Fred Johnston, president of Baldy Capital Corporation, poses with Melanie Zane, food and beverage manager, at the new office for Mount Baldy in Osoyoos. The office opened last week, but a few days later Johnston’s company announced that negotiations to purchase the resort were deadlocked and the insurance company would not insure the resort as long as it remained in the hands of the receiver. (Richard McGuire file photo)
A ski season this year at Mount Baldy Ski Resort now looks unlikely, as negotiations with a potential buyer have become deadlocked.
Both the receiver for the insolvent ski resort and the potential buyer now say the only thing that can lead to a reopening would be a strong show of support from the community.
Baldy Capital Corporation, the potential buyer, recently opened an office in Osoyoos and announced plans to market the resort, but its purchase offer wasn’t acceptable to the receiver, G. Powroznik Group Inc., or the secured creditor, Stark BC Venture LLC.
Fred Johnston, president of Baldy Capital Corporation, had maintained until recently that an interim agreement would allow his company to operate the resort, as it did early in 2015, until a purchase could be completed.
In an announcement last Thursday, however, he revealed that the insurance company would not insure the resort for the coming year “so long as the receiver is still in place as of Dec. 1, 2015.”
This means, he said, that ownership and operation “are now inextricably linked.”
Baldy Capital Corporation made a last-ditch “compromise” proposal to break the deadlock with a “drop-dead” deadline for acceptance of 4 p.m. last Wednesday.
Johnston said the secured creditor rejected it that day at 3:30 p.m.
“We got a message from the secured creditor’s lawyer rejecting our proposal,” Johnston said. “As we had indicated there will be no further negotiations without adding anything to it. We’re not changing it, it was take it or leave it and they left it.”
Even aside from the insurance snag, Johnston said he was not interested in an agreement to operate the resort if it wouldn’t lead to a purchase.
“Under no circumstances are we willing to do what we did last season, which is to operate it and make it look better and then have the receiver toss us aside and go and market it to somebody else,” said Johnston. “That will not happen again.”
On Dec. 19, 2014, the secured creditor and Baldy Capital Corporation entered into a “memorandum of understanding” (MOU), which sketched out the basic elements of a purchase agreement.
At the same time, the parties reached an agreement allowing Baldy Capital Corporation to operate the resort until the agreement could be finalized.
Last January, the resort reopened for the remainder of the 2014-15 ski season.
At the time, it was expected the purchase agreement would be reached last spring.
Johnston, however, said there were “differences of opinion” regarding the interpretation of the MOU and an agreement wasn’t reached.
Gary Powroznik, the receiver, however, maintains that Baldy Capital Corporation made a commitment to the secured creditor to make an offer acceptable to the receiver by Jan. 30, 2015 and complete by May 15, 2015.
“As there was no acceptable offer, the operating agreement ended on April 30, 2015,” Powroznik’s company G-Force Group said in a statement last Thursday.
Since that time, G-Force has maintained a dialogue with Baldy Capital Corporation, but has also pursued other potential buyers, Powroznik’s company said.
“Unfortunately, the receiver has not received an offer from them or any other party which is acceptable either to the primary secured creditor or the receiver, or is in a form that could be approved by the court, which is required,” said the statement from G-Force.
Powroznik tries to minimize the importance of Baldy Capital Corporation saying they are “simply one prospect” and that he has had contact with other potential buyers.
Nonetheless, he suggests that the sticking point was that neither Baldy Capital Corporation nor other prospects could show they had sufficient financing.
“The secured creditor has been very open to good, reasonable approaches by everyone that we’ve talked to, so he is not the problem,” Powroznik said in an interview. “The problem is the parties cannot show that they’ve got the financing.”
This means not only the financing to pay for the purchase, but also to operate the resort, he said.
“We don’t want someone to go in there and then they can’t pay all the bills and they come back to us and say ‘receiver, you do it,’” said Powroznik.
Johnston said the window is closing to reach an agreement that could allow the resort to operate this season.
Court approval on an agreement would be needed before the expiry of the insurance on Dec. 1, which is why Baldy Capital Corporation set a closing date of Nov. 25 when the parties met at the beginning of October, he said.
There is still a little time to get critical work done, such as maintenance of the lifts, to allow a Dec. 18 opening, Johnston said. Everything else is in place and ready to roll, he added.
The office in Osoyoos at the Watermark Beach Resort will remain open “for the time being,” Johnston said, although there has not yet been any sale of passes and that has been delayed until matters are resolved.
Johnston also hinted that he could turn to the courts to enforce the agreement reached last December if no other agreement can be reached.
“It’s a very long legal process that we would be getting into if that had to be pursued,” he said. “But we do have an agreement and we’re not walking away from it.”
Meanwhile, Johnston believes only a groundswell from the affected community could make a difference to getting negotiations back on track.
“We certainly see that happening,” he said last Thursday. “I’ve been getting a lot of phone calls today. There’s going to be 50 people who won’t have jobs this winter and countless others that won’t have work because of hotels that are not being booked, wineries that are not doing events and musicians that are not playing at the hill. So it has a very significant economic effect by not doing this.”
Powroznik also believes a sale hinges on community support.
“We need more evidence of local support,” he said. “Outside investors will say, ‘What’s the market and who’s going to support this? Who’s going to spend money?’”
Powroznik said what is needed is senior leaders at the local level who show they want the ski resort.
“We’re not asking them to put up a million dollars or anything,” he said, adding that they do need to show support in other ways, such as committing to buy ski passes.
He suggests a local task force involving people in the tourism and hospitality industries could be formed to work with a potential buyer.
Powroznik would not disclose the asking price for the resort, saying a would-be purchaser would need to sign a confidentiality agreement.
“It’s one of the best deals I’ve ever seen,” he said. “It’s not very expensive.”
There are capital improvements needed, he said, but these can be financed through the sale of real estate.
Powroznik suggests the previous owners focused too much on the real estate side and not enough on the activity that draws people to Mount Baldy. They were then hit by the economic downturn.
New owners would need to look at it as a four-season resort, also making it attractive in the summer months for people wanting to escape the heat of Osoyoos for a cool evening of entertainment.
Powroznik said it would be ideal if a buyer could be found to operate the resort this year, but if one can’t be, he will continue efforts to market it.
Johnston, however, doesn’t believe Powroznik has a Plan B in the absence of an agreement with Baldy Capital Corporation.
“Gary has always been trying to peddle it to other parties and has not had success,” Johnston said. “The offer that we had given … is still in excess of market value. We’ve bent over backwards to try to make it work for everybody, believing that we could make it succeed in the long term and that we could be more generous than somebody who is skeptical and didn’t know the future for the mountain.”
RICHARD McGUIRE
Osoyoos Times
