Barnes: 'Right-sizing our debt and equity structure'
"I thought it would be better for everybody to just hear all the facts instead of some of the rumors that seem to happen if I'm not in the room," Jim Barnes told the Select Board on Wednesday.
Referring to tax payment plans, board members had previously said the town had been "played" by the Hermitage — as the installments being paid will not add up to the total owed. But Barnes said the Hermitage would not have asked for tax relief if it was not necessary.
"I can tell you, we needed help and it was tough to get through the last couple of months but we're getting through," he told the board. "I'll point out that the heavy lifting has occurred. We put a lot of money into this. We put a lot of energy. I'd say the next half of the decade is the time to accelerate and execute this business model."
The latest focus is on "right-sizing our debt and equity structure," Barnes said. That's expected to help with securing insurance as the company continues forward with its plans. The master plan, necessary for resorts to have in Vermont, was approved in the state's Act 250 permitting process.
"Recently, we had some real estate sales that helped us," Barnes said. "Most particularly, we had a $2.6 million sale covering five lots in Stag's Leap area, which really helped us to start to catch up on some of our older payables."
The Hermitage expects to pull in another $2.5 million in real estate sales in September.
With permits secured, construction has began on some properties. The hope is to get permits for 93 more units, Barnes said, or over $110 million of real estate. Those lots have already been approved for water and sewer connections, he added.
Potential members of the club are being given tours during what the Hermitage calls "celebration weekends." Memberships include access to the private ski resort at Haystack Mountain and a golf course.
Current members are being offered chances to invest in the club.
"To get in the Equity Club, they've raised about $22 million," Barnes said. "So we're asking for these members to actually convert it into equity as part of this. We're also seeking to raise an additional $15 million in equity through this rights offering. That will get us a debt package of about $60 million, which is really all we need to complete the project in its entirety. Because we get to recycle that money. It's a line of credit we can continue to tap into."
The governance structure has changed. Hermitage now has a board of eight directors. Barnes said he is the majority owner and the club has 664 members.
In addition to the tax payment plans for properties in Wilmington, the company has been working to pay back vendors.
"It hasn't been easy and we have been eating away at an old problem," Barnes said. "Every day we eat away at that pile. But it is getting better."
The Hermitage recently hired several "key" new positions, he said. The list included managing director of hospitality, chief legal counsel, managing broker of Hermitage Club Deerfield Valley Real Estate, and senior director of marketing, advertising and public relations.
The value of the Hermitage and all of its holdings, continues to grow, Barnes said.
"Six years ago almost to the date in October, the value was zero," he added. "And today — we appraise every year — the values of all of our assets are over $140 million. So, it continues to grow."
A slide during his presentation broke down the history of the company. Haystack was acquired by the Hermitage in 2011. In 2013, the company bought the Brook Bound Inn and the Deerfield Valley Airport. The next year, the Hermitage began leasing and operating the Vermont House in downtown Wilmington and acquired the Snow Goose Inn. The company acquired the White House Inn in 2015.
A year later, the airport and a section of land in Wilmington known as the East Tract were sold in an effort to get through state permitting faster. Company officials had expressed frustration with the process but finally celebrated Act 250 approval in February.
"Since day one, the majority funding has occurred by my family," Barnes said. "That's me, when I say my family. That's $70 million invested over a course of five years. In addition, the members have invested $22.8 million in that convertible debt I just referenced. They also invested $3.6 million in secondary memberships. We encourage them to buy a second one maybe for their second kid or their third kid."
Barnes described club members as "dedicated to this project." The number of them "has created a pent-up demand for on-mountain housing," he said. The Hermitage also plans to expand its offerings around special corporate events.
Select Board member Ann Manwaring told Barnes his plans were "quite remarkable" and asked where the vitality of Wilmington's downtown fit into the picture. Barnes pointed to entities the Hermitage runs or owns such as the White House Inn, the soon-to-be Deerfield Valley Design Center and the Vermont House. But he also pointed to new restaurants popping up in wake of Hermitage development.
Manwaring then asked Barnes, "Why is it important to you?"
"It's always been important to us and we obviously put our money where our mouth is," Barnes said. "And we believe having a vibrant downtown is important to a shopping environment, a restaurant environment. Those are all things people want to see. And they didn't see that six years ago."
Reach staff writer Chris Mays at 802-254-2311, ext. 273, or @CMaysBR.
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