DOVER — Mount Snow's multimillion-dollar snow-making upgrade won't be finished for the upcoming ski season due to continued delays in the resort's EB-5 funding program, administrators have disclosed.
An executive with Mount Snow parent company Peak Resorts, during a July 14 announcement of the company's fiscal year 2016 earnings, said the West Lake snow-making project remains on hold due to the “excruciatingly slow” federal EB-5 approval process that has kept $52 million in foreign investor money tied up in escrow.
“We are not going to be able to get the entire [West Lake] project done now - this year - because of the delay in this approval process,” said Timothy Boyd, Peak Resorts president and CEO.
“It's certainly not going to impact our operation [at Mount Snow] for this year, because our existing infrastructure and snow-making system are still in place, and we'll still be able to operate like we have in the past,” Boyd added. “We just aren't going to have the same water capacity, probably, for this year that we'd hoped for.”
Cash constraint
Peak administrators also made clear that the Mount Snow EB-5 delay is affecting the entire company: Administrators are delaying issuance of a dividend to shareholders and also might have to dip into $10 million in short-term financing.
“The situation with EB-5 has constrained cash,” said Stephen Mueller, Peak Resorts chief financial officer.
The federal EB-5 program allows foreign investors to gain permanent residency by investing in U.S. job-creating projects. Mount Snow used EB-5 to raise $52 million from more than 100 investors to fund Carinthia LP, which includes the West Lake snow-making project and a new Carinthia Ski Lodge.
West Lake is supposed to give Mount Snow six times its current water-storage capacity, while the 36,000-square-foot Carinthia Lodge will feature a cafeteria, restaurant, two bars, and a coffee counter.
“The West Lake reservoir and related infrastructure improvements, plus subsequent projects, are all part of our long-term growth strategy to further improve the ski experience and drive increased visits for Mount Snow,” Boyd said.
But the project has been hampered because U.S. Citizenship and Immigration Services, which operates the EB-5 program, hasn't yet issued the necessary approvals to allow Mount Snow to access its escrowed money.
The agency recently approved Mount Snow's overall EB-5 plans. But until immigration services also finishes a review of an I-526 immigrant visa petition related to the project, Mount Snow can't touch its $52 million.
Missouri-based Peak Resorts operates 14 ski areas, but the Mount Snow issue took up a significant portion of the company's earnings report on July 14. Boyd again jabbed at federal officials for the slow review process, saying administrators had expected final approvals to happen two to four weeks after Citizenship and Immigration Services OK'd Mount Snow's EB-5 business plan in May.
“However, like everything else in this process, nothing has been done in a timely fashion, and we are now in our eighth week since our business plan was approved,” he said.
Visa applications backlog
Immigration officials have confirmed that the agency is dealing with a significant backlog of I-526 visa applications. In April, a federal report listed nearly 22,000 such applications, and officials said they were taking steps to reduce processing times and hire more help.
But the status of the Mount Snow investor review remains unclear. A Citizenship and Immigration Services spokesman has said the agency, as a matter of policy, doesn't comment on specific EB-5 projects.
The delay has spurred a lawsuit by one Mount Snow EB-5 investor. And it's caused stress for Peak administrators, who said they have spent about $12 million on the stalled Mount Snow projects so far.
“We will be able to reimburse ourselves for those outlays as soon as we can break escrow,” Boyd said.
The problem is, he can't say when that will be. Asked about the timing of West Lake, Boyd said it's now clear that project won't be finished by this winter.
“We'll still be able to get some of the work done, but we won't be able to get all of it done,” Boyd said. “So I don't think we're going to be able to enjoy the entire benefit of the whole infrastructure improvement this year.”
How much work happens at Mount Snow will depend on the timing of final EB-5 approvals. “We believe we are near the end of this process, even though we still don't have a date certain,” Boyd said.
In the meantime, though, Peak Resorts is taking financial precautions. During the July 14 earnings conference call, administrators reiterated the company's withholding of any dividend until the Mount Snow situation is resolved.
“While providing shareholder value is a priority for the company, the board continues to believe that it's prudent not to consider the issuance of our dividend while our EB-5 funds remain in escrow,” Boyd said.
He also noted that, due to delays in the release of EB-5 funding, Peak Resorts has received approval for $10 million in short-term financing. “We have chosen not to execute this loan at this time,” Boyd said. “If the EB-5 funds continue to be delayed for an extended period of time, we still may have to exercise this option.”
Warm-weather slowdown
It doesn't help that the company is dealing with the lingering effects of a poor 2015-16 ski season. Peak announced a net loss of $3.3 million for fiscal 2016, and Mueller - while not releasing numbers for individual resorts - pointed to a 25 percent companywide decline in skier visits compared to fiscal 2015.
Noting a comparable decline among all northeastern U.S. ski resorts, Peak's leaders blamed historically high temperatures during the 2015-16 season. After a weak winter, “the warm weather continued into early spring ski season, affecting visits,” Mueller said.
“March and April visits were 150,000 in fiscal '16, down 55 percent from the same period last year,” he added.
In spite of that report, Peak administrators found some reasons for optimism. They said January's acquisition of Hunter Mountain resort in New York was “immediately beneficial,” and they reported strong early demand for 2016-17 season passes.
Boyd added that “the weather so far this summer has been pretty normal, which has given our summer operations a solid start.”
He predicted a “significant rebound” for the company in the new fiscal year.
“Clearly, the extremely warm weather and the elongated approval process for the EB-5 program has created some difficult and unique challenges for us this past year,” Boyd said. “However, we believe the trend is our friend as we approach the upcoming ski season.”