Magic Mountain Changes Ownership…Again
The real story behind the co-op that never was
Magic Mountain, Vermont, is famous for steep, technical terrain, myriad tree lines, and a down-home, community vibe. One thing it has never been known for is a clear and stable ownership situation.
The saga continues for this Southern Vermont gem that keeps fighting an uphill battle. Magic lost two lifts and much of its snowmaking when Bromley abandoned it in 1991. Since reopening in 1998, the ski area has endured several management and ownership changes. It seemed to finally find solid footing under Jim Sullivan and his company JSL Magic, which had run the ski area since 2006. Then, just prior to the 4th of July holiday, an email was sent out to pass holders and members of the Magic Faithful Club that Sullivan would no longer be operating the resort. A new company called Magic Mountain Resort, formed by Tom Barker, a retired IBM and Lockheed Martin engineer who has had a business stake in Magic for more than a decade, would be taking over resort operations.
In order to fully understand the situation, we’ll need to delve more into Magic’s somewhat murky ownership situation. The immediate implications, however, are that the ski area plans to operate as usual this winter. Season passes that were bought from the former owner at early season prices will still be honored. The Magic Faithful Club—a collection of supporters who put up $3,000 each, initially to form a cooperative ownership group—would have no further role with the resort.
Barker also said that Sullivan was cooperating with the Vermont Securities Division to account for how the roughly $600,000 of club money was spent. Considering the infrastructure and maintenance projects completed by Sullivan’s company, Barker says he has little doubt that the money was spent at Magic Mountain. “I don’t see any reason to believe there’s something nefarious,” Barker says. Sullivan plans to stay on through the summer, at least, to help with the transition.
Don’t Call It a Co-Op
There are two entities that own Magic Mountain. The land and most of the infrastructure is owned by Magic Mountain Management, which has three partners: The family of Larry Nelson, now deceased, who bought the property at auction in 2002; Rob Lyszczarz, a New Jersey-based Realtor, and Barker, who owns a minority voting share (all are longtime Magic skiers). MMM then leases the ski area to an operating company. Most recently this was JSL Magic and Sullivan, but it has included other entities over the years.
“The operating company is actually where the real money can be made and lost,” says Barker. “There’s a lease fee to the ownership company, but quite truthfully, it’s very small. The owners basically are interested in the mountain succeeding and running well.”
In 2009, Magic Mountain became a media darling when the operating company—Sullivan’s company—announced plans to sell partial ownership to a skier-owned co-op. The sale was successful. According to reports, 333 shares were eventually pledged, breaking the 300 limit needed to legally become a co-op. The co-op partnership, however, never materialized.
When Mad River Glen sold to a co-op for $2.5 million in 1995, Betsy Pratt sold the entire ski area, real property included. Magic’s situation, however, is much more convoluted. Sullivan’s operating company did not own the land or infrastructure, and neither Sullivan nor the owners of the property were willing to give up 100 percent of their investments to go to a full co-op. “It’s harder to put that kind of an asset program together for the operating company without having it backed up by the property,” says Barker.
Barker also says the plan encountered legal issues. Once a board was established and did due diligence, Barker says, it learned that the co-op partnership not only needed permission from the State of Vermont, but from every state in which an investor lived—six or seven more states—and to pay fees, and likely fines, in each. “This was a fundraiser for the states, apparently,” Barker quips.
Instead, Sullivan offered to return the money to the co-op investors, or they could leave it with the mountain and become part of the Magic Faithful Club. Many left, but most stayed. In February 2014, Sullivan said there were 218 club members. MFC members get 20-percent-off season passes, and a child’s pass for half price. (They were also supposed to get a voting say in how the money was used, which is the center of the controversy surrounding Sullivan and the Securities Division). Mostly, though, they get to keep skiing Magic.
“I don’t need a plaque on my wall that says I’m a shareholder, or a Faithful member,” Greg Williams, a Magic regular from Connecticut who has been skiing here since 1978, told me in February. “I don’t care. I just want to come here, click my skis on, and go take runs—and continue to do what I’m doing for many years to come. That’s the only reward I need.”
The Tax Man
Sullivan’s eight-year tenure at the helm of Magic Mountain came to a head in June, when a notice was posted that the area was delinquent on its taxes.
“Under the terms of the lease, JLS Magic was supposed to pay the taxes,” says Barker. “The owners were not at all happy that they had to suddenly kick in money for that.” Magic Mountain Management also requested an accounting of the Magic Faithful Club funds, Barker says, but got no response. “It left us in doubt that the money was there to get the mountain open this year,” Barker says. A decision was then made to terminate JSL Magic’s lease to operate.
Barker, however, was unprompted in his praise for what Sullivan did well during his tenure. “Jim was very successful in growing revenue, and he’s been very successful in getting high quality snowmaking and grooming out on the mountain,” Barker says. “Unfortunately, he didn’t manage the costs of doing that to keep them in proportion to revenue. He had no net gain coming from the mountain. He just ran out of money.”
In an interview with Sullivan in February 2014, he said Magic had seen growth every year since he took over, excluding the horrendous winter of 2011-12. Both Barker and sources with JSL Magic say the area broke even the past two seasons. Barker says the plan going forward is to maintain the same product the ski area has been putting out while cutting costs by about 20 percent—no easy task in an industry as fickle as skiing. Barker has an advantage, however, in that he’s taking over the operation relatively debt free.
There’s also little doubt that Sullivan is leaving the place in better shape than he picked it up. Under his watch both lifts under went major overhauls and repairs, the mountain bought a new groomer, and the snowmaking system was repaired. The ski area also weathered a catastrophically low snow year, and Hurricane Irene, which filled the snowmaking pond with silt—both of which hit the resort financially.
As for the club, Barker says he’s still contemplating what benefits the new ownership company will extend to the Faithful moving forward. “I’m thinking it through at this point,” he says. “I’ll probably do something in their favor, but it probably won’t be as lucrative as what they originally had.”
To many of the Magic Faithful, the benefits appear to be the least of their worries. Geoff Hathaway, a Magic Faithful member who also was V.P. of marketing under Sullivan, calls the transition yet another example of someone from the community stepping up to make sure Magic continues to operate. Just as the community did when the Red Chair needed a paint job, when the snowmaking lines needed welding, and when the resort needed an influx of capital.
“The people who seem to be the least concerned [about the ownership change],” says Williams, “are the ones who put money in.”
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