Berkshire Bank of Massachusetts initiated foreclosure proceedings on the Hermitage Club and related properties last Friday, claiming three loans worth $17 million are in default with $16.3 million in principal still outstanding. The private club, located next to and once part of Mt. Snow, is open and spinning lifts this weekend but it’s not clear how long that will continue. While the marketing department feverishly posts pictures of fresh snow and smiling children on social media, what happens next will probably be decided in a court room. No one knows the eventual outcome but recent ski resort foreclosures and bankruptcies offer some insights.
Nine years ago tomorrow, Tamarack Resort said it was closing and laying off nearly all of its employees with a few hours’ notice. The developer of the not even five year-old resort had taken out a $250 million loan with Credit Suisse and defaulted, leading to a Chapter 11 bankruptcy filing on February 20, 2008. The balance owed on the original $250 million loan after four years was still $247.7 million. Sound familiar?
A bankruptcy judge turned operations over to a receiver in October 2008 in an attempt to preserve market value for a possible sale. Credit Suisse provided additional funding for mountain operations during the 2008-09 season, but after an operating loss of $2.8 million in four months, the bank had had enough and proceeded to mothball the property mid-season. A skeleton crew of employees including lift mechanics stayed on to maintain the assets for what turned out to be years.
Around this time, another finance giant, Bank of America, asked the bankruptcy judge for permission to remove the Buttercup and Wildwood chairlifts, which were purchased from Doppelmayr with a subsequent loan. The motion was denied and the lifts sat idle along with Tamarack’s others for most of 2009 and 2010. A group of Tamarack homeowners eventually ponied up to buy the Buttercup lift for $400,000 and forged an agreement with Credit Suisse to operate the ski area minus Wildwood for the 2010-11 ski season. BofA reportedly wanted millions to redeem Tamarack’s third detachable lift and the Municipal Association decided they simply could not afford it. The bank hired Highlander Lift Services and Construction, the same company that built the lift seven years prior, to remove it in the summer of 2012. “Ultimately, as sad as I am to remove it, it’s sadder to see a large $4 million machine sit there and grow cobwebs,” Paul Johnston of Highlander told the Seattle Times. “There are a lot of interested parties. It’s like buying a used car. It’s a lot cheaper, but it’s a used car with very low miles.” The Uni-GS detachable had fewer than 2,000 hours on it when it eventually found its way to Brian Head, Utah.
A group led by Credit Suisse brought in Replay Resorts to run Tamarack beginning in May 2015 but the venture was not particularly successful. The companies fell so behind on property taxes that Valley County scheduled a piecemeal auction of the resort’s assets for October 17, 2016. Just as many in the ski industry jockeyed at the prospect of buying well-maintained ski lifts for a steal, the Tamarack Municipal Association stepped in again at the eleventh hour. Four days before the auction, the homeowners bought all of the assets needed to run the resort’s five remaining lifts, presumably for pennies on the dollar. Today, Wildwood is shown on the trail map as a future lift.
Ascutney Mountain, Vermont
A big new high-speed quad opened at Ascutney Mountain for the 2000-01 season, adding 300 vertical feet to this decades-old ski area located along Interstate 91. The Garaventa CTEC detachable operated for nine seasons before repeated losses forced the ski area to close. Many blamed the failure on construction of the multi-million dollar high-speed quad serving only advanced terrain without snowmaking. The ski area’s largest lien holder won an auction for the entire facility in 2013 but never reopened it for skiing. Burke Mountain reportedly offered to buy the high-speed lift before deciding on a new one instead. Crotched Mountain stepped in and bought the CTEC Stealth, which today is known as The Rocket. Pats Peak later acquired the area’s three CTEC triples and installed one of them this past summer. Ascutney is now owned by the Trust for Public Land and in an amazing turn of events, a nonprofit group called Ascutney Outdoors plans to build a T-Bar on the site of the former high-speed quad by next winter.
Yellowstone Club, Montana
Y.C. in many ways is the most analogous to the Hermitage Club as a developer-owned private club targeting the wealthy. The Yellowstone Club was created with a $375 million loan from Credit Suisse and a crazy 14 lifts were constructed between 1999 and 2007. This Big Sky development filed for bankruptcy reorganization in November 2008, unable to pay many of its creditors amid the recession. It continued to operate through the turmoil and CrossHarbor Capital Partners bought the operation for $115 million in July 2009. Today the Club is apparently profitable and operated by Discovery Land Company. Y.C. recently opened three new lifts including a gondola.
Spanish Peaks, Montana
Spanish Peaks wasn’t so much a ski resort as a real estate development adjacent to Big Sky Resort. Developed by Pittsburgh billionaire James Dolan, the Club built an impressive five Doppelmayr lifts in the summer of 2005 to service ski-in, ski-out properties. Following the great recession, Spanish Peaks filed for Chapter 7 bankruptcy in October 2011. Unlike Chapter 11 reorganization, operations could not continue under Chapter 7 and all employees were laid off. A bankruptcy court appointed a trustee and real estate company to sell the club’s assets to pay Oaktree Capital Management, the primary creditor owed some $122 million. Fortunately, the property was more valuable sold as a whole rather than liquidated in pieces. An LLC representing most of the homeowners submitted one bid for the development but was outbid by Yellowstone Club’s CrossHarbor Capital. The company’s principal, Sam Byrne, scored 5,300 acres and five lifts for just $26 million at the June 2013 auction. Spanish Peaks’ lifts now operate as part of Big Sky Resort and are open to the public.
Moonlight Basin, Montana
The Moonlight Basin story has another happy ending with six lifts surviving bankruptcy and foreclosure intact. Lehman Brothers loaned the $124 million needed to build this ski resort on the north side of Lone Peak, which opened in December 2003. Amid the financial crisis, both Moonlight Basin Ranch and the bank itself went bankrupt during construction of the resort’s seventh lift. The remains of Lehman Brothers foreclosed on the property in 2012 and the lifts stayed spinning while the lender searched for a buyer. A year later, Big Sky’s Boyne Resorts and, you guessed it, CrossHarbor, partnered to buy Moonlight, where the new lift was finally completed last fall.
What does all this mean for the Hermitage Club? Berkshire Bank could successfully foreclose, the club could be sold as a whole à la Big Sky and/or assets liquidated like at Ascutney. The hundreds of homeowners could band together and bid to buy the entire company, as is reportedly being discussed and shown to be successful at Tamarack. Whatever happens will probably take years to play out but in the end, the lifts will not go to waste. If the private club model eventually fails, there are plenty of other mountains that would love a gently used bubble six-pack or Skytrac quad.
Update 3/6/18: This post initially included a copy of a lien filed with the State of Vermont by Doppelmayr USA related to construction of the new Barnstormer lift. Doppelmayr reached out to me to say the lift was fully paid for within a few months of completion and there are no outstanding amounts due. I apologize for the misinformation.