JAY — Visitors and employees at Jay Peak will experience few if any changes as control of the organization shifts from Bill Stenger, who has run the resort for 30 years, to a court-appointed receiver in the wake of a financial scandal that has rocked the state.
All the attractions that draw guests to the four-season resorts — weddings, waterpark, biking, skiing and concerts— will continue as normal. And when the fraud case centered around the alleged misuse of over $200 million in investor funds through the federal EB-5 program is resolved, there will be plenty of interested suitors if the resort hits the market.
That’s the assessment of Steve Olson, Chief Executive Officer of Leisure Hotels and Resorts, a Kansas-based firm specializing in the temporary operation of distressed hotel and resort properties.
He and Leisure Chief Operating Officer Jamie Tatge will manage the daily operations of Jay Peak Resort and the Q Burke ski area as the court resolves the federal case against owners Stenger and Ariel Quiros, whose assets were seized late last week by the Securities and Exchange Commission (SEC).
The two, with long-time Chief Marketing Officer and recently named General Manager Steve Wright, are the face of the Jay Peak operations until the fraud case against the developers and resort owners is resolved and a new buyer can be found. Olson sat down with the Messenger Thursday to discuss what he sees as a promising, modern development centered in a small community.
“The property is in great condition. You find very little that is in need of attention,” Olson said about the Jay Peak resort, which includes three hotels, three restaurants, the Pump House waterpark, a skating facility, and over 800 condos owned both privately and managed through the resort. “The staff appears to be very knowledgeable and interested. They’re very positive and in some ways relieved because the uncertainty is starting to come out of it now. And so they’re looking forwarding to moving forward.”
“Where growth stops decay sets in and that was starting to happen here. If there’s an uncertain future people start to question why they’re here. People want to be part of something that’s growing and successful,” Olson added.
Olson, 60, is a Minnesota native whose firm has worked largely with distressed properties in the Midwest, from Texas and Oklahoma to northern Minnesota. It’s his first time in Vermont, he says, just 10 days into the job, but the small communities of northern Vermont remind him of northern Minnesota.
His firm manages anywhere from nine to 30 properties at a time. But between Jay Peak and Q Burke, the size of the two projects will nearly double the portfolio currently managed by the company.
He made no guess on how long the resort will be operated by Leisure. The project could last six months or three years, he says.
“We’re used to teaming with communities, doing a lot of those types of projects. A lot of public money is involved in that. We get that environment. We know that you’re under the microscope and there’s promises that have been made and we have to achieve those,” Olson says.
After taking over as co-owner and president in 2007, Stenger laid out a three-stage plan for Jay Peak in 2008, hinging on funds raised through foreign investors, who exchange funding for job-creating projects in the U.S. for fast-tracked visas.
In 2010, as the project broke ground on the new 120-room hotel, Pump House waterpark and ice skating facility, everything seemed rosy. Then-governor Jim Douglas, Governor Peter Shumlin and U.S. Sen. Patrick Leahy were among those boosting Stenger and the EB-5 project as it promised to pump money into the struggling Northeast Kingdom economy.
Stenger testified in front of a Senate Judiciary Committee headed by Leahy in December of 2011 about the benefits of EB-5 and its impact. The projects didn’t stop at Jay Peak either. Partner Quiros was orchestrating a mirror hotel at Burke, renamed Q Burke after its new owner, and a downtown block in Newport, Vt. was leveled for what Stenger and Quiros called a “Renaissance Block” with shops, restaurants and a hotel.
This week it all came apart when both the SEC and the state filed civil charges against Quiros and Stenger. A federal criminal investigation is also underway.
The SEC has alleged Quiros diverted nearly $50 million of investor funds for personal use. He is accused of using the money, according to SEC filings, for a personal luxury condominium and to pay income and other taxes. The complaint accuses Stenger of facilitating the transfer of the funds and said he “recklessly” ceded control to Quiros, standing by as the “ponzi-like scheme” continued.
Stenger has denied the allegations in multiple media reports. Wright, who has worked with Stenger for over a decade, expressed shock while reserving judgment.
Now, Olson is left to manage a sparkling new resort that has gone from a northern Vermont outpost famous for its bare-bones amenities and deep powder tree skiing to a four-season resort with a conference center, championship golf course, and indoor water park complete with retractable roof. And while it will be an appealing property to potential buyers, he cautions that Stenger may have moved too quickly, swayed by the prospect of low interest payments and minimal taxes on the projects.
“The EB-5 funding clouds, I think, people’s judgment because you are not required to pay traditional principal and interest payments, which is usually substantial. So people tend to maybe overbuild and spend more than they should because they don’t feel like they have that ongoing expense to deal with,” said Olson, who stressed that he is not yet close enough to the Jay Peak Resort finances to assess the sustainability of what Stenger has built.
“But someday that hits a wall and the payment needs to be made and either the resort has reached it or it hasn’t. So I can’t speak to that other than the travelers today do want a lot of amenities,” Olson continued. “They do want to come in and do it all. And typical resorts, conditions are not all that good. The newer they are the better they do as far as drawing customers in initially. But that only lasts seven to 10 years and then you have major capital improvements that need to be made. The bigger the property is the more money that you need. Most don’t anticipate that and don’t budget for that and don’t reserve for that.
“So the resorts that go 100 years or more have one, probably no debt, two, a good capital plan and three, a superior marketing effort that continues to draw people into the marketplace, and excellent people taking care of the customer.”
Jeffrey Schnieder, a Miami, Fla.-based attorney, was appointed by the SEC last Thursday to form a team to manage the Jay Peak and Q Burke resort projects as the seizure of assets unfolded. He hired a team of accountants and operators including attorney Jeffrey Goldberg, who became the court-appointed receiver and brought Leisure Hotel and Resort aboard.
“I’m at the mercy of the receiver. I work to his orders. Larger properties take longer usually,” Olson said.
Olson appointed Wright as the ski resort General Manager, who will handle day-to-day operations.
From a windowless, spartan office converted from a janitor’s closet off the Hotel Jay lobby, Olson signs off on everything from light bulbs to pencils to bathing suits in the Pump House store, as the court has limited the amount of funds available to the resort. Olson spends his time meeting with employees across the resort, working often from 7 a.m. until 11:45 at night. He was a skier 15 years ago, he says, but hasn’t had an opportunity to take a late-season run. He did find time this week to take a ride up the aerial tramway.
Olson says, he doesn’t intend to micromanage Wright’s job.
“We’re here to help communicate and make decisions quickly and we don’t want any delays. The quicker we can make that decision the faster we can solve the issues,” Olson says.
Wright has been the chief marketing officer at Jay since 2004. He says he was as stunned by the news of the allegations against Stenger as anyone.
“I was definitely not prepared for it,” said Wright, who over the last 12 years has branded Jay with progressive ad campaigns and a policy of largely transparent communication. “Our perception as it relates to the public certainly took a couple steps back. The optics in this are not what we would normally hope for.”
Wright added that the sentiment he has received from Jay loyalists, both personally and on social media, has been overwhelmingly positive. As for the allegations against Stenger he said, “I’m trying to keep as open a mind as possible. But the Bill Stenger I know and worked with, this is not in step with the character of who he is.”
Both Olson and Wright have made numerous assurances that there will be no changes to the staff. Any cuts, Olson said, will be seasonally based. He allowed that if guest numbers drop after the EB-5 controversy, so too might staff levels. Thursday night, Olson was planning to address condo property owners. His firm, he says, has extensive experience working with condo associations through distressed resorts.
Olson also stressed that Stenger, who until the case is resolved is still the resort owner, has provided valuable assistance and cooperation.
“He’s innocent until proven guilty, and we need to be kind, he’s still the owner here, and it’s not ours to judge. He could be back tomorrow for all I know,” Olson says.
So far, Leisure has identified a handful of money-saving inefficiencies, primarily centered on labor costs during a slow season in early spring when guest visits are down. He says four to five employees, mostly lawyers, have been let go due to their connection with the EB-5 program.
Olson returned to his family in Kansas Friday, but will return Wednesday for another round of meetings with his team. While he is only currently managing the ski operations at Q Burke, he’s hoping to receive word shortly that his company will operate the hotel there as well. Goldberg has stated that the Q Burke ski area will be open next winter, and passes are currently being sold.
“My job is to help analyze where the problems are, where the opportunities are, and provide that guidance and function for the court to secure these assets,” Olson says.