 million in EB-5 equity. This is not a debt offering. This is an equity offering. So the investors will be investing in a limited partnership.”
He also outlined future plans for additional EB-5 offerings that would operate “like an assembly line.” Deutsch said Mount Snow can build another 600 to 700 housing units, many of them with “ski-in, ski-out” accessibility designed to draw more visitors.
“We hope that we’re able to bring one offering out every year, assuming the EB-5 program continues and is reauthorized,” Deutsch said. “We think that the EB-5 program is a great source of capital. It’s a cheap source of capital. It meets a real need for rural communities … and we think it’s the best way to go forward as we continue to develop Mount Snow.”
Splitting with the state
Forming a new EB-5 regional center independent of the state’s, Deutsch said, “will allow us to continue to move forward in a much more expeditious way in these real estate and EB-5 offerings.”
A regional center, according to the government’s definition, is a broad term for “any private or public economic business entity that coordinates foreign investment within a given geographical area” in compliance with EB-5 regulations.
A federally approved regional center has regulatory and financial obligations: It “must demonstrate in verifiable detail how jobs will be created, either indirectly or directly, and commit sufficient funds to promote and oversee capital investment opportunities,” the USCIS says.
Deutsch told investors that he wanted to divorce Mount Snow’s projects from the state’s EB-5 troubles.
“The other thing is that we won’t be tied to any other projects that might fail in the state of Vermont, like we were with the Jay Peak fiasco,” Deutsch said. “We think that held us up quite a bit in getting our current funds released. We can’t prove it, but we’ve heard through the grapevine that it did.”
Mount Snow isn’t interested in any more slowdowns: Administrators say they can bring many more skiers to the resort, but only if they can offer more amenities and more lodging.
In Thursday’s earnings release, a Peak executive predicted that the Mount Snow EB-5 upgrades will “allow us to gain a greater share of the Vermont ski market.” And Boyd said he wasn’t worried about the recently announced acquisition of Stowe Mountain Resort by Colorado-based Vail Resorts.
“Generally, we don’t consider Stowe much of a competitor of ours because they’re quite a bit farther north,” Boyd said. “It’s kind of a different market. Stowe is very, very high end. I don’t see a lot of cross-competition there.”