Real Estate
90 Layoffs at Moonlight, as Resort’s Cash Troubles Continue
Moonlight Basin dramatically cuts staff in what CEO Lee Poole says is a temporary but necessary move.By Robert Struckman, 10-08-08
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A mass layoff at Moonlight Basin near Big Sky, Montana, has sent a chill through Gallatin Canyon’s resort community.
Sources said about 90 employees lost jobs. CEO Lee Poole declined in a written statement to address specifics of the layoffs or how many workers remain.
“Moonlight Basin Ranch and a number of its subsidiary companies have decided to immediately implement temporary layoffs of a portion of its workforce,” Poole said in a press release issued late Wednesday afternoon. “We are deeply saddened by this painful but necessary action.”
The subsidiary companies include a lodge, real estate office, a gallery, a spa, a daycare and other related entities. It’s unclear which of them bore the cuts, or if all did.
The layoffs were announced Tuesday and will go into effect after Friday, sources said.
Moonlight has been struggling for cash ever since its primary lender, investment bank Lehman Brothers, collapsed in mid-September-- a casualty of the real estate crisis rocking Wall Street. This week, Lehman CEO Richard Fuld has been grilled and criticized on Capitol Hill for his role in the banking crisis.
About two weeks ago, Poole wrote in an email: “Lehman Brothers has been Moonlight Basin’s banking partner for the last 13 months. We are… working through the matter and expect to continue normal operations.”
“Moonlight is pursuing a number of options to obtain alternative financing and to replace Lehman as its primary lender,” Poole wrote in Wednesday’s statement. He described Moonlight as a “strong asset with a solid brand,” a factor which will help replace the resort’s funding.
It’s no secret that, nationally, even strong and profitable businesses are having trouble getting credit.
Insiders say Poole defended the cuts to his peers in the Gallatin resort industry by saying he needed to save enough cash to open Moonlight’s ski operation.
This summer, Moonlight had access to plenty of money. Construction was pell-mell. By mid-September Moonlight had spent some $100 million and had an additional $70 million in financing through Lehman Brothers, sources said. Poole declined to confirm the figures or discuss other details of the resort’s financial situation.
Moonlight Basin, which opened its ski mountain in 2004, has been developing a four-season resort with a Jack Nicklaus golf course and a new lodge at the base of Six Shooter Lift, as well as residential developments and villages with hotels, dining and shopping.
But new resort development projects throughout the Rocky Mountain West have been hit hard by the real estate bust and the associated credit crunch, with Tamarack Resort in Idaho falling into bankruptcy and the high-end Yellowstone Club, also near Big Sky, struggling to sort out numerous financial problems. Resort development requires lots of capital and lots of eager buyers of expensive second homes—both of which are now in short supply.
About a year ago, a Moonlight spokesman spoke about its expansion with an air of inevitability: “It’s going to happen no matter what. The question is how quickly,” said Russ McElyea, who went on to tell NewWest.Net that the build-out would “move as quickly as possible.”
Moonlight Basin officials have given mixed signals at times. Last December, a spokesman announced that the resort was for sale. A month earlier, the resort had sent out a press release to advertise its search for equity partners—hardly a routine way for a resort to find funding.
The work stoppage and layoffs combined with Poole’s unusual past moves add up to alarm bells in today’s uncertain real estate environment, one source inside the high-end Big Sky resort world said. After all, even major national banks reported being fine on a Friday, only to collapse over the weekend. The source asked, what’s really happening at Moonlight?
Poole declined to discuss the subject
Instead, he added, in his release, “We are committed to open Moonlight Basin ski area for the 2008-2009 season, and to make this layoff period as short as possible.”
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Comments
"Banks have proved themselves to be the most hazardous economic institution known to man. Breakdowns in banking lie at the centre of most financial crises. And banks are unusually effective at spreading financial distress, once it starts, from one place to another."
The Economist, May 3, 2003. "A cruel sea of capital: A survey of global finance."
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"Proponents of the loan push notion suggest that the banks have victimized themselves by their absurd lending decisions .... From this perspective, bankers as loan pushers become active door to door salesmen (albeit in pin stripe suits)."
William Darity and Bobbie Horn. The Loan Pushers: The role of commercial banks in the international debt crisis. 1988. Ballinger Publishing Company, a subsidiary of Harper & Row.
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"Construction is notorious for its boom/bust character and after each bust bank managers become very cautious and resolve never to become so exposed again. But when they are again awash in liquidity and desperate to put money to work, a new cycle begins."
George Soros. The Crisis of Global Capitalism. 1998
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"Real estate speculation must be as old as the land - in the United States, it is certainly as old as the frontier - and the first bad bank loan was no doubt made around the time of the opening of the first bank."
"Still, the boom of the 1980s was unique. Not only did creditors lend more freely than they had in the past, but the government intervened more actively than it had ever done before to absorb the inevitable losses. Two important trends converged in the boom : the democratization of lending and the socialization of risk : more and more people were able to borrow, and more and more debt was federally subsidized …. By standing behind good banks and bad banks alike, the government in effect removed the oldest charter in banking - that is, safekeeping."
James Grant. Money of the Mind : Borrowing and Lending in America from the Civil War to Michael Milken. Farrar Straus Giroux. 1992. Introduction, p.5.
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"For better or worse, American capitalism has taken on a new look. At one time, it was a system based on owning. It is now a system based on owing."
Medoff, James and Harless, Andrew. The Indebted Society. 1996. Little, Brown.
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' … the main dangers to the success of capitalism are the very people who would consider themselves its most ardent advocates : the bosses of companies, the owners of companies, and the politicians who tirelessly insist that they are 'pro-business'."
"… widespread and quite outrageous abuse, by capitalists, of capitalism … The danger exists everywhere in the world, but it matters most in the United States."
" … the abuse of capitalism and of democracy in the country that is seen - especially by itself - as the highway to greatness."
The Economist, Special 160th Anniversary Issue, A Survey of Capitalism and Democracy, June 26-July 4, 2003
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Presently he is supporting NPR, and the current socialist candidate for President. One only needs to know what the Warburgs, Rothschilds said and why JP Morgan caused the scare back when. The banking and power broker elites like Soros want these things to happen so they can control the general public. Time to wake America!
Saying that the real estate and finance crisis was predictable, I cited a variety of sources that could have been taken as early warnings. If I understand you correctly, you have no objection to my saying that the financial crisis was predictable, but you object to my citing the billionaire capitalist George Soros, who you see as a socialist.
You say that I must be a "Lib" in order to cite Soros. But it's worse than that. I'm basically a knee-jerk moderate, but I'm also politically promiscuous -- willing to take good ideas from wherever they come, without prejudice against any single philosophy. Like the others I cited, Soros saw a basic problem, one that's in all our faces now.