While Tupper Lake looks to the Adirondack Club and Resort for economic salvation, real-estate agents question whether the developers’ ambitious business model is plausible.
By Brian Mann
For seven years, Michael Foxman, lead developer of the proposed Adirondack Club and Resort in Tupper Lake, has argued that his massive $500 million project will boost the North Country economy, with financial risks limited to himself and other private investors.
“It’s really a once-in-a-lifetime project,” he said, when first unveiling the concept in 2004. “We get a chance to make a lot of money and do a lot of really good things for the community.”
Yet even as the Adirondack Park Agency (APA) wraps up its review and prepares to vote on a permit application, the Adirondack Explorer found that significant doubts remain about the project’s economic viability. The business plan for the resort also remains unclear, despite years of scrutiny, public hearings, and statements by Foxman and his consultants, and there are lingering questions about its financial impacts.
The APA’s review is based in part on a detailed economic analysis submitted to the agency by Foxman last year. But in lengthy interviews, he distanced himself from that analysis. He discounted or qualified many of its assertions about bond issuances and the schedule for building homes and developing such amenities as a new ski lodge, equestrian center, and gym.
“The reason you don’t see any specificity is because we don’t know what the [real estate] market would look like,” said Foxman, a seventy-three-year-old attorney from Philadelphia.
Foxman proposes building the Adirondack Club and Resort (ACR) over fifteen years in the vicinity of the Big Tupper Ski Area and a public golf course on Mount Morris. When completed, it would have some 650 residential units, including condos, town houses, single-family homes, and rustic mansions modeled on the Adirondack Great Camps of yesteryear. It also would have a sixty-room hotel and restaurant. The ski area—now run by volunteers—would be taken over by the developers and refurbished.
Most of ACR’s 6,235 acres would remain undeveloped and open to residents for hiking, cross-country skiing, birding, and leaf-peeping. Foxman sees the resort as unparalleled in the Northeast, a four-season blend of wilderness and civilization that will attract buyers from New York City, Toronto, and other cities.
Yet when pressed, Foxman provided only a rough outline of how ACR’s “vast infrastructure costs”—for roads, electrical lines, and wastewater treatment, among other things—would be financed. He described a mix of private borrowing and bond issuances.
He also said much of the early cash flow for the project’s construction, marketing, and operations would come from the sales of between “forty and fifty” luxury-priced land parcels and vacation homes each year. “The bulk of initial sales will be the Great Camps,” he said, referring to estates that would range from nineteen to 770 acres.
Yet Foxman hopes to make available a variety of properties, not just Great Camp lots, at any given time. The initial prices for build-ready parcels, he said, could range from $100,000 for a small home lot to $5 million for the largest Great Camp lot.
An extensive review of real-estate records in Tupper Lake and other places in the Adirondack Park found little evidence to suggest that ACR will be able to sell high-end real estate at the prices or at the pace that Foxman envisions, even once the regional housing market recovers from a painful three-year slump.
Indeed, no independent real-estate agent contacted for this story thought the company’s sales goals were realistic. Speaking anonymously, even some realtors who publicly endorsed the project expressed skepticism, saying they wanted the APA to approve the permit but questioned whether the resort’s homes or properties would find sufficient buyers.
“You’re talking about numbers that would make more sense in an area that has an established international draw, like Aspen or Vail,” said Mark Bergman, who sells vacation homes in North Creek and Lake George. “Those numbers in Tupper Lake are, to be polite, very aggressive,” he added.
The Adirondack Club and Resort is a politically sensitive subject in Tupper Lake. Although surrounded by beautiful mountains and waterways, the former logging town has been in economic decline for years. Its downtown is plagued by shuttered storefronts, and the former Oval Wood Dish factory closed long ago. Young people leave because they can’t find work. Most local leaders and residents regard Foxman’s project as a way to revitalize a community that lost 7 percent of its population over the last decade.
“This is one of the biggest issues any of us here will ever face,” said Mayor Mickey Desmarais at a public meeting in March. “The village has supported ACR since inception. We do look for some sort of approval [from the Park Agency].”
Nevertheless, some local government officials and business leaders in Franklin County continue to express concerns privately about ACR’s financial stability and Foxman’s capacity to realize his ambitious vision.
In researching this article, the Explorer was unable to confirm important details of how the project’s complicated financing and construction phasing would work in practice. We also found evidence that Foxman’s investors face cash-flow difficulties. Finally, a claim about ACR’s relationship with the prestigious Orvis outdoor company appeared to be exaggerated or at least premature.
The LA Group, a consulting firm hired by the developers, prepared the economic analysis submitted to the APA last June. Written during a deep slump in the housing market, the detailed document nonetheless describes a relatively rapid pace of construction for many of the resort’s luxury amenities.
In the first three or four years, it envisions the building of a marina and a new ski lodge at a total cost of $7.7 million. Phase-one costs also include road installation, electric lines, construction of the first module of a sewage-treatment plant, and other infrastructure worth roughly $8.6 million, according to the document.
As recently as March, Foxman’s representatives cited the analysis to explain how the project would improve life in Tupper Lake. “We are projecting some 313 [construction] jobs created per year on average,” Jim Martin, a senior planner with the LA Group, said at a crowded public hearing.
Martin suggested that the community would see a $9.6 million boost in payroll as the project rolls out. He also predicted that a negotiated agreement for “payments in lieu of taxes” (or PILOTs) would funnel substantial dollars to local governments during the build-out, including $612,000 in annual payments to the school district. “That’s quite an impact just from phase one alone,” Martin said.
Apart from the promise of jobs and tax revenue, the community is drawn to Foxman’s plan to fix up the Big Tupper Ski Area, which closed in the 1990s. Volunteers reopened part of the mountain during the past two winters, but the ski area needs millions of dollars in repairs to become fully operational.
“Big Tupper needs to be resurrected on the scale that is being proposed by the Adirondack Club and Resort,” said Neil Seymour, director of tourism for Franklin County, an early supporter of Foxman’s project. “Anything less would jeopardize the future of the project.”
LA Group’s analysis forecast sales of $91 million worth of resort properties in phase one of the build-out. That revenue would be supplemented with a round of private borrowing and capital infusions from new investors. Foxman has also proposed an initial issuance of roughly $10 million worth of tax-free, low-interest bonds by the Franklin County Industrial Development Agency, with a total of $35 million in bonds issued over the lifetime of the project.
But in conversations with the Explorer, Foxman said the analysis now under review by the state—including the schedule for construction, job projections, and the forecast of revenues for local governments—was merely conceptual. He suggested that actual build-out would likely be much slower, with the first bond issuance closer to $3 million.
“We’re not going to go out there and spend $50 million or $100 million on amenities and infrastructure before we have sales,” he said. “We’re going to scale the project to the market. In the economy such as we’ve been experiencing, it’s only sensible to do that.”
When asked to give a more detailed picture of his strategy for financing millions of dollars in annual construction costs, salaries, marketing costs, and PILOT payments, the developer offered few specifics. He declined to describe his pool of investors and said that talks with possible bank lenders were not yet under way.
Foxman also wouldn’t say when ACR would be able to begin work on the lifts and ski lodge at Big Tupper. “I can’t tell you precisely when we will start to do what,” he said.
Asked why his account of ACR’s start-up differs so substantially from the analysis prepared by the LA Group, Foxman argued that the document was never intended as a “business plan” or fixed roadmap. “To meet the requirements for the APA [review], it was necessary to make some assumptions,” he said. “You’re dealing with a business that has to be flexible.”
Despite these uncertainties, Foxman maintains that more investors will back his project once an APA permit is secured. (ACR will also need approvals from two other state agencies, the Department of Environmental Conservation and the Department of Health, before moving forward.) He also predicts that dozens of buyers for resort properties will be found each year—though the early buyers will have to embrace his vision of the resort before many of the recreational amenities are available.
“Will the first buyer have to be more courageous than the two hundredth buyer? Probably,” Foxman said.
But a report issued in 2006 by the Hudson Group, a consultant hired by the town, concluded that ACR’s projected sales were not based on “reasonable and substantive” data and questioned whether the resort could be “successfully marketed given the number of units and prices being proposed.”
In the years since that study was released, the Adirondack housing market has been crippled by the national recession. Even in the Park’s established resort communities, real-estate agents say luxury homes languish on the market for months. Sellers have been forced to drop their prices sharply.
Another major new Adirondack resort project, the Front Street development in North Creek, has stalled. Despite receiving its APA permit three years ago and offering buyers “ski-in, ski-out” access to the popular Gore Mountain Ski Area, Front Street has failed to sell a single unit.
Meanwhile, over the last three years, only thirty properties in all of Franklin County have sold for the prices Foxman hopes to fetch—far fewer than the forty to fifty properties he plans to sell annually just in Tupper Lake. Indeed, to achieve his goals, ACR would have to sell roughly twice as many luxury properties each year as sold in 2010 in all of Essex County, which includes Lake Placid, one of the Park’s most popular destinations. Last year, only twenty-four properties in the county sold for above $500,000. Many of those were highly prized waterfront properties with homes. In contrast, ACR will be selling parcels that, with few exceptions, lack waterfront, and at least some parcels will be vacant.
Foxman acknowledged that “we would love to have more waterfront” to sell. But he maintains that there are people ready to invest in the multi-dimensional resort he plans. “We think this will work or we wouldn’t stay at it,” he said. “We’re not just dreaming this up.”
Yet a half-dozen real-estate agents contacted for this story expressed deep reservations about the marketability of Tupper Lake as a destination for wealthy buyers, especially at a time when customers remain scarce in the Park’s established resorts. They insisted on speaking anonymously because of the political sensitivity of the project.
“It will never happen,” said one broker knowledgeable about the vacation-home market in the Tri-Lakes region, referring to the prediction that forty to fifty ACR properties will sell each year. “[Foxman] doesn’t have any waterfront, and they’re in Tupper Lake, not Lake Placid. But even in Lake Placid, that number of sales would be far-fetched.”
“There’s no history to support those kinds of numbers in the Adirondacks, especially now,” agreed another prominent realtor.
However, the business community in Tupper Lake has pushed back against this kind of skepticism, with the Adirondack North Country Chamber of Commerce endorsing the project. The Northern Adirondack Board of Realtors (NABOR) also passed a resolution supporting the resort.
Poised for discovery?
NABOR’s executive director, Laura Burns, said she doesn’t think the real-estate market is robust enough to allow ACR to sell forty to fifty homes per year “within the next few years,” but she did note that conditions are improving. “I feel this region is poised to be discovered by the rest of the world,” she added.
Jim LaValley, a Tupper Lake realtor, helped found a civic group called ARISE (Adirondack Residents Intent on Saving our Economy) to support ACR. He described the resort’s business model as ambitious, but he said its goals are achievable if the vacation-home market continues to revive.
He suggested that sales could eventually exceed Foxman’s projections, while acknowledging that “there are going to be years when that number [of sales] won’t be met.”
Foxman contends that, as an outsider, he brings a fresh eye to the region and understands its appeal to wealthy urbanites. “I think people who know the Adirondacks and know it well are almost at a disadvantage. There has never been another resort of the type that we propose,” he said.
In promotional materials, public statements, and documents provided to the APA, Foxman has touted the resort’s relationship with Orvis, a posh outdoor-recreation company headquartered in Vermont. He has branded his resort as an “Orvis sporting lifestyle community.”
In an interview with the Explorer, however, Orvis spokesman James Hathaway downplayed his company’s ties to the project. He said that a past agreement existed to operate a fly-fishing school and a shooting school, but he said Orvis has no active involvement and no plans to invest in Tupper Lake. “It’s been sort of a dormant process,” he said. “If it comes to pass [that the resort is built] and they want to hire us and work with the Orvis company, that’s great.”
Foxman said he still expects Orvis to run a fly-fishing school at the resort, though plans for the shooting school have been dropped. “We signed those agreements with them in 2005, and everything has been put on hold,” he said. “What [Hathaway] is saying is not wrong, but once the project starts up again Orvis will be there.”
In recent weeks, ACR has also shut down its website, raising questions about the company’s ability to market the resort. When asked about the decision, Foxman said, “We don’t need [a website]. What’s it going to say? That we’re going to build a resort some day when we get an APA permit?”
Taxes left unpaid
During extensive interviews with the Explorer, Foxman generally dismissed concerns about his resort’s viability as “irrelevant and misleading.” He characterized financial issues as scare tactics raised by environmentalists and other opponents of the project.
But doubts about ACR’s financial viability resurfaced in March when it was revealed by the Adirondack Daily Enterprise and Saranac Lake radio station WNBZ that Foxman and partner Tom Lawson had fallen behind by roughly $100,000 in local property-tax payments. Since 2007, the men have repeatedly failed to pay their property taxes, and they violated a repayment schedule negotiated with Franklin County.
Foxman conceded that his investors lacked the funds to make the payments and suggested that the lengthy permit-application process has strained ACR’s cash flow. “We’re no different than anyone else. We have limits and priorities. We obviously will pay our taxes with interest and any penalties,” he said.
Asked whether the delinquency should raise alarms about his company’s soundness or his capacity to finance a project of this magnitude, Foxman insisted that critics don’t understand how large-scale real-estate developments work. “There is going to be at various times about $500 million spent on this project. Do we have $500 million [on hand]? I certainly don’t. I doubt any of our investors do,” he added.
Contributing to the uncertainty is Foxman’s own background. He acknowledges that he has no direct experience as a resort builder or operator, though he says his partners, including Lawson, will provide needed know-how. In 1979, he co-founded Sunrise Savings and Loan in Florida, which went bankrupt after making large loans to real-estate developers. The resulting federal bailout cost taxpayers $680 million. Foxman was indicted on fraud and conspiracy charges, along with several partners. Three men were later convicted, but the counts against Foxman were eventually dismissed.
Some of ACR’s fiercest critics cite the savings-and-loan case as a reason for their continued distrust of the developer. Tupper Lake attorney Jack Delahanty, speaking at an APA hearing in March, accused Foxman of having an “extremely poor fiscal-management history.” He argued that the resort’s backers should be required to post performance bonds before the resort is given the green light “to assure fiscal responsibility.”
When asked about the Sunrise bailout, Foxman described it as ancient history—the legal case ended in 1996—with no bearing on ACR or his own credibility. He pointed out that he stepped down from the bank’s board two years before it failed, and he insisted that federal prosecutors were overzealous.
Indeed, seven years after he first appeared in Tupper Lake, most community leaders interviewed for this story said they were comfortable with Foxman and his track record. His long devotion to the resort and to this mountain community has won him a small army of ardent supporters.
“I don’t know what else is out there that could even begin to bring the magnitude of benefit that this project is going to bring,” said state Assemblywoman Janet Duprey, whose district includes Tupper Lake.
What if it fails?
Understandably, local leaders and residents are hopeful about ACR’s potential. During the March public hearing, Mary Sparks, a retired school principal and lifelong resident, argued that the project “would energize local businesses to invest and expand, as well as encourage entrepreneurs to invest and start up new businesses.”
But when the APA completes its examination of the project this fall, state officials will be required to consider the worst-case scenario. How would the resort’s failure or bankruptcy affect the community?
Foxman’s critics suggest that if the vacation homes don’t sell, the venture could collapse, leaving local governments holding substantial parts of the property or paying to maintain costly and unneeded infrastructure. “If this thing turns out a bust, who winds up owning the place?” asked APA Commissioner Cecil Wray in 2007. “Isn’t that something we should know?”
Under the proposed PILOT arrangement (which is still being negotiated with the Franklin County IDA), much of the property-tax payments would not go into the coffers of local governments. Rather, the money would pay off bonds issued by the IDA to help finance the resort. Nevertheless, Foxman says local governments will see a substantial boost in tax revenues, eventually topping $11 million per year.
But some Tupper Lakers have questioned the deal. “If there’s a large number of foreclosures, somebody has to make those payments so you can cover those taxing districts,” Fred Schuler, a local resident, said at a public hearing last year. “Is the [Franklin County] IDA responsible for those payments to the school, the town, and the county?”
John Tubbs, the IDA’s executive director, said the public agency will enter into a long relationship with ACR if the bonds are issued and a PILOT established. In exchange for those economic incentives, the IDA would be required by state law to obtain what he described as a “controlling interest” in the project. “Once the bonds are repaid, the property reverts” to private ownership, Tubbs said.
That sounds like a risky and complicated entanglement. But experts contacted by the Explorer agreed that these are fairly common economic-development tools, used frequently by county IDAs to spur private-sector growth and jobs. If structured correctly, they would pose little or no financial danger to the community—an important criterion for APA approval.
“The question arises about whether [Franklin County or its taxpayers are] on the hook for the bonds or some indebtedness,” Tubbs said. “The answer is no.” He also suggested that Franklin County would aggressively pursue ACR to make sure that its PILOT payments to local governments were made on time.
But here again, significant questions remain. Vetting the resort and its business plan to make sure that it qualifies for IDA assistance is a complicated process, involving financial and legal experts from Malone to New York City. Despite years of talks, no framework for a deal has been reached for the PILOT or the bonds.
Indeed, ACR’s most recent proposal was tentatively rejected because the company asked that parcels of land remain within the PILOT tax-diversion program even after they are sold to homebuyers. “We couldn’t find other places where [a PILOT] worked like that,” Tubbs said. “We did ask ACR’s attorney to provide us with precedents and to demonstrate how they believe that would work in practice.”
Tubbs said those talks are expected to resume once an APA permit has been issued. He also noted that the IDA would assist the project only if it moves forward as a full-scale resort. Tourism ventures that create sustainable employment are eligible for bonding and PILOT programs, but real-estate subdivisions are specifically excluded.
If the project were to fail, Foxman could try to sell the property to another developer. If he found no buyer and lenders foreclosed, then the property could be auctioned off and the various stakeholders, including those who bought the IDA bonds, would fight for their shares of the proceeds. In that event, the county and local governments presumably would go after any back taxes.
But Foxman isn’t thinking about the worst-case scenario. Despite the sour real-estate market and those he called “doubters,” he said he remained bullish about his vision for Tupper Lake.
“Sometimes it takes an outsider to see a local opportunity,” Foxman wrote in an e-mail. “With luck, we all will get a chance to see if this is one of those times. We think all the ingredients for an outstanding resort are there.”