Hermitage, bank square off in Windham Court

Berkshire Bank Vice President Peter Landauer (right) testifies Thursday as Windham Superior Court Judge John Treadwell (center) listens.

NEWFANE- Attorneys for Berkshire Bank and the Hermitage met in Windham Superior Court for a status conference on foreclosure proceedings Thursday afternoon, followed by a hearing on the bank's emergency motion to appoint a receiver.

Berkshire Bank filed for foreclosure on several Hermitage properties, including Haystack Ski Area, the Hermitage Golf Course, the Hermitage Inn, the Doveberry, the Snow Goose Inn, the Horizon, and other properties, in February. In April, the bank filed an emergency motion asking the the court to appoint a receiver to protect and maintain the value of the property.

Testimony offered during the hearing revealed the bank and the Hermitage have been negotiating with prospective investors to take over the beleaguered private club. An investor whose personal information had been redacted in a loan term sheet entered as an exhibit in the Hermitage's objection to Berkshire Bank's motion seeking the receivership was named during testimony for the Hermitage. “Dover resident Howard “Trip” Morse, of Clark-Mortensen was called to the witness stand by Hermitage attorney Robert Fisher to explain insurance matters related to the Hermitage properties. During the questioning, Fisher asked Morse about his knowledge Rich Bonnanzio, vice president and chief operating officer of Northone Capital Partners, and also the investor who signed the redacted the term sheet for the proposed $26 million in financing. Morse, who is also a Hermitage Club member, said he was the one who introduced Bonnanzio to Barnes. Morse said he met Bonnanzio through an introduction by Nutmeg Inn owner Paul Lockyear. Bonnanzio, according to the testimony, has second home near Stratton Mountain. “He (Bonnanzio) has extensive background in banking and investments and we asked if he was interested in investing in the Hermitage. We vetted him. And I've been the liaison between him and Jim Barnes on a daily, sometimes hourly basis.”

Morse said Bonnanzio's plan was to pay off the existing creditors and continue developing the Hermitage “with Jim's vision” and his own. “His mission is to make everyone whole again,” Morse said. “He's looking to invest not only in the Hermitage, but also in the local community. Working with Jim Barnes, (chief restructuring officer) Pat Reinhardt, (interim president) Bob Rubin, and members of the advisory board, we have uncovered and spoken to creditors . There are a lot of lawsuits out there, and a lot of people here (in the courtroom) would be made whole.”

In earlier testimony, Berkshire Bank Vice President Peter Landauer noted that the Hermitage's term sheet from Bonnanzio appeared to have expired under the terms. “The way I read it, there was supposed to be a payment of $220,000 by April 30, and a deadline for closing (on the $26 million loan) by May 2.”
Landauer said there had been no payment made to Berkshire Bank and, to his knowledge, no payment made to any other account. According to the term sheet filed by the Hermitage, if no payment occurred by April 30, “then this agreement is considered null and void.”
Morse, however, testified that the agreement had been extended and Bonnanzio and Barnes were still in negotiations for the financing. “So the term sheet is alive?” asked Fisher.

“Yes, and a lot more,” Morse said.

Later in the hearing, however, Judge John Treadwell said Morse's testimony was “not particularly compelling evidence of any on going negotiations” on which

In his testimony, Landauer revealed that the bank has been in negotiations with an investor who seeks to buy the Hermitage debt from Berkshire Bank. The investor is Mark Greenberg who, according to Morse, is the owner of Mark Greenberg Real Estate, a Watertown, CT-based company that owns, leases, and sells commercial real estate. During cross examination, Fisher asked if the bank had an agreement with Greenberg. “No, we've had discussions, but there's no agreement,” Landauer said.

Landauer said he had talked to Greenberg two days before the hearing, and told the court that Greenberg “has the intention of having the Hermitage up and running for this season.”

In support of their motion asking the court to appoint a receiver to oversee that Hermitage assets covered under their mortgages, the bank argued that the Hermitage, because of its financial difficulties, was unable to provide adequate ongoing care and maintenance or pay for any emergencies that might arise during the foreclosure. “Is the Hermitage a going concern, able to pay their bills?” asked Anderson.
“No,” said Landauer. “They ran out of cash in the first quarter of 2018. They defaulted on their bank debt and didn't pay their taxes to Wilmington or Dover.”
Landauer said the bank paid $80,000 to Wilmington for lease of town-owned land on Haystack Mountain, $660,000 to Wilmington for delinquent property taxes, $74,000 to Dover for delinquent property taxes, $82,000 to Green Mountain Power to maintain electrical service, and $48,000 to Suburban Propane to deliver fuel. “In early April it was still very cold,” Landauer said. “We got a call from someone at the club saying that they were low enough on propane that here probably wasn't enough to get through the weekend of April 6, 7, and 8.”

Anderson also asked Landauer about the plaintiff's summary of liens, writs, and other claims filed against the Hermitage. Landauer estimated the claims added up to about $12 million.

“And all of these delinquencies occurred when James Barnes was running the Hermitage?” asked Anderson.”
“I believe so,” Landauer said.
Anderson also referred to an affidavit signed by Barnes and Rubin, in which they said they and their employees were best able to care for the property during the foreclosure proceedings. “Based on the prior testimony about the bills that didn't get paid, do you have any confidence that Jim Barnes would be able to pay the maintenance bills during foreclosure?” Anderson asked.
“No sir,” Landauer answered.

The bank proposed the appointment of Alan Tantleff, of FTI Consulting, as receiver at a cost of $32,000 for each of the first two months, and $16,500 for every month thereafter. “That seems like a lot of expense, is it reasonable?” asked Berkshire Bank attorney James Anderson.
Landauer said Tantleff's fees were in line with other companies the bank had considered. “It's a large, complex operation,” said Landauer. “It requires a lot of work and a person who has the background.”
Landauer told the court the bank talked to a number potential receivers, but recommended Tantleff because of his relevant experience, including as receiver of the Yellowstone Club, a private ski club similar to the Hermitage.

Tantleff's fees would be added to the principal owed on the Hermitage loans, which he said currently stands at more than $17 million. Landauer said the receivership was necessary to preserve the bank's Hermitage assets, valued at over $32 million.

The Hermitage argued that their “skeleton crew” of paid employees was currently maintaining and providing security for the Hermitage properties. He provided inspection reports he said indicated that all was well at the properties, and there were no damages or incidents of theft or vandalism from the properties. He suggested that Rubin and Hermitage employee John Cleanthes were already supplying the same level of security as proposed by Tantleff.
“I don't believe there's any security between sunset and sunrise,” Landauer said.

Fisher asked that, if the court decides to appoint a receiver, to do so effective in 60 to 90 days, and to limit the scope of the receiver's duties. “The has been no vandalism and no theft,” he said. “In regard to worries about freezing pipes, no harm will come to the assets over the summer.”
“If they don't keep the electricity on, the burglar alarms won't work,” Anderson said in rebuttal. “And they have no ability to pay.”

Judge Treadwell told attorneys he would take testimony under advisement and issue a decision “shortly,” however he indicated the decision would not be issued before the end of the day. “It's in the interest of all the parties to move expeditiously, but the court does need some time to consider all the proposals offered.”

The Deerfield Valley News

797 VT Route 100 North
Wilmington, VT 05363

Phone: 802-464-3388
Fax: 802-464-7255

Comment Here