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Capital Beat: Sale of ski area reignites transparency concerns

  • A snow gun sits idle at the Mount Sunapee Ski resort, Wednesday, Dec. 16, 2015, in Newbury, N.H. Unusually warm weather has ski areas closed with hopes of colder weather and snow soon. The Mount Sunapee Resort, which plans to resume operations Sunday, says it hasn't had one productive night of snowmaking since Nov. 30. (AP Photo/Jim Cole) Jim Cole



Monitor staff
Sunday, June 10, 2018

Sometime around 7 a.m. Monday, Gov. Chris Sununu got what must have been an eye-opening phone call. 

The caller: Tim Mueller, the industrious patriarch of the local Mueller family ski resort and real estate empire, well-known to the governor throughout his public and private sector career. The occasion: a seismic announcement. Twenty years after first acquiring the rights to Mount Sunapee through a lease agreement, the Muellers were cashing in, selling the operation to a top player: Vail Resorts.

A press release was set to drop in a matter of minutes.

“He said ‘Yeah in about 15 minutes I’m going to announce it’ and I went: ‘O– okay’,” the governor recalled Wednesday, speaking before an Executive Council breakfast meeting.

The final $82 million deal was broad, and not limited to Sunapee. The Muellers were unloading all three of their resort assets to Vail, including Crested Butte in Colorado and Okemo in Vermont. The former would give the Colorado-based ski conglomerate a greater share of the Western market; the latter would give it a new foothold in the East.

Stakeholders were ecstatic. But for some, Monday’s last-minute notice to the governor is just the latest in a troubling trend. Since New Hampshire opted to lease out the previously-state-run Newbury ski area in 1998, many of the business’s fina   ncial arrangements have been less than transparent, critics say.

Lease transfers have been shrouded by limited liability companies subject to sparse reporting requirements; sales have been kept out of public scrutiny and review through legal maneuvers. 

Today, with one of the largest corporate players in the ski industry taking the reins, local residents, environmentalists say they’re hoping for stronger oversight over the proposed sale. Even the attorney general agrees.  

“We are looking for assurances from the State that this matter will come before the Governor and Executive Council for review and that there will be a public process to get information and answers to people’s questions and concerns,” a local activist organization, the Friends of Mount Sunapee, said in a statement after the announcement. 

It’s a concern that dates back to the signing of the original lease.

In 1998, New Hampshire moved to privatize what had until then been a state-run operation, retaining the title but leasing the land to Okemo, by then owned by the Muellers. The lease guaranteed the state $150,000 a year in rent – plus three percent of revenues – and established operating rules, environmental protections, and public access to the property.

The document required written approval from the state before the lease could be assigned to other parties, to be given by the since-disbanded Department of Resources and Economic Department (DRED). But that approval, it added, “shall not be unreasonably withheld.”

At the time, advocates warned that the arrangement was too weak to allow the state any meaningful leverage, according to Tom Elliott, a former executive director of Friends of Mount Sunapee.

By Elliot’s telling, those worries were realized. Over 10 years, numerous transfers and assignments took place without obstruction by the state.

“Every single request to transfer from one entity to another was approved, just as the lease unfortunately contemplated,” he said in an interview.

Then, on the heels of the financial crisis, the Muellers changed up the arrangement. For 10 years, they had operated the property through the direct lease with the state under their parent company for the three resorts, Triple Peaks LLC. But in December 2008, Triple Peaks sold its assets – including ownership of the Sunapee lease – to CNL Lifestyle Properties for a reported $132 million. 

CNL took the land, but Triple Peaks leased back the operational rights under a new 40-year agreement. The upshot: The Muellers still kept their ski operations. But they were no longer the direct owners of the state lease.

For those skeptical of privatization from the start, the new financial arrangements were more cause to press for transparency. But it wasn’t until 2017 that the attorney general joined the chorus.

In April last year, newly-appointed Attorney General Gordan MacDonald received a surprise: CNL Lifestyle Properties, the holder of the state lease, had been bought out. The new owner was Och-Ziff, a hedge fund that would later be tangled in a bribery scandal and fined more than $400 million by the Securities and Exchange Commission.

No state documents had been signed, no public officials sought out. The sale had been structured to evade the need for state approval – while CNL needed a green light to transfer the lease, putting its ownership up for sale wasn’t mentioned anywhere in the original lease.

Back then, MacDonald and other officials were less than pleased. And this week, the attorney general said he hopes the Vail agreement will proceed more state input.

“There is a mechanism that Och-Ziff used,” MacDonald told reporters. “And I’ve said this publicly, we need to change that. This lease agreement needs to be changed to ensure that when that asset is transferred by means of this transfer of ownership mechanism, the state is protected. It gets to weigh in on that.”

At present, little is known about the announced sale. We know that Vail is purchasing Triple Peaks, the holder of the sublease. We know  that Vail intends to pay off the Muellers’ sub-leases with Och-Ziff – $155 million in total. But whether that means Vail will be transferred the lease is up in the air – even for the Attorney General’s office. 

“We’re blind as to whether they’ve got the Och-Ziff model or the transfer of the lease model,” MacDonald said Wednesday. “I haven’t seen the proposed transaction yet.”

Speaking to reporters   Wednesday, Sununu said he too is waiting on details. But the former CEO of Waterville Valley expressed hope. 

“Vail is a very reputable, very well respected resort owner and manager across the country, and they well could be a great partner for New Hampshire,” he said. “But I really want to see what the plans are going forward. And I think that’s where we’ll start getting into the meat of the deal, so to say, and finding out what their plans are and how this plan is structured.”