Jay Peak located in the Northeast Kingdom (err...boondocks) of Northern Vermont, is know for three things which are:
Prodigious amounts of snow
Jay Peak, is located in an area of northern Vermont known as the Northeast Kingdom and is a short 15-minute drive from the Canadian border. Jay Peak is synonymous with snow, hardcore skiing and investment fraud. Let’s look at each separately.
The resort is the holy grail of east coast powder skiing. Jay is located between the Atlantic Ocean, the Great Lakes and Lake Champlain with the St. Lawrence to the North, thus exposing the mountain to storms both from the east and west. As a result, the mountain averages 350 inches of snow per year which is higher than many areas out west. In 2001, the mountain received an astounding 571 inches of snow! Why so much snow? Many say it is due to the “Jay Cloud” a weather phenomenon that dumps truckloads of the white frozen precipitation onto the steeps of Jay. The “Jay Cloud” can be explained via the meteorological condition known as orographic lift. Orographic lift occurs when wind pushes air against a mountain, forcing the air to rise, as air rises it cools and the moisture condenses into snow. Because of this weather phenomenon that blesses Jay Peak with so much snow, legitimate “west coast” powder skiing can be enjoyed. In fact, Meathead Films won the 2013 Powder Award for Best Powder for a segment they shot at Jay in the movie “No Matter What”. It was the first time an East Coast resort received the prestigious award.
Jay Peak is also known to many skiers for its glade skiing. The resort was a pioneer in off trail/into the woods skiing. In the mid 80’s, Jay Peak was owned by the Québec resort, Mont Saint Sauveur. They hired Bill Stenger to be the GM of Jay Peak and during this time the mountain saw significant growth that included an expansion into off-piste skiing. The story goes, that Stenger noticed many skiers venturing into the woods and then happily discussing their exploits in lift lines, bars and restaurants. So rather that banning the off trail activity, Stenger and his management team embraced the idea. In the summer of 1987 the first of Jay’s glades was cut. However, the glades, didn’t start showing up on the trail map until 1993. The glades have since become the norm att ski areas, but Jay Peak was a pioneer in the activity. Additionally, Jay Peak is one of Vermont’s highest mountains at 3,858 feet it boasts 2153 feet of vertical drop and is home to some of the steepest and most difficult trails in Vermont, New England and Eastern North America. In fact, Tuckerman’s Chute averages a decline of a staggering 34.31 degrees – oh, and it is covered in trees and only rated a black diamond.
Lastly, and the reason the mountain has been put up for sale, it is known for investment fraud. Ariel Quiros and Bill Stenger brought more than 800 investors from 74 countries to put up $500,000 each, all were seeking green cards in exchange for the investment under the EB-5 program. The investment dollars were to be used for nine projects, including developments in the Northeast Kingdom, Jay Peak Resort, Burke Mountain (which Quiros renamed QBurke - What kind of jackass does that?) and a biomedical facility in Newport, VT which the government said was “nearly a complete fraud.” However, Quiros had other ideas he used $50 million dollars for himself - including buying a Trump condo. The Securities and Exchange Commission (SEC) did not look kindly on this “business” practice and took control of the mountain. The government has spent the last couple years getting Jay Peak back on its feet and ready for sale. The Burlington Free Press reported in a early January that Jay Peak is for sale and they expect a deal to be closed in the summer of 2019.
This brings us to the big question...Who will buy Jay Peak? In order to answer this question with some degree of accuracy, even though it is a guess, you need to know that ski resorts generally sell for around 6 to 10 times profits. In 2017, Jay Peak reported a profit of $10 million, which would put the sell price at $60M - $100M. My initial gut reaction is this is too much for Jay Peak, especially since Stowe was sold in 2017, the same year that Jay reported the profits, for $41M. Is Jay Peak really worth more than Stowe?
Who are the Contenders?
Vail Mountain Resorts
Vail Mountain Resorts is a massive, $7.42 billion company that is traded on the NYSE. The company has more than enough cash on hand ($354 M) to purchase Jay Peak Resorts. This would be the second Vermont resort, as stated earlier they bought Stowe for $41 M in 2017. One objection that has been frequently stated is Vail wouldn’t have an interest in buying Jay Peak because it is too close to Stowe. I personally don’t buy into this argument because Vail owns Beaver Creek, Breckenridge, and Keystone which are within and hour drive of Vail, which is the same distance between Stowe and Jay Peak. Vail claims to be the premier mountain resort company in the world and a leader in luxury, destination-based travel at iconic location. When Vail purchased Stowe, they stated Stowe’s reputation as a premiere ski destination fit their profile. Jay Peak simply doesn’t fit the profile of a premier mountain resort, while Jay Peak has made huge strides in developing the resort, it still is not a destination resort and the town lacks any activity outside of the resort.. Unfortunately, if you own the EPIC pass, I don’t believe that Jay Peak will be added to it for the 2019/2020 season.
Odds that Vail buys Jay Peak: Medium - > Now Very Low (I refuse to eliminate them entirely)
Note: On July 22, 2019, Vail entered into an agreement to purchase Peak Resorts for $11/share or about $260 M. Due to this purchase, I believe the chances Vail buys Jay are now very low.
Note: On September 6, 2019, it was reported via meeting minutes from the Jay Zoning Board meeting that Vail Resorts is NOT interested in purchasing Jay Peak.
Alterra Mountain Corporation
Alterra Mountain Corporation is the other 600 pound gorilla in the mix. Alterra owns 15 different resorts, they only own two on the East coast they are Mount Snow and Mont Tremblant. Alterra is a privately own company between KSL Capital Partners and Aspen/Snowmass (Henry Crown and Company), so the financial condition of the company is unknown since they are privately held, but Henry Crown was a billionaire when he passed away and KSL Capital Partners owns a myriad of other properties therefore it seems a deal could easily be structured. Additionally, Jay Peak seems to fit in with many of Alterra’s other properties such as Squaw Valley, Winter Park and Steamboat Springs. Squaw is known as a hardcore skiers mountain (watch the movie GNAR, if you doubt this) and Winter Park is off the beaten path much like Jay Peak. My money is that Jay Peak becomes part of the IKON Pass when Alterra purchases the mountain.
Odds that Alterra buys Jay Peak: High
Note: On September 6, 2019, it was reported via meeting minutes from the Jay Zoning Board meeting that Alterra is sill interested in purchasing Jay Peak and they possibly have the funds. Although, no mention was made of the asking price for Jay Peak.
Peak Resorts Inc.
Owns 15 resorts on the east coast (VT, NH, PA, NY) and central US (OH, IN, MO). The biggest resorts in their portfolio are Mount Snow, VT, Attitash and Wildcat (NH) and Hunter Mt (NY). Peak Resorts is a publicly traded company on the NASDAQ under the ticker symbol SKIS. The company currently trades at $4.65 per share and is valued at $70.52 M. However, Peak Resorts did buy Hunter Mountain in January 2016 in an all cash deal of $35 million. The majority of Peak Resorts properties are located within 100 miles of major a metropolitan area, and since Montreal is under 100 miles it fits their profile of enabling guests to visit the resort and return in the same day, although other cities like Boston are over 200 miles. Currently, Peak Resorts has $10 M cash on hand, so it is feasible that they could structure a deal, but I don’t believe they have the assets to purchase the mountain if they were to get into a bidding war with another company or individual. Jay Peak would be nice addition to the Peak Resorts portfolio and be a welcome addition for skiers who hold the Peak Pass, but I don’t believe Peak Resorts has the financial chops at this time to acquire the mountain.
Odds that Peak Resorts buys Jay Peak: Low to Medium —> now 0%
Note: On July 22, 2019, Vail entered into an agreement to purchase Peak Resorts for $11/share or about $260 M. Due to this purchase, there is now zero percent chance that Peaks will by Jay.
Resorts of the Canadian Rockies Inc.
Resorts of the Canadian Rockies (RCR) owns Fernie Alpine Resort, Kimberley Alpine Resort, Nakiska, Stoneham Mountain Resort, Mont-Sainte-Anne, and Kicking Horse Resort. The company is privately owned by N. Murray Edwards who has a net worth of $2.2 billion dollars, so he clearly has the cash to purchase Jay Peak. Jay is 3.5 hr drive from Mont Saint Anne and Stoneham, so an argument could be made that adding another resort on the east coast would make sense. However, everything that Edwards owns is Canadian, such as the Calgary Flames, Canadian Natural Resources and Magellan Aerospace. Therefore, with Jay Peak being located in the US, I don’t believe RCR will purchase Jay.
Odds that RCR buys Jay Peak: Low - Very Low
POWDR is an adventure lifestyle company that offers a portfolio of eight mountain resorts including Copper Mountain and Eldora Mountain Resort in Colorado; Killington and Pico Mountain in Vermont; Boreal Mountain Resort and Soda Springs in the Lake Tahoe region of California; Mt. Bachelor in Oregon, and Lee Canyon in Nevada. POWDR owns the Woodward camps and programs which includes Woodward PA, Woodward Copper in Colorado, Woodward Tahoe, Woodward West in Stallion Springs, CA, and Woodward Riviera Maya, Mexico. After doing some poking around on the POWDR website it isn’t clear to me where this company is headed, they seem to be a west coast centric company with an increasing focus on Woodward camps versus ski areas. Not only will POWDR not buy Jay Peak I wouldn’t be surprised if they sold Killington/Pico at some point since they are the only areas they own on the East Coast.
Odds that Powdr buys Jay Peak: Low —> now very low
Note: On September 6, 2019, Powdr was not listed as one of the five remaining bidders . Although, I don’t believe this rules them out entirely, as anyone could still come in and make an offer.
Boyne is a real American dream story, it was started when Everett Kircher in 1947, bought the land necessary to begin development of what is known today as Boyne Mountain for $1! As of this writing, Boyne Resorts owns Big Sky Resort, Brighton, The Summit at Snoqualmie, Cypress Mountain, British Columbia, Boyne Mountain and Boyne Highlands and on the East Coast they own Loon Mountain, Sugarloaf and Sunday River. Adding Jay Peak to their portfolio would make for a great road trip going from Loon, to Sunday River to Sugarloaf to Jay. However, Boyne Resorts is privately held so their financial condition is unknown. Additionally, Boyne is different than Vail Resorts and Alterra who buy resorts without prior involvement, whereas Boyne has acquired resorts that they have leased in the past. However, if they have the cash I could see Boyne making a move to purchase Jay Peak.
Odds that Boyne Resorts buys Jay Peak: Medium to High —> Low
Note: At one time there were 26 signed non-disclosure agreements and it isn’t clear if Boyne was one of the contenders.
Les Sommets is a company in Quebec that owns Mont Saint Sauveur, Mont Avila, Mont Gabriel, Morin Heights and Edelweiss. I’m sure many of you have never hear of these areas, however Saint-Sauveur is routinely in the hunt to be the last ski area to close in Eastern North America, in fact last year it closed on May 27th, thus beating Killington by one day (they did it again in 2019, closing on June 2). The other interesting tidbit about Les Sommets is it was the previous owner of Jay Peak, they owned it from 1978 to 2008 when they sold the resort to Ariel Quiros for $15 million plus the assumption of $8.5 million debt. In April 2017, two Jay Peak EB-5 investors filed suit against MSSI/Saint-Sauveur Valley Resorts, Inc., claiming the company aided and abetted fraud. Government appointed receiver Michael Goldberg (person now running Jay Peak) subsequently joined the suit as lead plaintiff. Additionally, Les Sommets used to be calls Mont Saint Sauveur International (MSSI), but changed their name with the aim to better market the regional areas now that the company no longer had United States holdings. In my opinion, while it would seem like a natural for Les Sommets to step in and purchase Jay Peak, I believe Les Sommets just wants to run as far away as it can from Jay Peak. Plus, it may raise too many eyebrows in government/legal circles since they have been dragged into the EB-5 legal debacle.
Odds that Les Sommets buys Jay Peak: Very Low —> remains very low, they were not one of the five companies listed in the Jay Zoning Planning minutes.
The New Comers
Fosun is a Chinese international conglomerate and investment company. Founded in 1992 by billionaire Guo Guangchang, the company is headquartered in Shanghai and is publicly traded on the Hong Kong exchange. Fosun owns a littler of everything including Club Med. So, if they buy Jay Peak maybe one of my all time favorite skiers will visit Jay Peak, none other than Club Med spokeswoman Julia Mancuso. Fosun also owns the Wolverhampton Wanderers of the English Premier League. The purchase of Jay Peak doesn’t seem to fit into their portfolio of businesses, but they do have deep pockets and could easily make the purchase.
Odds that Fosun International buys Jay Peak: High
The Pacific Group is based in the hotbed of skiing, Atlanta, GA. With that said, they are a real estate development company and have developed and managed properties in Whistler, Mammoth and Utah. The company is private, so it is unknown if they have the funds, although I would assume so .
Odds that Pacific Group buys Jay Peak: High Medium
Oz Management is a global, diversified alternative asset management firm, from Australia, with a range of fully-integrated platforms across Multi-Strategy, Credit, and Real Estate. Regarding real estate they build seek to build portfolios that are balanced between traditional and niche asset classes, employing moderate leverage, using creative structures and targeting high cash-on-cash returns. The company real estate holdings are very diversified with only 4% being in ski resorts (although I couldn’t find what resorts). Jay Peak seems to fit into their portfolio and they appear to have the ability to raise the capital.
Odds that Oz Management buys Jay Peak: High
Snow Operating was the surprise nugget from the Jay Planning Board minutes. Snow Operating was led and founded by SUNY Geneseo grad, Joe Hession. He was the architect behind the creation of SNOW Operating’s Terrain Based Learning™ and Conversion & Growth Programs, which have been implemented at more than 50 resorts world-wide, including Jay Peak. You may not know Joe, but if you are a skier you know his wife, she is none other than Halley O’Brien who is the attractive and hilarious host of “The Snow Report Show”. Snow Operating is the owner/operator of Mountain Creek Resort in New Jersey, home of NJ’s steepest trail - Pipeline. Snow Operating also owns North America’s first indoor, real-snow, ski and snowboard facility, Big SNOW American Dream. which will open in the fall of 2019.
Jay Peak seems like it will be a stretch for the company, but it would be nice to have the place run by folks that have a passion for skiing and may want to keep the culture of Jay as is.
Odds that Snow Operation buys Jay Peak: Medium (although if Alterra doesn’t buy, I own an IKON pass) I’d like to see Snow Operating purchase the resort.
With all of that said, I don’t have all the financial details for Jay Peak and of the companies that could be purchasing the resort, so this is nothing but wild speculation with a little thought.