Hermitage Club’s Pending Foreclosure Follows Years of Management Issues
SAM Magazine—Wilmington, Vt., Feb. 27, 2018—Last Friday, Berkshire Bank filed a foreclosure complaint against the Hermitage Club, which has been building a private club at Haystack Mountain in southern Vermont, following what the bank said was a series of missed mortgage and tax payments.
It’s the latest woe for the ski area. Haystack operated as a public ski area for decades, until neighboring Mount Snow sold it in 2005 to an entity determined to turn it into a private, members-only ski area. After that effort failed, Connecticut-based businessman Jim Barnes—who at the time only owned the Hermitage Inn down the road from Haystack’s base—purchased the mountain in 2011, and moved forward with the private club model, called Hermitage Club.
Since then, significant improvements include the installation of a $7.5 million six-passenger bubble lift and construction of a $21 million 80,000-square-foot base lodge. A multitude of other construction projects have also taken place on the property—but not always with permission from the proper local, state, and federal authorities. Worse, perhaps, membership sales proved insufficient to sustain the business and how it was being operated.
That ultimately led to Friday’s foreclosure complaint against Barnes and the Hermitage Club. The complaint says that Hermitage failed to make mortgage payments and pay taxes on properties in Dover and Wilmington, including several local inns Barnes has purchased in the last few years for use by members and staff.
Of the $17.1 million in loans—a $15 million note from 2014, a $1 million note from 2016, and a $1.1 million note in 2017—the Hermitage and Barnes still owe more than $16 million in principal, plus $213,800 in interest, and about $43,600 in late charges.
According to reports, the bank’s action is just the most recent turmoil in a series of issues for Barnes and the Hermitage. Earlier last week, checks delivered to the town of Wilmington for property taxes did not clear. It was reported that a group of members were interested in assuming ownership from Barnes. At a meeting on Sunday, Feb. 18, Barnes reportedly asked members to provide another $3,000 each to cover payroll through April 1. No agreement was reached, so the club laid off as many as 80 employees a couple days later.
It was reported in early February that Robert Balewicz, former manager of Hermitage Club Realty LLC, filed a whistleblowers retaliation complaint with OSHA, alleging that he was fired after complaining to Barnes and the club’s legal, HR, and accounting departments of illegal accounting activities and kickbacks related to real estate referral fees. The club denies the allegations.
In addition, Balewicz and John Santaniello, former managing director of hospitality at Hermitage, have filed workplace harassment complaints with the Vermont Attorney General’s office regarding wrongful termination.
In January, the Hermitage narrowly kept intact its water and sewer services—including fire suppression systems—for the ski area’s base lodge and other properties it owns, because it was six months delinquent on paying its bills to Cold Brook Fire District. The $87,000 payment came the day before an appeal hearing was to take place, which was the last step the club could take to avoid Cold Brook shutting off services.
The month before, Cold Brook threatened to not issue sewer/water allocations for the club’s master plan if the club didn’t pay delinquent money owed on a $3.1 million bond taken out for upgrades to the district’s infrastructure needed for future development planned by the Hermitage. The club paid $118,000 to avoid being denied allocations.
The Hermitage has consistently blamed state permitting delays for its financial woes, as well as a slow membership drive and the residual effects of the snowless winter of 2015-16. But the permitting delays are partly the result of increased scrutiny over permit applications after the club reportedly performed several construction projects and land alterations without obtaining proper permits, and in some cases did not adhere to the requirements of permits it did obtain.
In 2012, inspectors from the National Forest Service discovered that a new trail had been built to connect Haystack to another trail on Forest Service land along the ridgeline between Haystack and Mount Snow, and that ridge trail had been widened and straightened with an excavator, both without federal authorization. Barnes admitted to authorizing the work, and in October 2015 agreed to pay more than $72,000 in fines and restitution.
On the state level, things got even stickier. In February 2015, the state charged Hermitage Club with 15 counts of violating land use and water quality regulations between 2011 and 2014. According to reports about the lawsuit, in late 2012 a court ordered the Hermitage to stop any unauthorized work and obtain the proper permits, but the state said the violations continued. Assistant attorney general Justin Kolber said it was “a pattern of what we allege is after-the-fact behavior. They do the work, then submit an application after it was already done.”
“The agencies repeatedly informed the Hermitage Inn of what was allowed, what wasn’t allowed, and what permits were needed, and those communications went ignored for a period of time,” Kolber continued.
In April 2015, a settlement of $205,000 was reached.
Despite the long list of issues, Hermitage Club has attracted an affluent set to the area, and real estate has seen a pop as a result. Reports of members interested in taking over the operations of the club are a positive sign for the local area and the business itself.
Much of this report was sourced from work done by Brattleboro Reformer reporter Chris Mays (email@example.com), who has been following the situation at Hermitage Club for several years.