Club names new president, hopes to stave off bank foreclosure action
by Mike Eldred
Mar 01, 2018 | 4875 views | 1 1 comments | 76 76 recommendations | email to a friend | print
The clubhouse patio at Haystack Mountain was filled with Hermitage Club members enjoying the sun and skiing on Saturday.  Officials hope a management change and financial restructuring will help the club get through the winter season.
The clubhouse patio at Haystack Mountain was filled with Hermitage Club members enjoying the sun and skiing on Saturday. Officials hope a management change and financial restructuring will help the club get through the winter season.
WILMINGTON- On Friday, February 23, the Hermitage Club announced that long-time club vice president Bob Rubin had been named interim president. Within hours, the valley learned that Berkshire Bank had filed for foreclosure on several Hermitage Club properties in Windham Superior Court.

Hermitage Club owner and founder James Barnes stepped down as president to focus on strategic plans, he said, including the negotiation of a deal with club members for partial ownership of the club.

Rubin will oversee all operations of the Hermitage Inn Real Estate Holding Company which includes the Hermitage Club, the Hermitage Golf Course, hospitality venues, and real estate development. Senior management will now report directly to Rubin, according to the club.

The same afternoon, Berkshire Bank filed a foreclosure complaint against the Hermitage Inn Real Estate Holding Company, the Hermitage Club, and Barnes. The bank is seeking foreclosure on several Hermitage properties including the Hermitage Inn, Haystack Ski Resort and ski area lands, Haystack Base Lodge, Haystack Golf Course, Chamonix Townhouse Village, Haystack Golf Course, water rights to Mirror Lake, hundreds of acres of land, along with several smaller parcels. The foreclosure action also includes the Snow Goose Inn, the Horizon Inn, and the Doveberry Inn.

According to the complaint, Barnes and the Hermitage failed to make sufficient payments on three loans, including a $15 million “base lodge” note signed in December 2014, a $1 million bridge loan in June 2016, and a second bridge loan of $1.1 million made in July 2017. Of the total $17.1 million in loans, the Hermitage and Barnes still owe $16,342,175.61 in principal, along with $213,799.76 in interest, and $43,603.79 in late charges.

Wilmington officials said checks presented for Hermitage property taxes on Friday, February 23, failed to clear, and property taxes due previously are delinquent. According to the bank’s complaint, the failure to pay taxes on the properties is a default on mortgage and other loan agreements. Wilmington Selectboard member and Rep. John Gannon said the Hermitage has also failed to pay the town for the lease of town-owned land on Haystack Mountain.

Gannon said board members have contacted the bank to get taxes and the lease paid. Taxes on the Hermitage properties constitute about 15% of the town’s property tax revenue, Gannon said, but because the town must fund any uncollected education property taxes to the state, the loss is multiplied. “The town can’t short the state just because the Hermitage doesn’t pay their property taxes,” he said. “So the problem is worse than a loss of 15% of tax revenue. It could have a huge impact. It’s in everyone’s interest to have things work out,” he said. “But we’re preparing for the worst case scenario for the current tax year, and we’ll see what happens for the next year.”

The tax issue isn’t limited only to the property tax. Gannon notes that the state has filed $1.2 million in liens for unpaid rooms, meals, and liquor taxes, including the 1% local option tax. “Presumably we’re going to get it at some point, but we’ve noticed a decline in 1% revenue,” he said.

Last week the club also curtailed its operating hours and laid off 15% of its workforce. Gannon said he’s concerned about the potential for the loss of more Hermitage jobs in the event the club closes, as well as the impact for other businesses in the area, particularly restaurants. “We’ve had a restaurant Renaissance in Wilmington,” Gannon said, “and a lot of Hermitage Club members go to these restaurants. I’d hate to see them get hurt if the club closed for a long time and members stopped coming.”

The foreclosure complaint also listed about 45 individuals, businesses, and government entities that have filed liens or writs of attachment against Hermitage Club properties totaling more than $9.7 million as defendants, along with Barnes and the Hermitage. The amount includes a $1.5 million writ filed by Reinhart Food Service, two $1 million writs filed by individuals for residential properties, and the $1.2 million in liens filed by the Vermont Department of Taxes. According to the documents, the 45 creditors’ claims are “junior and inferior to that of (Berkshire Bank).”

Gannon said there may be many more local contractors and businesses that haven’t yet filed liens for money they are owed by the Hermitage, and he suggest they file liens as soon as possible to protect their claims in the event of a bankruptcy. “If they don’t file a lien and there’s a bankruptcy, they may never collect a dollar,” Gannon said. “They still may not, but at least they’ll be identified in bankruptcy court as having a debt that’s owed. If you don’t file, the court won’t know you exist.”

In an email to club members this week, Rubin acknowledged that the Hermitage has suffered financial difficulties. Rubin said that, since November and the appointment of Chief Risk Officer Pat Reinhardt of G2 Capital Advisers, the company moved closer to “break-even” cash flow. But he said other factors stymied the club’s recovery. “Unfortunately, challenges caused by negative press, and growing mistrust, resulted in no new membership or real estate sales. This, coupled with a decrease in club usage, have led to a significant shortfall in revenue.”

Hermitage Club officials said the bank’s action was anticipated, and suggested it could spur ongoing negotiations. In his email to club members, Rubin said the Hermitage still seeks financial solutions. “(The Hermitage) continues to seek potential investors and a financial solution to ensure the long-term sustainability of the club,” he said. “It was understood that any financial restructuring would include a change of management of the day-to-day operations of the club. In anticipation of same, last Friday I was chosen to be the president of (the Hermitage) during this transition period.”

The Hermitage Club remains open for business, according to Rubin. The clubhouse and fitness center are open daily, and skiing and snowboard at the mountain and snow sports programs will operate this Friday, Saturday, and Sunday.
Comments-icon Post a Comment
michael gilberg
March 01, 2018
Perhaps the Town of Wilmington should take steps to foreclose its tax liens against the most valuable Hermitage properties, terminate the Glebe lease, and terminate the Town's obligation to purchase a multiple story ladder truck for the Fire Department, all so as to minimize the negative effect on the Town's freeholders of the Hermitage's negative finances.

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