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Stenger talks EB-5

VTKilarney

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I had a chance to hear Bill Stenger give a presentation yesterday on Jay Peak and EB-5 development. Here are some highlights:

1) There have been 550 EB-5 investors from 74 countries.
2) Administrative fees are on top of the $500,000 investment and are negotiated. The fee varies by the investor's country and the project.
3) Only Phase 1 investors have an identified exit strategy at this point.
4) There is only one project left at Jay to be permitted - the West Bowl expansion. That will take a year or two to go through the permitting process.
5) In the middle of winter there are 1,500 employees at Jay. Prior to EB-5, there were about 275. More than 250 of these employees receive benefits.
6) In the summer, there are 400+ employees working at Jay.
7) AnC Bio will break ground late this summer.
8) The condos at Jay will break ground this fall.
9) Burke will break ground on June 3rd.
10) There are four things that potential EB-5 investors want to know. In order: (a) How long until a visa will be obtained; (b) will the conditional visa be made permanent; (c) what will the return on investment be during the project (dividends); (d) what is the exit strategy.
11) There are now 450 EB-5 projects in 34 states competing for funding.
12) There is now stiff competition from urban projects. Investors are MUCH more comfortable investing in a project in New York City or Las Vegas than in rural Vermont.
13) The urban projects often have gerrymandered TEAs (target employment areas) to allow for the lower $500,000 investment.
14) Some urban projects are funded only partially with EB-5 money and don't really need EB-5 money in the first place to be funded. (Some of these projects are up to 70% bank financed.) EB-5 investors like these projects because they believe that they are much less risky since traditional funding sources are investing in the project as well.
15) All of Jay's projects except for the West Bowl project are fully subscribed.
16) Each investment group at Jay receives an almost identical dividend thanks to common management. That dividend can be from 1-4 percent, but in reality has been about 2% starting around year 3.
17) Route 242 toward Newport will be re-paved when they get the green light to put the new sewer line in. This will occur this summer or next.

An economist also spoke at this meeting. He stated the following:
1) The US economy is expected to grow at 3%+ for several quarters, which is an improvement.
2) Vermont is not expected to grow as much as the rest of the country. The forecast for Vermont is not encouraging.
3) The crackdown on Chinese corruption has led to a capital flight from China. This is a good thing for EB-5 projects. People who got their money by corrupt means want to get that money out of China so they don't get in trouble now that there has been a crackdown. (Note: Stenger is correct when he says that the investor has to have obtained their money legally. I am not sure if the economist believes that this is overlooked, or if he did not know this.)
4) Vermont had its best ski season in years. Skier visits in the northeast were up 20% this year.

The major thing I took from this is that urban EB-5 projects seem to be a HUGE problem for Vermont. Stenger wants to see a legislative fix to this. It is clear that the money is not as easily obtained as it used to be.
 

VTKilarney

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I just noticed that 1,225 direct jobs have been created with 550 investors - and only during the peak ski season. In the summer, it's less than 400 direct jobs. Since most of those 1,225 peak season jobs are not full time, the actual number of direct jobs created per investor is very low. EB-5 requires 10 jobs per investor - but allows those jobs to be direct, indirect, or induced. Jay seems to rely heavily on indirect and induced jobs.
 

VTKilarney

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I for got to mention that Stenger stated that the water park has 300,000+ visitors per year. That's pretty darned impressive.
 

Domeskier

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I had a chance to hear Bill Stenger give a presentation yesterday on Jay Peak and EB-5 development. Here are some highlights:

3) The crackdown on Chinese corruption has led to a capital flight from China. This is a good thing for EB-5 projects. People who got their money by corrupt means want to get that money out of China so they don't get in trouble now that there has been a crackdown.

I like this one - China is cracking down on its crooks, so hopefully we'll be able to get them to come over here!
 

HowieT2

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as far as the eb-5 investor having to obtain the money legally, they are both correct. The economist is right that much of the money from chinese investors may not be, but the recipient of the funds can't be aware of that specifically or they would be guilty of money laundering. wink wink
 

thetrailboss

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Here goes....

I had a chance to hear Bill Stenger give a presentation yesterday on Jay Peak and EB-5 development. Here are some highlights:

3) Only Phase 1 investors have an identified exit strategy at this point.

This confirms some discussion from a few weeks ago.

4) There is only one project left at Jay to be permitted - the West Bowl expansion. That will take a year or two to go through the permitting process.

It will be interesting to hear how ski terrain and lifts create jobs....as in full time jobs. And I bet that truth be told the EB-5 money will have to go to lodges and/or real estate with lifts being done on the cheap.

5) In the middle of winter there are 1,500 employees at Jay. Prior to EB-5, there were about 275. More than 250 of these employees receive benefits.

While at first blush this is impressive, and it is, the big problem is that 1,250 of these jobs have no benefits (i.e. are low skill, low paying jobs). The NEK needs more good jobs.

10) There are four things that potential EB-5 investors want to know. In order: (a) How long until a visa will be obtained; (b) will the conditional visa be made permanent; (c) what will the return on investment be during the project (dividends); (d) what is the exit strategy.

No surprise.

11) There are now 450 EB-5 projects in 34 states competing for funding.
12) There is now stiff competition from urban projects. Investors are MUCH more comfortable investing in a project in New York City or Las Vegas than in rural Vermont.

Here's the big problem.

13) The urban projects often have gerrymandered TEAs (target employment areas) to allow for the lower $500,000 investment.

Well.....

I know that there has been some :blink: with regards to the job creation criteria and metrics. So, not to be too cynical, they are all manipulating the system.

14) Some urban projects are funded only partially with EB-5 money and don't really need EB-5 money in the first place to be funded. (Some of these projects are up to 70% bank financed.) EB-5 investors like these projects because they believe that they are much less risky since traditional funding sources are investing in the project as well.

This is interesting. And it also makes riskier ski investments less attractive.

15) All of Jay's projects except for the West Bowl project are fully subscribed.

Good to hear.

16) Each investment group at Jay receives an almost identical dividend thanks to common management. That dividend can be from 1-4 percent, but in reality has been about 2% starting around year 3.

Interesting. Better than nothing.

An economist also spoke at this meeting. He stated the following:

Was it Art Wolff? Dick Heaps?

2) Vermont is not expected to grow as much as the rest of the country. The forecast for Vermont is not encouraging.

Unfortunately he needs to be saying this to the folks in Montpelier. But then again they just ignore this kind of information.

3) The crackdown on Chinese corruption has led to a capital flight from China. This is a good thing for EB-5 projects. People who got their money by corrupt means want to get that money out of China so they don't get in trouble now that there has been a crackdown. (Note: Stenger is correct when he says that the investor has to have obtained their money legally. I am not sure if the economist believes that this is overlooked, or if he did not know this.)

Interesting.

4) Vermont had its best ski season in years. Skier visits in the northeast were up 20% this year.

How did Jay fare? We know Burke was flat.

The major thing I took from this is that urban EB-5 projects seem to be a HUGE problem for Vermont. Stenger wants to see a legislative fix to this. It is clear that the money is not as easily obtained as it used to be.

Now we know what the issue was regarding competition.
 

Big Wave Dave

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thanks for this. the one item in their that scares me is the statement on Vermonts business climate. I dont try to get very political but its clear to me economic liberalism is reallhy starting to harm the ability to business to function in this state. no secret, lots of studies show vermont to be a very hard place to do business, just getting tired of hearing it. We really need political balance and the vestiges of the '60's who run this state to start to understand how reality is slapping them....
 

yeggous

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thanks for this. the one item in their that scares me is the statement on Vermonts business climate. I dont try to get very political but its clear to me economic liberalism is reallhy starting to harm the ability to business to function in this state. no secret, lots of studies show vermont to be a very hard place to do business, just getting tired of hearing it. We really need political balance and the vestiges of the '60's who run this state to start to understand how reality is slapping them....

I don't think this is the major issue at Jay. Getting "good" jobs to the Northeast Kingdom is just about a lost cause. There is no existing educated workforce of the infrastructure those workers demand. One of the biggest factor working against these rural areas is the lack of commercial airline service. Burlington is the only spot in the state that can support a growing high tech industry.
 

thetrailboss

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thanks for this. the one item in their that scares me is the statement on Vermonts business climate. I dont try to get very political but its clear to me economic liberalism is reallhy starting to harm the ability to business to function in this state. no secret, lots of studies show vermont to be a very hard place to do business, just getting tired of hearing it. We really need political balance and the vestiges of the '60's who run this state to start to understand how reality is slapping them....

I can't resist responding. ;)

The folks in power are ignoring the reality and have been for a long time. It is because a vocal part of their constituencies either don't need a job or don't want a job.

The push for regulating and for accomplishing liberal social agenda items is taking a toll on private industry. Count how many manufacturers have left in just the last two years. Some of it is international economic issues....but a lot of it is the cost of doing business. Lately it is fear as to what the single payer system will look like and cost.

Another issue that they are not considering is the demographic changes with younger folks like my wife and I leaving and taking our tax revenue....err... "contributions to society" with us to another zip code.

So Vermont is fast becoming a state of the haves and have nots. The former either having wealth from another state or part of their life and the have-nots struggling to survive and increasingly using public benefits. The middle getting really squeezed.

It's not political; just an observation of the situation.
 

thetrailboss

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I don't think this is the major issue at Jay. Getting "good" jobs to the Northeast Kingdom is just about a lost cause. There is no existing educated workforce of the infrastructure those workers demand. One of the biggest factor working against these rural areas is the lack of commercial airline service. Burlington is the only spot in the state that can support a growing high tech industry.

Even BTV is at risk of losing the high tech sector. WCAX has reported that IBM is considering selling its chip division and the Essex Junction Plant. The named potential buyer either has other sites or has said it would relocate. IBM, at one time, had 9,000 jobs at that plant or something like that. It is now about half the size.
 

VTKilarney

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Mr. Hale specifically identified the potential loss of IBM as a threat to the state's economy. We don't know what will happen when IBM sells of that division, but we do know that IBM has not been investing in the Burlington plant. Their investment has been in New York state.

He also mentioned some political issues that would have a major negative impact on the state's economy:
1) Funding education through a property tax.
2) Universal health care at the state level funded through a payroll tax.
 

thetrailboss

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Mr. Hale specifically identified the potential loss of IBM as a threat to the state's economy. We don't know what will happen when IBM sells of that division, but we do know that IBM has not been investing in the Burlington plant. Their investment has been in New York state.

He also mentioned some political issues that would have a major negative impact on the state's economy:
1) Funding education through a property tax.
2) Universal health care at the state level funded through a payroll tax.

Yep. All big problems.
 

Big Wave Dave

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I can't resist responding. ;)

The folks in power are ignoring the reality and have been for a long time. It is because a vocal part of their constituencies either don't need a job or don't want a job.

The push for regulating and for accomplishing liberal social agenda items is taking a toll on private industry. Count how many manufacturers have left in just the last two years. Some of it is international economic issues....but a lot of it is the cost of doing business. Lately it is fear as to what the single payer system will look like and cost.

Another issue that they are not considering is the demographic changes with younger folks like my wife and I leaving and taking our tax revenue....err... "contributions to society" with us to another zip code.

So Vermont is fast becoming a state of the haves and have nots. The former either having wealth from another state or part of their life and the have-nots struggling to survive and increasingly using public benefits. The middle getting really squeezed.

It's not political; just an observation of the situation.

Yup, this nails it. Well said Trailboss. Add in the minimum wage... no one is going to start a business here for a long time that has any scale to it whatsoever. Unless its a small plane manufacturer :)
 
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