[from Facebook]
Arcteris offer sheet:
The March 4th email titled “Latest Update to Rock Pond Condo Owners” ... It is not our intention to negotiate through general distribution. However, due to the importance of this issue to all of you, we wanted to ensure you have a more accurate understanding of both our intentions and our offer.
Arctaris remains sincerely committed to working with the Berry family to complete a sale transaction that will reopen Saddleback Mountain as quickly as possible, restore a critical economic engine for the greater Rangeley community, and to be able to honor the legacy of the Berry family’s long commitment to western Maine. Reopening the mountain with adequate capitalization would support the health of numerous Rangeley businesses, real estate, tourism, and the community overall. We understand that continued inaction on the mountain is the greatest risk to the Rangeley community, affecting every business and property owner.
With that in mind it is important to clarify our offer, process, and position:
* Arctaris Offer: The Arctaris offer was well in excess of what we understand to be the Berry’s total debt on the property. In response to repeated questions about financial capacity, questions that we repeatedly answered, the Arctaris Impact Fund, a $500,000,000 target fund, provided a signed letter from PNC Bank to the Berry family’s advisers that confirmed our cash deposits alone exceeded the cash amounts due at closing to purchase Saddleback. As a managed investment fund with committed capital from limited partners that include several national banks and other strong institutions, Arctaris does not need to raise capital for this transaction. If we proceed with Saddleback, Arctaris would use its own capital to fund the purchase. There is no financing contingency.
* Closing Process: As a fiduciary for our investors, Arctaris is a methodical investor. To that end, we follow a process before closing on any transaction, which includes buying a ski mountain. Hence, we indicated that we expected 120 days to close the transaction, which is typical for any prudent purchase of an asset of this size.
* NMTC Contingency: In order to rationalize the purchase of an asset that has traditionally underperformed financially it is necessary to leverage programs designed for this type of venture. To that end, as it is accustomed to doing, Arctaris would obtain equity derived from New Market Tax Credits (NMTC). The Berry’s advisers have been skeptical of the region’s eligibility for this program (it’s eligible) and of our chances to succeed in obtaining the tax credits (we don’t share that skepticism). However, to provide further comfort of our commitment to closing, Arctaris, in early February, removed receipt of New Markets Tax Credits as a condition to closing. Feedback from others suggest that the Berry’s advisors have often discounted and misconstrued our offer to purchase the mountain. Weeks after we removed the NMTC contingency, that contingency continues to be cited as a basis for not accepting our offer. Again, securing New Markets Tax Credits is no longer a condition to closing.
* New Chairlifts: Arctaris originally recommended in 2018 that the State of Maine designate Rangeley as an Opportunity Zone (OZ), opening the way for a tax-advantaged acquisition of Saddleback Mountain. Although the administration passed over Rangeley, we were subsequently contacted by several Maine-based charitable foundations and other philanthropically-minded individuals who inquired whether there were any other paths forward to reopen the mountain. These discussions culminated in several encouraging scenarios whereby Arctaris would purchase the mountain and dedicate the funds for its renewal, and the community would raise donations to purchase a new chair lift and T-bar. We believe that the community is sincere in its intention to purchase the new lifts to re-open the mountain, though this process may take the full 120 days to complete. All recognize that the window for placing a deposit on lifts is closing.
* Challenges: Saddleback has faced numerous challenges finding buyers because of the upfront initial purchase price, the high cost of replacing aged equipment, and the initial working capital strain associated with rehiring the 120 staff members who were laid off after the mountain shut. Further, the mountain requires adequate capitalization and reserves to ensure that it does not turn insolvent again in several years whenever we have another light snow season. For whomever owns the mountain next, any potential investment “upside” will come from development of real estate – but that will take years to complete, given that it will take some time to convince the real estate market of the stability of the ski area and given that the Berry family and others still own a significant backlog of condominium inventory and undeveloped Magalloway lots. The unfortunate reality is that this investment simply doesn’t pencil out for a financial buyer or for the owners of other ski areas in the area who have enjoyed increased skier visits since Saddleback closed. It pencils out for Arctaris only because of our mission-driven investment goals and because of our skill and experience with leveraging non-traditional sources of capital.
Despite Saddleback’s considerable challenges, Arctaris believes that there is a path to reopening Saddleback which includes combining our capital with the philanthropic contributions from the Rangeley community. For scale, we are budgeting for a $25-30 million-dollar investment plan over the medium term that would include a $3-5 million-dollar philanthropic component. Our firm is an impact investment firm that works in partnership with banks, foundations, and economic development agencies to revitalize communities. Arctaris is uniquely suited to lead this type of bold initiative that will help to stabilize the Rangeley community, bringing back local businesses, jobs, and real estate values.
We look forward to working directly with the Berry family to find a mutually agreeable path to reopening Saddleback Mountain.
Thanks,
Jonathan Tower