Michael Goldberg, the attorney charged with sorting out the finances at Jay Peak Resort in the midst of a fraud scandal, painted a bleak financial picture for the ski area located on the Canadian border.
If he isn’t able to find more money soon, Goldberg said, he will have to shut down Jay Peak and “eliminate any possibility of Q Burke opening.”
Goldberg said there is insufficient cash in company accounts to meet operational costs in the off-season. About $4.7 million is left, most of which is frozen under an order from the Securities and Exchange Commission. Goldberg said he needs $7 million to $11 million to run the operation during the offseason from May to October.
“If we do not come up with additional funds soon, the resort will cease operating,” Goldberg said.
In addition, Goldberg said, he has had to borrow money from Jay Peak to meet essential needs, such as payroll, at Q Burke in order to prevent the sister resort in East Burke from “going dark.”
Last year Jay Peak had to obtain a line of credit of $2 million to continue operating; this year, the resort has sought an additional $4 million bridge loan to cover operating expenses, Goldberg said in a deposition filed by the SEC on Friday.
The resort is faced with a “daily barrage of demands for payment” from hundreds of vendors — from soda distributors to Internet providers — who are owed money.
The 52-year-old gondola system must be repaired and the price tag for that expense is $4.1 million. Half of the payment would be due in the next four months.
“If the gondola becomes non-operational, the resort will not be able to transport skiers to the top of the mountain, and will not survive,” Goldberg told SEC lawyers.
The Jay Peak developers overstated revenues for operations of the resort and inflated the appraised value of the property, Goldberg said. Projected operating profits for Jay Peak last year were $12 million to $13 million, according to Quiros; the actual profit was $3 million. Goldberg expects 2016 profits to drop to $1.8 million.
The EB-5 development projects at Jay Peak present additional problems, Goldberg said. Two are incomplete — Stateside and Pine Ridge — and there is no money to finish the construction.
Stateside fully was funded with immigrant investor funds. Stenger and Quiros raised $67 million from 134 investors for the project. While the Stateside hotel was completed, the 84 townhouses on site are “nowhere near finished,” and DEW Construction Corp. walked off the job earlier this year. A medical center and recreational center also were not completed as part of the Stateside project; it would take an infusion of $20 million to finish the work as there is no money left in the investor account.
The resort has paid the Tram Haus investors $2.6 million; another $14.87 million is owed for repayment. Other investors at Jay Peak whose projects are completed did not receive exit strategies from the developers.
While Quiros maintains he has invested $25 million in AnC Bio, Goldberg said he didn’t see evidence of that level of investment.