Detailed blog article about new Jay projects

[mattlucas]

http://jonnyjay.blogspot.com/2012/01...utes-from.html

There is way too much to digest in this article for me to post a sentence or two to sum it up. There are big changes afoot at Jay, and as the competition among resorts changes so does the nature of the game.

I definitely wonder how news like this (and developments in recent years at other neighbors) spawns a keeping up with the joneses approach to ski area improvements, not just at SB but everywhere. Stowe's Hotel looks awfully familiar, for example.

But while Jay has taken dramatic steps forward as a destination in recent years, it seems like they undertook the projects with a lot of community and skier involvement. Where is the on mountain meeting about the Village and Beginner Area? Is it just too small a project that no one cares? If there was direct skier input wouldn't these projects be even more successful?

Furthermore, if there is EB5 money on the line for past projects, were those contingent on the current improvements as well as upcoming ones? I'm surprised that the EB5 program is so wildly successful in most peoples opinion. Easy access to capital is a great lubricant for projects, but if the projects are implemented for the sake of taking the easy money it doesn't really help anyone.

I wonder what is going on at Jay and if people will say too soon, too fast in a few years.

[Tin Woodsman]

http://jonnyjay.blogspot.com/2012/01...utes-from.html

There is way too much to digest in this article for me to post a sentence or two to sum it up. There are big changes afoot at Jay, and as the competition among resorts changes so does the nature of the game.

Quick summary as follows:

Stateside Base
- Mid-market hotel with 85 rooms
- 8,000 sq ft Mountain Learning Centre
- 12,000 sq ft replacement for Stateside lodge
- 15,000 sq ft Recreation Centre
- Outdoor amphitheatre

On-mountain
- Replace Bonnie quad with high speed Six and move to old Powerline alignment
- Replace Jet triple with Bonnie quad
- Move Jet triple to where Bonnie quad is now and chop it in half to serve beginner/intermediate terrain down low, plus transfer back to Tramside
- Built out West Bowl starting in maybe 3-4 years

That's quite a large agenda.

[HowieT2]

Quick summary as follows:

Stateside Base
- Mid-market hotel with 85 rooms
- 8,000 sq ft Mountain Learning Centre
- 12,000 sq ft replacement for Stateside lodge
- 15,000 sq ft Recreation Centre
- Outdoor amphitheatre

On-mountain
- Replace Bonnie quad with high speed Six and move to old Powerline alignment
- Replace Jet triple with Bonnie quad
- Move Jet triple to where Bonnie quad is now and chop it in half to serve beginner/intermediate terrain down low, plus transfer back to Tramside
- Built out West Bowl starting in maybe 3-4 years

That's quite a large agenda.

big agenda and big debt load/service. I think win has said before that they dont view loading up on debt as a gamble they want to take. It's been done in the ski industry before and we know how that movie ends.

as for input, this is really just the latest phase in a project that was originally intended to be done at the same time as the gatehouse and claybrook. at the time there was input and meetings. now its just a matter of the market being amenable and pulling the trigger.

[random_ski_guy]

I agree. Jay's plans seem too aggressive. I dont believe the industry can support this level of development in the northeast in this economy (or any economy). I hope they arent embarking on a plan that leads to an ASC style demise.

[Tin Woodsman]

big agenda and big debt load/service. I think win has said before that they dont view loading up on debt as a gamble they want to take. It's been done in the ski industry before and we know how that movie ends.

as for input, this is really just the latest phase in a project that was originally intended to be done at the same time as the gatehouse and claybrook. at the time there was input and meetings. now its just a matter of the market being amenable and pulling the trigger.

I agree. Jay's plans seem too aggressive. I dont believe the industry can support this level of development in the northeast in this economy (or any economy). I hope they arent embarking on a plan that leads to an ASC style demise.

While Jay's plans are certainly aggressive, I think it's important to note that they are unlikely to be heading towards a debt-fueled, ASC style demise. These projects, as with previous ones on Tramside and our own Schoolhouse/Framhouse were funded by EB5 money. As such, the money to build them isn't debt but is rather equity.

I think Bill Stenger has been in this business long enough to know that loading up on debt to fund base area development is not the right model for most (any?) ski area operators, especially ones with just a single mountain the portfolio.

[random_ski_guy]

I understand Tin, EB5 and all, but it still seems like a lot of infrastructure and projects for a ski area of its volume.

[Tin Woodsman]

I understand Tin, EB5 and all, but it still seems like a lot of infrastructure and projects for a ski area of its volume.

No doubt - it's a big jump they're making. But that's how you move up from miid-size to big time I guess. Also, keep in mind they're only 2 hrs from Montreal, so the market opportunity for them is ultimately larger than for SB. And if press reports are to be believed, they are killing it with their ice rink and water park. Imagine if SB had a waterpark at the base the last 6 weeks or so. Instead of pinballing down Deathspout with 500 of your closest friends, you'd have legit options for aquatic fun. Not that this is the right thing to do for SB, but it's a pretty interesting approach they're taking.

[muddy_hollow]

Paraphrasing Win's comment from another thread "....you have to pay it back" I could see SB loading up on debt like this in the instance that Summit Ventures didn't purchase the property and run it like a proper business. Jay is a great place to ski but it's a long ride from Boston and even if they make all these changes, will the masses skip over there? In these uncertain times, it is nice to see SB taking some risks but overall making fiscally reasonable decisions.

What's the downside to the EB5 program if the Jay cannot pay the money back? Since this is a government program, is it federally insured? Would the tax payers end up picking up the bill ala Stowe / AIG?

And BTW it would be really nice to get a free lift ticket to stowe from Burnake for putting my grand children in debt


--- off to powder day

[HowieT2]

Paraphrasing Win's comment from another thread "....you have to pay it back" I could see SB loading up on debt like this in the instance that Summit Ventures didn't purchase the property and run it like a proper business. Jay is a great place to ski but it's a long ride from Boston and even if they make all these changes, will the masses skip over there? In these uncertain times, it is nice to see SB taking some risks but overall making fiscally reasonable decisions.

What's the downside to the EB5 program if the Jay cannot pay the money back? Since this is a government program, is it federally insured? Would the tax payers end up picking up the bill ala Stowe / AIG?


And BTW it would be really nice to get a free lift ticket to stowe from Burnake for putting my grand children in debt


--- off to powder day

Im pretty sure the EB5 program has nothing to do with loan guarantees by the govt. it simply provides a green card or citizenship to the foriegn investor.

[Tin Woodsman]

Im pretty sure the EB5 program has nothing to do with loan guarantees by the govt. it simply provides a green card or citizenship to the foriegn investor.

Moreover, it doesn't have to be paid back like debt, but it does need to earn a return, just like any other equity investment. The thing is, b/c it's equity and not debt, you don't have the same issues with getting up to your eyeballs in unsustainable interest payments and debt loads - the same formula that has sunk many others in the ski industry. It's not free money to be sure, but equity holders by definition have a lot more risk of not seeing a return than debt holders, and such an outcome wouldn't sink Win or SB.

[gostan]

Moreover, it doesn't have to be paid back like debt, but it does need to earn a return, just like any other equity investment. The thing is, b/c it's equity and not debt, you don't have the same issues with getting up to your eyeballs in unsustainable interest payments and debt loads - the same formula that has sunk many others in the ski industry. It's not free money to be sure, but equity holders by definition have a lot more risk of not seeing a return than debt holders, and such an outcome wouldn't sink Win or SB.

But, it does bring with it all of the typical reporting , paperwork and issues that taking in investors/partners always brings with it. And, it reduces the shareholder equity positions of the original investor partners.

[HowieT2]

Moreover, it doesn't have to be paid back like debt, but it does need to earn a return, just like any other equity investment. The thing is, b/c it's equity and not debt, you don't have the same issues with getting up to your eyeballs in unsustainable interest payments and debt loads - the same formula that has sunk many others in the ski industry. It's not free money to be sure, but equity holders by definition have a lot more risk of not seeing a return than debt holders, and such an outcome wouldn't sink Win or SB.

I might be wrong but I would think that along with eb5 money, they also took on debt for these projects.

[random_ski_guy]

I would think EB5 represents only a portion of the financing, a large portion perhaps, but not 100%. Has it been confirmed that the next round of improvements is to be funded by EB5 and if so, does this constitue a second investor pool or are they completing the scope under the original EB5 pool? I still feel the improvements agenda seems ambitious even if its primarily equity financed and to be fueled by the montreal market.