Jay Peak bombshell - Page 7

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  1. #61
    Quote Originally Posted by noreasterbackcountry View Post
    Where does it say that they didn't look closely at the internal documents/business plan?
    I think this is what people are referring to (from the VT Digger article):
    Before now, the regional center did not require any formal reporting, even though MOUs with all the EB-5 projects include a clause that quarterly reports are to be submitted.

    Are the MOUs they are referring to between the developer and Vermont's EB-5 Regional Center?


  2. #62
    Quote Originally Posted by VTKilarney View Post
    2) Structure things so that there is no recourse for investors who are not paid back. Changing their status to unsecured creditors is an example.
    Except that the article indicates the latest offer includes a security interest, which is an improvement over their original unsecured position when they first invested.

    Quote Originally Posted by VTKilarney View Post
    I suspect that no creditor in their right mind would touch Jay Peak with a ten foot pole from here on out. Even if they don't have to pay their debtors back, they still have massive amounts of debt on their books.
    If there are no secured lien holders over the assets (which you suggested in a previous comment) they should have no problem getting additional financing up to the value of the unsecured assets- given that they would get priority over any unsecured debt holders.

    Quote Originally Posted by VTKilarney View Post
    3) Revenues don't meet the expenses of running all of these new facilities. (Based on my anecdotal observations, this is possible.) Water parks and golf courses aren't cheap to run. Hotels need customers more than five months out of the year in order to break even.
    It's easier if you're paying 1% interest on the money used to build the infrastructure... but you've got a point. At some point it has to become a profitable enterprise or it will go away, like any business-- except banks.

    Quote Originally Posted by VTKilarney View Post
    First of all, anyone can sue anyone.
    For the most part this is true, but remember that the money flows though the regional center. This complicates the calculus as my understanding is that the regional center is a state entity and has some immunity from suit.

    More to your point though, even if they can't tie up the investments in Court, the allegations of impropriety from disgruntled investors are enough to discourage future investment and derail the regional development plan.

  3. #63
    Quote Originally Posted by VTKilarney View Post
    I think this is what people are referring to (from the VT Digger article):
    Before now, the regional center did not require any formal reporting, even though MOUs with all the EB-5 projects include a clause that quarterly reports are to be submitted.
    That makes no sense given the reporting requirements I've read about. In addition the article also says, "He [Stenger] said Jay Peak provided quarterly reports and required documentation throughout the limited partnership, and the company is now responding to requests for detailed financial accounting."

    The author doesn't reconcile this inconsistency in the article, and I'm inclined to believe, given the USCIS and regional center requirements, that it was a misstatement, much like the false impression given that investors originally had a secured position.

  4. #64
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    Quote Originally Posted by noreasterbackcountry View Post
    Where does it say that they didn't look closely at the internal documents/business plan?

    What I see is that the regional center received complaints from disgruntled investors who felt they weren't being paid back fast enough and were being converted to unsecured note holders (from unsecured ownership interests), the Center read the agreements to see - lo and behold- everything that Jay was doing was called for in the contract, and told the investors what they found- Jay had a right to do what they were doing.

    I see this as investors who were probably given rosy projections on how quickly they would be paid back, ignored any language in their agreements about the "at risk" nature of their investment, and are now throwing around allegations of fraud to try and leverage a better payback schedule (and secured status) knowing that Jay and QBurke are highly sensitive to public perception.
    Well....not exactly.

    The Partnership Agreement did provide that the GP could unilaterally make such a change to the agreement without notice or consent. Apparently, JPR as the GP opted to change the LP's ownership interests and did not give them notice or the ability to consent to the move.

    JPR, for whatever reason, finally notified the LP's (the investors) of the change from (1) equity ownership to unsecured ownership, and (2) from a 5-year exit plan to a 15 year exit plan. Those are pretty big changes that I think any investor would be concerned with.

    The article states that, at least one side, claims that the VT authorities merely directed complaints to Jay; another part has an admission that JPR, though within its power to make these changes, did not act with the "best accepted practice".

    Of course what is implied is that the reason for the change was because of financial problems. We can only wait and see if that is the case.

    As to reporting, you're right that the system does have oversight over the investors, but the issue here is what is going on with their money. The article I believe says that VT is only now requiring JPR to provide quarterly reports.
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  5. #65
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    Quote Originally Posted by noreasterbackcountry View Post
    All the more reason to be in favor of the EB-5 program. They allow for development that investment bankers view as too risky. Although you should also note that per the article there is private equity investment in Jay--- so somebody did think it was a decent opportunity, albeit not to the tune of $600 million.
    I think that these "private investors" are actually Messrs. Quiros and Stenger.

    The point is that Jay is in a much better position than those companies that leveraged themselves to the teeth with loans. I'm guessing that 1% rate to the investors is much better than the interest other places are paying on their loans.
    This assumes that JPR can actually make good on its plan to pay back its EB-5 investors. I think folks are questioning that assumption.
    Live, Ski, or Die!


  6. #66
    thetrailboss's Avatar
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    Quote Originally Posted by noreasterbackcountry View Post
    Except that the article indicates the latest offer includes a security interest, which is an improvement over their original unsecured position when they first invested.
    That's not correct. They originally had equity ownership. That was converted to unsecured loans. Now, apparently, it is something different.

    For the most part this is true, but remember that the money flows though the regional center. This complicates the calculus as my understanding is that the regional center is a state entity and has some immunity from suit.
    From my understanding, "regional centers" do not have to be operated by state government. Some are done in other forms. Vermont decided to have its Economic Development folks run one.
    Live, Ski, or Die!


  7. #67
    Quote Originally Posted by noreasterbackcountry View Post
    All the more reason to be in favor of the EB-5 program. They allow for development that investment bankers view as too risky.
    Hardly. EB-5 is the artificial monkeying with small-scale economies, and it will have negative unforeseen consequences with very little real local benefit. The "jobs created" metric, for instance, is obscenely fraudulent and laughable.

    At the end of the day, this is nothing more than wealthy foreigners skipping the long-line of immigrants trying to gain access to America legally, and simply "paying" to be here. In my opinion, it's loathesome, and worse, it's will prove to be financially harmful, not beneficial.

    Quote Originally Posted by VTKilarney View Post
    The biggest problem is that by doing this the EB-5 gig is up for Jay Peak. Nobody in their right mind is going to fork over $500,000 to these folks from this point forward. So what you see is what you are going to get. And it gets worse. I suspect that no creditor in their right mind would touch Jay Peak with a ten foot pole from here on out.
    It could get much worse. And lets not forget the genesis of them being able to get all this money wasn't 100% about Jay Peak Ski Resort, there was also a very big carrot being waved in front of the rabbit to help Newport and that region's economy, to create much needed jobs, etc... That's likely not going to come to fruition now (which I was skeptical about from day 1 with the big Biotech company, etc...).

    Quote Originally Posted by noreasterbackcountry View Post
    That makes no sense given the reporting requirements I've read about. In addition the article also says, "He [Stenger] said Jay Peak provided quarterly reports and required documentation throughout the limited partnership, and the company is now responding to requests for detailed financial accounting."

    The author doesn't reconcile this inconsistency in the article, and I'm inclined to believe, given the USCIS and regional center requirements, that it was a misstatement, much like the false impression given that investors originally had a secured position.
    You're not reading it right.

    AFAIK, Stenger's comments ONLY refer to the very first project, the Tram Haus, and not the others. That, project, by the way was the smallest of the EB-5 concerns in terms of money at only $17.5M. LOL. The second clue was the "and the company is now" part.


    And there's plenty of CYA work going on with the State of Vermont right now, because:

    Moulton said Friday the center has been monitoring Jay Peak “right along.”
    Does NOT jive in any way shape or form, with:

    Recently, the center put the resort “on notice,” and is now requiring the company to submit quarterly reports. Before now, the regional center did not require any formal reporting
    You cannot in one breath say you've been "monitoring" an entities finances, and in the next breath acknowledge there's no formal reporting in place. ≠

    I guarantee you there are some people in Montpelier right now sweating and praying everything is on the up-and-up here.
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  8. #68
    Quote Originally Posted by thetrailboss View Post
    That's not correct. They originally had equity ownership. That was converted to unsecured loans.
    Which is to say that they were converted from an unsecured interest to an unsecured interest. Given that their equity interest was in the form of a limited (and non-voting) partnership interest, I can't see that they've lost much. And even if they did, the change was authorized in their partnership agreement.

    Having buyer's remorse about the agreement that allowed for this type of change is a long way from fraud.

    Also, having an issue with the way in which this change was communicated is a long way from fraud.

    Quote Originally Posted by thetrailboss View Post
    This assumes that JPR can actually make good on its plan to pay back its EB-5 investors. I think folks are questioning that assumption.
    I'm actually not assuming that. I'm saying that it is easier to make good on the plan to pay back EB-5 investors at 1% then it is to make good on an agreement to pay back a bank at 5%+. Plus, if you fail to pay the bank they can seize the assets, whereas if you fail to make your expected returns to investors or pay back unsecured note holders their options are much more limited.

    The point being that Jay is in a better position than those companies that have to pay back higher interest rates on the money they borrowed to build infrastructure.

  9. #69
    Quote Originally Posted by thetrailboss View Post
    JPR, for whatever reason, finally notified the LP's (the investors) of the change from (1) equity ownership to unsecured ownership, and (2) from a 5-year exit plan to a 15 year exit plan. Those are pretty big changes that I think any investor would be concerned with.
    Oh, the "whatever reason" for the numerous month delay is quite obvious.

    As VTKilarney noted, the foreign money moving into Jay Peak is going to slow substantially now.

    By intentionally stalling for 5 months it gave Jay Peak 5 more months to lock up more investors to the tune of $500,000 apiece! Of course, the journalist cant come out and SAY that, but I think it's pretty obvious. In fact, if you're one of those $500,000 folks who signed on during that 5 month delay, I'd say you have suitable grounds for a lawsuit. Material change in contract non-disclosed.
    President - Bicknell's Thrush Extermination Solutions (BTES), LLC



  10. #70
    Quote Originally Posted by BenedictGomez View Post
    Hardly. EB-5 is the artificial monkeying with small-scale economies, and it will have negative unforeseen consequences with very little real local benefit. The "jobs created" metric, for instance, is obscenely fraudulent and laughable. At the end of the day, this is nothing more than wealthy foreigners skipping the long-line of immigrants trying to gain access to America legally, and simply "paying" to be here. In my opinion, it's loathesome, and worse, it's will prove to be financially harmful, not beneficial.
    Our immigration system is based on preferences. Spouses of citizens get preferential treatment over spouses of permanent residents. Adult brothers and sisters of citizens have to wait longer than children of permanent residents. And cooks have to wait longer than people willing to invest a half million dollars to create jobs. It's far from perfect, but its hardly "loathsome". Remember that immigration laws themselves are a barrier to pure free market capitalism. In a true libertarian society, people would be allowed to freely immigrate and invest- but we (understandably) have barriers against that. How people move through those barriers is a reflection of our priorities and we prioritize those who are willing to put up $500k to create jobs over those who are apple pickers. I'm okay with that. Ideally, I think both should be easier, but that's just me.

    I also think your "artificial monkeying" argument is a bit overly dramatic. Is it any less artificial when a bank loans the money for a project? The folks in investment banks who make decisions on where to invest are just as prone to screwing up as folks who work in the EB-5 centers. If recent history is any indication, they are MORE prone to error.

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