Will the Adirondack Club and Resort fly financially?

For years, the ferocious debate surrounding the Adirondack Club and Resort project in Tupper Lake has mostly involved environmental questions.

But this week, NCPR is airing an investigative report looking at economic and financial issues that will likely shape the project in ways that are far more significant.

In interviews, lead developer Michael Foxman suggested repeatedly that any lingering skepticism about his business plan was prompted by green groups lobbying against his vision.

But our probe — done in partnership with the Adirondack Explorer magazine – found that significant questions remain about basic elements of the project’s financing and prospects.

– Can Mr. Foxman’s team really sell between forty and fifty luxury-priced properties every year, as he predicts?  To do so he would have to sell roughly twice as many luxury homes as sell currently each year in Lake Placid.  We couldn’t find a single independent expert familiar with the Adirondack real estate market who thought that was realistic.

– If he can’t sell that many homes, how will Mr. Foxman support the resort’s daunting infrastructure costs, which run into the tens of millions of dollars?

–Is the resort really an “Orvis sporting lifestyle community” as Mr. Foxman suggests?  A spokesman for Orvis downplayed their company’s involvement, stating that they have no plans to invest and describing the relationship as “dormant.”

–What does it mean that the Adirondack Club and Resort has shut down its website?  Or that the company’s investors failed to pay their local and county property taxes, to the tune of nearly $100,000?

–Why does Mr. Foxman now discount the financial analysis put forward by his own consultants as recently as last June, which laid out detailed schedules for bond issuances, construction and job creation?

–If that analysis no longer offers an accurate vision for what the resort might look like, how it might be financed, and how it might benefit the community, then what is the basis for the public’s understanding the project?

In our conversations with Mr. Foxman and with community leaders in Tupper Lake, some have suggested that these questions are irrelevant or insignificant or perhaps even politically motivated.

This is, after all, a private venture.   Is it really anybody else’s business if Mr. Foxman and his investors choose to risk their money and time on a project that some people view skeptically?

But we are just emerging from a deep national recession triggered in part by a massive housing bubble.  That debacle showed that private projects on this scale can have serious ramifications, for good and ill, in their communities.

Mr. Foxman and his representatives have also made sweeping promises about how this resort will reshape Tupper Lake, including the permanent reopening of the Big Tupper ski area.

A lot of local people are literally banking on his vision.  They need to have good information and a realistic understanding of the project in order to make informed decisions about their own lives and businesses.

Our reporting didn’t reach any conclusions about the viability or appropriateness of the resort.  That’s not the role of journalism and it certainly wasn’t a goal of this report.

But even as we hope and dream about a better future for Tupper Lake, we think it is important to raise tough and sometimes uncomfortable questions.

You’ll find more great reporting on these thorny issues in the latest issue of Adirondack Life magazine, and in the pages of the Adirondack Daily Enterprise.

And when the Adirondack Park Agency resumes its hearings into Mr. Foxman’s project next Tuesday, the focus will shift to economic matters.

In the meantime, as always, your thoughts and comments are welcome.

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19 Comments on “Will the Adirondack Club and Resort fly financially?”

  1. Peter Hahn says:

    That resort is (or will be if things go well for them) so big that failure would have a big impact on the region. Its a possibility that people need to think about seriously.

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  2. Paul says:

    The sales goals are way too over ambitious. These places cannot compete with properties that are available that are directly on the water. People buying resort property in the Adirondacks want one thing “waterfront”. If you want a slope-side condo you are going to buy in Colorado, if you want something closer you will go to Vermont. If a few of the higher Adirondack peaks had been developed into ski areas then we could compete but not with Mt. Morris.

    With that said, who at the APA is qualified to analyze the financial aspects of this project? Their expertise is in zoning and environmental impact analysis. Since when are they in the business of studying real estate finance?

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  3. Peter Hahn says:

    Paul – the one thing the APA should think about is the environmental impact of a failed resort.

    Like/Dislike this comment: Thumb up 2 Thumb down 1

  4. Paul says:

    Peter, they should be able to make that assessment. I agree. That is why I am sure there would have to be some kind of phasing.

    Like/Dislike this comment: Thumb up 3 Thumb down 0

  5. Frank says:

    what a pipe dream

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  6. Paul says:

    Brian, from the NCPR piece this morning it sounds that some of the claims that this project will somehow leave the local taxpayers holding the bag if this project fails are without merit. Is that what you learned from the “experts” that you described?

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  7. Brian Mann says:

    Paul –

    Yes. The experts I spoke with felt that PILOT and bonding arrangements of this sort can be arranged in such a way as to eliminate those risks to the community and the taxpayers.

    I also came away from my research with a lot of information to suggest that the Franklin County IDA plans a very thorough and professional vetting of this project, to make sure that it meets their standards.

    –Brian, NCPR

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  8. Paul says:

    This really leaves the two questions as I see it. Are there adverse environmental impacts? The APA will make that decision. Since this project contains both clustering (around the ski area), and homes that leave lots of “green space”, along with almost no shoreline impact, I imagine that this project will probably get approval. That leaves the last and most contentious issue, “phasing” of the project? If the APA has to require phasing will that mean that the business plan will be unworkable? That is what the developer will probably claim, and he may be correct. It sounds like you can’t attract the kind of buyers you will need without all the amenities in place. Nobody wants to get stuck owning a million dollar camp in the woods with no guarantee that the stuff that was promised is going to be available. That is a valid argument against phasing. I can see where this is going. The permit will be approved with phasing conditions and then the developer will sue the agency based on the fact that they cannot make any money with those restrictions in place. Given the experience of the developers (and others) this may be a very valid argument for a claim to the court. I hope I am wrong about this but I have a bad feeling about where this might end up.

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  9. Mike says:

    Brian, per your comment 1:44 pm and article. The way the PILOT is proposed has the very real possibility of raising the existing locals tax bills. The projected sellling prices of the ACR properties are hopelessly optomistic. In fact if you had dug a little deeper you would have found that the June 2010 submission to the APA shows the projected selling prices have been raised over 50% since 2005. And we all know what has happened to the housing market nationwide in that same timeframe. back to the PILOT. If the homes in the ACR don’t sell for the crazy predicted prices there may be little of no money going to the local taxing entities(town,school and county) Same scenario if they dont sell as fast as predicted. The infrastructure will be in place and will need to be serviced and maintained by the town(roads that need sanding, plowing, etc) If there is no PILOT money left over after making the bond payments the locals will see their tax bills going up disproportionately to make up the shortfall. So Mr Foxman may portray this project as a “private venture” but it is actually using Public Tax dollars to finance what should be His infrastructure costs. And if you go back to the APA application you will see that Mr Foxman clearly states that the project is not economically viable without the PILOT. If this project were strictly being financed privately i would have no problem with it, but when the developer is in effect asking for 36 or 45 or 54 Million dollars from public taxes to pay for HIS infrastructure costs I have real issues with it as do most of the taxpayers in Tupper Lake.

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  10. Paul says:

    “The infrastructure will be in place and will need to be serviced and maintained by the town(roads that need sanding, plowing, etc)” I don’t quite follow this. Don’t we always use public money to build roads and infrastructure? This is not “his” roads and infrastructure wouldn’t these be town roads and town water lines or whatever they need? They must be right or why would we plow and maintain them?

    Like/Dislike this comment: Thumb up 0 Thumb down 0

  11. Mervel says:

    But I would suspect that without substantial pre-sold units and a proper substantiation of demand, he is not going to get his initial funding needed to build these first units. This is not 2007, banks are more conservative particularly on speculative projects such as this.

    I think the fly in the ointment would be public financing of any kind for these projects, the market should be able to determine the risk and if he can’t get private financing then that would be it.

    Like/Dislike this comment: Thumb up 3 Thumb down 0

  12. knuckleheadedliberal says:

    A real estate developer has been overly optimistic about a proposed development?
    I am shocked!

    I guess from now on I should be careful when realtors tell me I should build a bigger house with more bedrooms and baths, with granite countertops and stainless steel appliances–you know, for re-sale value. Maybe I should think more carefully when a car dealer tells me I should buy a more expensive car with a bigger engine. Maybe I should wonder–just what is it Wall Street is doing with the money in my pension or 401k?

    I mean, I would hate to believe those people were trying to take advantage of my gullibility.

    Like/Dislike this comment: Thumb up 5 Thumb down 1

  13. knuckleheadedliberal says:

    Paul, I don’t know the exact mechanism but roads in developments are usually built by the developer to approved specifications then, in some fashion, deeded over to the taxpayer for maintenance. The developer wants the maintenance off their books, at least in areas where it snows. Places like Sun City in Arizona are entirely private gated communities and the residents pay for community maintenance. Otherwise the public, even kids and poor people, would have a right to drive through. There are gated communities in the Adirondacks that operate on the same principle; Adk League Club, Bay Pond Park, the northwest side of Long Lake, Big Wolf in Tupper…and if you’ve ever been to one of these places you will note that rich people rarely pave the roads they have to pay for themselves.

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  14. James Lanthier Jr. says:

    I think that I am the first person that is not your friend commenting on this article which is written to be as negative as possible. Just for the fact that you are useing some government funded money (NCPR) to exploit Adirondack Explorers propoganda written by you, its too bad that you are dragging them down along with yourself. You will be discredditing this organization. Shame on you. I am also a reporter. I am freelance. I will be posting everything that you write on my Facebook page. My Facebook page covers many reporters reports. To make it easier for you to find it I have a blackbear for a profile photo. Also I have another example of your propoganda on my page. I think you’ll find it interesting.

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  15. tourpro says:

    Who is the “Adirondack North Country Chamber of Commerce” mentioned in the article that endorsed the project? ANCA? Plattsburgh NC Chamber?

    Like/Dislike this comment: Thumb up 1 Thumb down 0

  16. Philly Jones says:

    Your premise is incorrect from the first sentence. Environmental concerns have never been addressed from the “pseudo” environmental groups opposed to this project. You’ve never found the threatened snail darter here. Really, you’ve never even attempted to. And now you’re going to, gasp!, move onto economical concerns? Give me a break. You could care one friggin’ less about the economics of the adirondack citizenry, you never have. This great economic depression we’re in will never resolve with the myopic vision, or rather lack of vision, you pretend to have.

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  17. Paul says:

    Knuck,

    Keeping these as private roads is not a bad option. Setting this up like Bay Pond is probably a better way to go.

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  18. Mervel says:

    Philly, who are you speaking too?

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  19. wishes says:

    Filly,

    While I feel very certain there are not snail darters living on mt Morris, the “wildlife assesment” was completed by the developers folks, the LA group. It looks like they copied a species list off an Adirondack field guide. That said, endangered species is not the only criteria to look at. If it was impact statements would be much much easier. They are many other factors to consider.

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