Balsams Takes Big Leap Forward With Crucial Investor

December 10th, 2021
From The Caledonian Record

“NORTH COUNTRY – After being shuttered for a decade and incurring a number of setbacks in its redevelopment, a critical investor has come along for The Balsams Grand Resort in Dixville.

If the financing comes together this winter, the ground could be broken on the first phase of development early next year.

On Wednesday, lead developer Les Otten asked the Coos County Commission to consider adopting a resolution that would invite Provident Resources Group Inc., a 501(c)(3) nonprofit based in Baton Rouge, La., which began partnering with The Balsams team in April, to participate in the financing of the new Lake Gloriette House hotel and convention center, a major piece in the redevelopment plan.

‘The plan has always called for two major hotels, one the rebuild of the Hampshire-Dix house … and the other, a 280-room hotel that, until now, had not had a partner to build it,’ Otten told The Caledonian- Record on Thursday. ‘And both hotels are critical in order to get critical mass for the ski area and everything else that we’re building.’

Provident Resources Group, which has placed some $5 billion in bonds in 21 states for projects similar to The Balsams, specializes in making community- based investments in areas of need where hotels and housing of different types can significantly and positively impact the community, he said.

Provident would be making a roughly $100 million investment through a bond to acquire, finance, design, develop, own, and operate the Lake Gloriette House hotel and conference center, a critical financial piece in a total $208 million first-phase Balsams redevelopment.

‘This is significant funding that puts the project in a position where we expect, if this deal goes forward, that we’ll have the rest of the funding to build the first phase of The Balsams starting later this late winter or early spring,’ said Otten, who projects 24-month construction period before completion.

As a 501(c)(3), Provident is required by the IRS to be invited to participate in a project that will benefit the county.

By passing the requested resolution, the county commissioners, who enthusiastically received the proposal this week, would be expressing support for the project and Provident’s participation, said project spokesman Scott Tranchemontagne.

‘The resolution in no way, shape, or form makes the county liable for the bonds that will ultimately be sold and paid back by the taxes/assessments on the real estate,’ he said.

House Bill 540, signed into law in 2019, gave the county the authority to create a Tax Assessment District around the Balsams property, with taxes and assessments on the property going to repay that separate assessment district bond during a period of 20 or 30 years.

Along with Provident, Goldman Sachs, which has a direct relationship with Provident and with the Balsams team for the potential issuance of the tax assessment district bond, is looking at underwriting the Provident bond, which Tranchemontagne said would be sold to institutional investors, such as Blackstone or Fidelity, at no financial risk to county taxpayers.

‘This is a significant step forward that could lead to financing for additional elements of the project, and perhaps breaking ground at some point in the spring,’ he said. ‘If you’re a supporter of The Balsams, it was a pretty good day yesterday.’

Provident would own the hotel as well as some municipal services, and any excess funds from hotel operations would be reinvested in the community, with Provident paying its fair share of the assessment district and general real estate taxes along with the other owners, said Otten.

Although Otten said he is not yet in a position to identify the other investors, he said the team is working with a bank for the Hampshire-Dix House and has a bank for the equipment that will need to be leased.

‘We waited to identify Provident and Provident to identify Goldman and Goldman to be identified with our project until we had a pretty strong feeling we knew where all the parts and pieces were,’ he said.

The county commissioners are expected to take up the request to approve the resolution with Provident’s involvement on Monday.

‘[The resolution] is a recognition by the county commissioners that the project will be a social and economic development benefit to the community and that it’s something that the county doesn’t have the financial capability of undertaking on their own,’ said Otten.

The commissioners for Coos County, which is not putting up any money for the project or being asked for money, have already arrived at that preliminary finding and community benefit, he said. Before the next step, digging in with due diligence and finding buyers for the bond, a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing will be held, in about a month or so, after the new year, as required by the IRS.

Otten, who has been the lead developer since 2014, and Tranchemontagne said they appreciate the patience of everyone through the years and the persistence of the development team. There is still a ways to go, though, and the hope is that no more roadblocks are thrown in front of the project, they said.

‘What I’m most happy about is the partners that we have are nationally recognized in what they do, not back-room chop shops, not hard money lenders,’ said Otten. ‘You can’t get much more traditional than a company like Provident and a company like Goldman … This is clearly an indication of a very solid step forward for the project.’

The total first-phase redevelopment had been estimated at $185 million, but increasing construction costs nationwide led to a 7- to 10-percent increase in The Balsams project, bringing it to the current $208 million, with contingency costs.
(The Balsams team, made up of more than a dozen developers, is putting $20 million into the project).

First-phase components, though, remain the same and include an expansion of the Wilderness Ski Area with new lifts and snow-making; renovating the historic Dix and Hampshire houses; building the new Lake Gloriette Hotel and conference center; revitalizing the Panorama Golf Course; adding Nordic baths, a retail marketplace, and fine dining and culinary offerings; and a Planned Unit Development for the future development of up to 4,600 four-bedroom equivalent lodging or residential units.

For the project’s real estate program, which currently has more than $20 million of reservations on sales, Otten said sales are going well and there’s about $12 to $14 million worth of inventory of equal value available.

In May 2020, he announced a new Environmental, Social and Governance (ESG) proposal that seeks a clean energy resort that would provide hundreds of jobs in an impoverished area.

‘All of the things we were emphasizing in the ESG will be part of the package,’ said Otten.

A revitalized Balsams would help the North Country economy in a significant way with about 600 construction jobs, more than 400 new jobs at the resort, and the potential for 1,500 new resort jobs in the long term, said Tranchemontagne.”