New England Hermitage Club, VT, in the news.

[Dave Marshak]

They should turn Ascutney into Hermitage North...

That's a good precedent. When Ascutney went bankrupt, the bank settle a $64 million mortgage for less than $2 million. I remember that because I was involved in a bankruptcy negotiation at the time, and I used that to reset the debtors' expectations.

Hermitage could come back as a debt free condo development, maybe one with a golf course.

dm

 

[LKLA]

That's a good precedent. When Ascutney went bankrupt, the bank settle a $64 million mortgage for less than $2 million. I remember that because I was involved in a bankruptcy negotiation at the time, and I used that to reset the debtors' expectations.

Hermitage could come back as a debt free condo development, maybe one with a golf course.

dm

If that is the case then the bank will likely have to own the new development or it might just go under and that would mean that a lot of people would get hurt who currently work for the bank given that a loss of that magnitude might very well have significant impact on a small, local/regional bank like Berkshire Bank. Not only that, many legit businesses in the area may no longer be able to get financing from Berkshire Bank now.

 

[Muleski]

This is ugly, and sad for those who are minor stakeholders in the community.

It's easy to look at things through the rearview mirror, and "pile on." I admit to doing plenty of it over my lifetime, and I have had plenty of people pile on when I have made business decisions that failed. Having said that, from the very start, one had to wonder about the viability of this venture.

Simply put, was there really a market, and a plan to make it work. Sadly, the Yellowstone Club {which is absolutely not comparable to this...watermelons versus grapes}, had tough time when it became clear that the original operator and developer was "robbing Peter to pay Paul," and lining his own pockets while the YSC fell short on a mounting pile of unpaid financial obligations.

I hope that the fallout on this is minimized as much as possible. There may be very few "good and viable" scenarios for this, short of some folks with enormous assets willing to take it on as a toy. Nor sure if that's a possibility.

If anything, there's a lesson that "trusting" people who run these projects and operations without some very diligent oversight can be like playing with fire. And if things look a lot better than might be expected, dig deeper.

Not a good decision by the bank to EVER make these loans. This is speculation, IMO. And note that we didn't have any big hitters, for example in the PE business, bringing their firms into it. Not to pile on, but those folks, regardless of where home is, are skiing elsewhere...YSC being just one place.

Best of luck. This sucks.

 

[K2 Rat]

Berkshire Bank is bigger than I suspected. It's holding company is based in Boston and trades on the NYSE ( BHLB) with 1.7billion in market cap. 500mm in annual revenues. 45mm share outstanding trading at $38. 2k employees. 122mm in estimated '18 earnings. Not that they want to write the hermitage loan off, it appears it would not do significant harm. Although I have never heard of them, they have been around since 1846. The real harm will be to the employees, contractors and anyone that was depending on the place for their livelihood.

 

[LegacyGT]

While it may not be impossible, there are many obstacles to making a private exclusive ski mountain work in Southern VT. But what went wrong here is not necessarily a result of any of those obstacles. Instead, we see mismanagement coupled with delusions of grandeur that took precedence over sustainable organic growth. The Hermitage Club had a nice country inn/restaurant, a good golf course, a spectacular lodge and a ski mountain which offered a unique crowd-free experience (if not fantastic terrain). People were willing to pay for all of this. I don't know how the finances add up but these operations all make some degree of sense. But along the way, the club bet heavily on real estate, homebuilding, condo development, acquisitions of additional inns and the construction of a hotel property. (Nobody ever really explained why a private club would want so many hotel rooms). Could the club have continued with existing membership and a narrower set of properties? Or was it determined that growth was necessary to attract more members and keep the whole thing going? I have no idea. But from my spot up the road at Mt Snow, the club's management/ownership seemed to have a limited attention span and a focus on the future. This can be exciting and keep things fresh. But I'd pop in from time to time and read the promotional materials and emails. The sense I got was that it was always about the next thing and rarely about the existing operations. It's clear how this thinking translates into Ponzi-type behavior.

 

[LKLA]

Berkshire Bank is bigger than I suspected. It's holding company is based in Boston and trades on the NYSE ( BHLB) with 1.7billion in market cap. 500mm in annual revenues. 45mm share outstanding trading at $38. 2k employees. 122mm in estimated '18 earnings. Not that they want to write the hermitage loan off, it appears it would not do significant harm. Although I have never heard of them, they have been around since 1846.

No one just writes off $18M, be it a public or a private company, large or small. And being part of a larger company means little - they could decide to close Berkshire Bank, not lend to businesses in Southern Vermont, stop doing business with the ski operators...

People are going to get hurt here no matter where they work as long as they or their business had something to do with Hermitage. Be it the folks who founded Hermitage, the members, the club employees, the bank who lent them money, the businesses who have outstanding invoices, the town,...plenty of harm to go around. Unfortunately most of them unwillingly thrown into the the fire - lied to, deceived,...

 

[LegacyGT]

Not that they want to write the hermitage loan off, it appears it would not do significant harm.

We will see how valuable the assets are. I don't see them getting much for the inns and restaurants. Mount Snow has been developing more and more of its property, adding more dining and lodging options. This has been to the detriment of many local properties and restaurants. It was already hard enough to own a restaurant or inn in the area but it's getting harder as these business find themselves in competition with Mount Snow. The golf course is pretty good. I don't know what it's worth. But someone may want it. But of interest here is the ski area. When Mount Snow sold Haystack to the previous owner there was a prohibition on it being used as a public ski area. So after two failed private ski clubs, what are the options?

1) Shutter it and sell off some assets. Some of the lifts may be valuable elsewhere. Maybe some equipment as well (although I heard that some groomers were repossessed). This would be a huge shame especially with the spectacular base lodge they've built. Southern VT is littered with abandoned ski areas and this would become one more...albeit a little bigger than most of them. The one bright spot would be for those with AT gear as a number of these shuttered resorts have become home to people willing to earn their turns.

2) Sell it back to Mount Snow. This seems to make a lot of sense but I'm not sure it does. I don't know what it really does for Mount Snow. There has been talk of combining the areas for decades. Mount Snow could use a little more terrain and parking. But operating an area this large would seem to add great expense without necessarily attracting correspondingly larger crowds. The best case would be to leverage the Hermitage lodge as a luxury option. For years Mount Snow has been operating the Grand Summit hotel as a luxury property and it really isn't. Actually, it's kind of a dump and the Hermitage buildings could give them a more appropriate setting for expensive dining and spa treatments. It's a toss up though and I'm not sure that Mount Snow would jump at this even if it cost $1.

3) Sell it back to existing membership. If members could spend their current annual dues and continue to get crowd-free skiing along with luxury ammenities, then I'd bet a good chunk of them would buy in. But do the finances add up? I don't know. Comparisons to the Yellowstone Club are not really relevant. Compared to the Hermitage, Yellowstone members pay a lot of for a little. Not taking away anything from the club but I imagine most members visit infrequently. These are people who hold club memberships around the country (golf, beach, ski) and may visit each a couple times a year. Hermitage Club members live nearby and use the club heavily. Many of them are there every weekend. They are paying less but requiring more service (grooming, patrolling, etc.).

4) Come up with another private model. This one interests me the most. Is there a way to offer cheaper memberships to a lot more people. I don't know the details but something like Holimont may make sense. Mount Snow gets very crowded on weekends and holidays. Haystack is not nearly as a good a mountain but for a reasonable amount, people would join to avoid the crowds. Still, this amount has to be quite reasonable.

 

[Dave Marshak]

If that is the case then the bank will likely have to own the new development or it might just go under...

No. The bank just sells it off for whatever it can get, and the new owners presumably pay only take as much as the business can support. If the bank goes under for one bad loan the management is too reckless to have a bank in the first place.

No one just writes off $18M, be it a public or a private company, large or small.

Chittenden Bank was smaller than Berkshire, and they wrote off over $60 million in the Ascutney bankruptcy. They didn't go bust either. Long Island Lighting Company wrote off $6 BILLION. They went bust but the stockholders did all right. $18 million is chump change in commercial real estate.

dm

 

[LKLA]

We will see how valuable the assets are. I don't see them getting much for the inns and restaurants. Mount Snow has been developing more and more of its property, adding more dining and lodging options. This has been to the detriment of many local properties and restaurants. It was already hard enough to own a restaurant or inn in the area but it's getting harder as these business find themselves in competition with Mount Snow. The golf course is pretty good. I don't know what it's worth. But someone may want it. But of interest here is the ski area. When Mount Snow sold Haystack to the previous owner there was a prohibition on it being used as a public ski area. So after two failed private ski clubs, what are the options?

1) Shutter it and sell off some assets. Some of the lifts may be valuable elsewhere. Maybe some equipment as well (although I heard that some groomers were repossessed). This would be a huge shame especially with the spectacular base lodge they've built. Southern VT is littered with abandoned ski areas and this would become one more...albeit a little bigger than most of them. The one bright spot would be for those with AT gear as a number of these shuttered resorts have become home to people willing to earn their turns.

2) Sell it back to Mount Snow. This seems to make a lot of sense but I'm not sure it does. I don't know what it really does for Mount Snow. There has been talk of combining the areas for decades. Mount Snow could use a little more terrain and parking. But operating an area this large would seem to add great expense without necessarily attracting correspondingly larger crowds. The best case would be to leverage the Hermitage lodge as a luxury option. For years Mount Snow has been operating the Grand Summit hotel as a luxury property and it really isn't. Actually, it's kind of a dump and the Hermitage buildings could give them a more appropriate setting for expensive dining and spa treatments. It's a toss up though and I'm not sure that Mount Snow would jump at this even if it cost $1.

3) Sell it back to existing membership. If members could spend their current annual dues and continue to get crowd-free skiing along with luxury ammenities, then I'd bet a good chunk of them would buy in. But do the finances add up? I don't know. Comparisons to the Yellowstone Club are not really relevant. Compared to the Hermitage, Yellowstone members pay a lot of for a little. Not taking away anything from the club but I imagine most members visit infrequently. These are people who hold club memberships around the country (golf, beach, ski) and may visit each a couple times a year. Hermitage Club members live nearby and use the club heavily. Many of them are there every weekend. They are paying less but requiring more service (grooming, patrolling, etc.).

4) Come up with another private model. This one interests me the most. Is there a way to offer cheaper memberships to a lot more people. I don't know the details but something like Holimont may make sense. Mount Snow gets very crowded on weekends and holidays. Haystack is not nearly as a good a mountain but for a reasonable amount, people would join to avoid the crowds. Still, this amount has to be quite reasonable.

Hermitage is a flawed business model, period. There is no long-term case to be made here.Surprised they even made it this far. Everyone I ever spoke to about it in NYC basically laughed.

Why would Mt Snow be interested? It has plenty going on with the huge expansion at Mt Snow, the significant expansion at Hunter, and a bunch of other things. And there are plenty of more attractive options up and down the Northeast if they are looking to make acquisitions.

Maybe Vail would be interested - or maybe the Yellowstone Club wants an East coast sister property

 

[Dave Marshak]

3) Sell it back to existing membership.

That's probably the best result for the members. It may be their only hope of getting any value at all from what they have invested there. I think the most likely outcome is that someone (whether the members or someone else) gets it for nothing and runs limited operations there, like cross country skiing and golf or mountain biking. Eventually it will end up like all those old Catskills hotels. Or a casino.

dm

 

[Dave Marshak]

... maybe the Yellowstone Club wants an East coast sister property

Developing new locations is wat got YC into bankruptcy. I don't think they'll try that again.

dm

 

[LKLA]

No. The bank just sells it off for whatever it can get, and the new owners presumably pay only take as much as the business can support. If the bank goes under for one bad loan the management is too reckless to have a bank in the first place.

Chittenden Bank was smaller than Berkshire, and they wrote off over $60 million in the Ascutney bankruptcy. They didn't go bust either. Long Island Lighting Company wrote off $6 BILLION. They went bust but the stockholders did all right. $18 million is chump change in commercial real estate.

dm

The only people who are reckless are the folks who founded and/or managed Hermitage Club. That has been clear for some time.

$18M is not chump change amigo. If it was, the bank would not be wasting its time, least of all paying taxes on it out of its own pocket and spending on legal fees and the like.

Being a big bank does not mean you care any less about losing money and it does not mean that people do not lose their jobs. This is not good for anyone.

As I said, plenty of collateral damage to go around and impact lots of people directly or indirectly.

 

[LKLA]

Developing new locations is wat got YC into bankruptcy. I don't think they'll try that again.

dm

Maybe it will join a multi-mountain pass

 

[Dave Marshak]

The only people who are reckless are the folks who founded and/or managed Hermitage Club. That has been clear for some time.
.

If a bank loans money without doing its due diligence, which includes verifying the underlying value of the businesses it loans money too, it is reckless. It is also reckless if it makes one loan so large that it could break the bank, which was your premise.

dm

 

[LKLA]

If a bank loans money without doing its due diligence, which includes verifying the underlying value of the businesses it loans money too, it is reckless. It is also reckless if it makes one loan so large that it could break the bank, which was your premise.

dm

Best we stick to the facts.

For now, the facts show that the only folks who have been reckless here are the founders of Hermitage - Jim Barnes and company. The rest is pure speculation.

Unfortunately, the damage and pain will likely not be limited to just those who have been reckless.

 

[newboots]

Berkshire Bank has branches all over - well mostly, all over the Berkshires, in Western Massachusetts. It's unlikely to go under, and certainly not on one bad loan, even this one.

It's good that they paid the taxes. These towns run on the thinnest of margins. They're not in a position to buy less road salt, delay payroll, or shut down town services. A tax bill the size of Hermitage's going unpaid would be a disaster for a small Vermont town like Wilmington.

 

[LKLA]

Berkshire Bank has branches all over - well mostly, all over the Berkshires, in Western Massachusetts. It's unlikely to go under, and certainly not on one bad loan, even this one.

It's good that they paid the taxes. These towns run on the thinnest of margins. They're not in a position to buy less road salt, delay payroll, or shut down town services. A tax bill the size of Hermitage's going unpaid would be a disaster for a small Vermont town like Wilmington.

Missing the point here.

The bank may not go under, but people my lose their job. The town may not go under, but people may suffer the consequences of the town no being able to collect the taxes it is owed. Perhaps Hermitage does not go under but people have already been let go and no longer have a pay check.

This could have grave consequences for all the businesses in the area. Berkshire bank is likely a major lender in the local/regional market. This is not good for Warren, for the ski industry, for Hermitage members, for Berkshire Bank, for the state of Vermont, for Hermitage employees,...

 

[newboots]

Missing the point here.

The bank may not go under, but people my lose their job. The town may not go under, but people may suffer the consequences of the town no being able to collect the taxes it is owed. Perhaps Hermitage does not go under but people have already been let go and no longer have a pay check.

This could have grave consequences for all the businesses in the area. Berkshire bank is likely a major lender in the local/regional market. This is not good for Warren, for the ski industry, for Hermitage members, for Berkshire Bank, for the state of Vermont, for Hermitage employees,...

Yeah. I'm pretty angry about all this. See my earlier posts.

 

[Uncle Louie]

http://www.dvalnews.com/news/more-club-lawsuits-filed

http://www.dvalnews.com/news/bank-files-foreclosure-brook-bound-inn

More of the same.

And something....well.....not the same

http://www.dvalnews.com/news/club-counters-receivership-motion-claims-26-million-loan-escrow

 

[LegacyGT]

And something....well.....not the same
http://www.dvalnews.com/news/club-counters-receivership-motion-claims-26-million-loan-escrow

Kind of fascinating. Who is the knight in shining armor? There's no way that it's a reputable lender. Is it Barnes? Is it some group of membership? And, if this goes through, then what? Berkshire Bank may be taken care of but what about other lenders? And contractors? And real estate investors? And how many members are sitting on house accounts with tens of thousands of dollars? How do you ever get the thing up and running again when it's starting off so far in the hole?