This is an interesting article about Red Mountian in Canada. It seems they had a crowdfunding event to stick it to Vail.
It sounds like a great place, I've never been but I'd love to see it. The town at the base almost sounds like a mini Telluride.
It's not just crowdfunding, it's an investment opportunity via special crowdfunding websites for investing in ownership shares. Very different from a Kickstarter or Indiegogo campaign. Phase I started in 2016 to see if enough "reservations" would be made to reach $10 million. That turned out to be successful so work began to set up Phase II. Phase II for Canadians to actually invest money started during Summer 2017, with the U.S. going online last week. More paperwork for the U.S. ;-)
Lots of info on Red Mountain or StartEngine websites. Several 2-3 min videos. Plus a recent webinar Q&A session.
https://www.startengine.com/red-mountain-resort
They expect to close the offering on Dec. 1. Have about $1 million from Canadians already, with a target of $C1.5 million.
A few of the capital improvements that will be funded by the new money are already in progress. Assuming there is enough money raised to make the investment program a reality, then new funds would be used to payoff bridge loans.
$1000 gets 5 lift tickets, transferable. The other perk at the lowest level is access to the Owner-only lodge. Someone who wants a custom designed pair of Blizzard skis or a snowboard can get one for a higher amount, plus other perks such as season passes.
Red Mountain is a few hours drive from Spokane. Southwest flies to Spokane. Has been on my radar for a few years, even since they expanded to Grey Mountain. First with cat skiing, then by adding a lift. Over 2500 acres now.
It says that some of the upgrades includes toilets that flush lol
eggraid wrote:
It says that some of the upgrades includes toilets that flush lol
I gathered from comments in the webinar in late Sept that getting permission to put in a septic system is not easy. The CEO was saying that the location of the new cabins that are a perk for the Class D share owners is connection to where the septic system already exists so no new approvals would be needed. From the description, the way Red was when the current partnership bought the place reminds me a bit of Alta 25-30 years ago. The old Watson's Shelter wasn't much until it was completely rebuilt.
The full webinar is about an hour. They also pulled out video clips to make it easier to hear the Q&A about specific questions.
http://www.redresort.com/news/join-ceo-howard-katkov-live-online-qa-session/
http://www.redresort.com/ownthemountain/live-webinar/
First time I saw this I thought it had to be a scam. Even after seeing it get some mainstream coverage I still question if it’s really on the up/up.
Why would anyone pay $1K for 5 day tickets when “Red’s two-day lift pass sells for C$184”? Normally the appeal of these crowdfunding deals is a prepurchase something and receive a considerable discount for taking on the risk.
i don’t see anything on the site that makes this any different than other crowdfunding sites... which means none of these prizes or rewards are guaranteed. My reward for “investing” and prepaying $1,000 dollars is getting a few lift tickets at well over the counter price?? What about the risk of this whole thing not working out? I hope investors know that means they get nothing. No lift tickets. No refunds. Nada.
Red is a great place. My son and I split a week between Red and Whitewater. If I could only ski at 2 places for the rest of my life, these would be it. Both are in the east Kootenays, one of dozens of named sub ranges in interior BC. IMO they have the best powder snow in North America.
dt3 wrote:
Why would anyone pay $1K for 5 day tickets when “Red’s two-day lift pass sells for C$184”? Normally the appeal of these crowdfunding deals is a prepurchase something and receive a considerable discount for taking on the risk.
You are correct that no one is investing in Red Mountain just because of the perks. This is not like a Kickstarter compaign where most of the backers are looking for a discount on a new product or service. Anyone who puts in money has to have a non-tangible reason to want to support Red Mountain and the direction that the current owner partnership have planned for the next 5-10 years. One reason that Phase 1 had such a high goal was to see if it was worth going forward with all the paperwork required to even start Phase 2. Even 30% of the $12 million in Reservations is a lot of money. All of it will go towards capital improvements. Over $1 million of those improvements are already in progress funded by regular business loans. There are a lot more ideas for future upgrades and expansion. How fast those happen depends on funding.
One of the questions in the 9/27/17 webinar with the Red CEO was "So ”˜Investment’ usually means a return on dollars committed. It sounds like this investment is more familial in nature. Does social good dominate or parallel this investment going forward? What’s more quantifiable?" The entire webinar was about an hour. They split out a few questions as video clips.
http://www.redresort.com/ownthemountain/live-webinar/
https://youtu.be/zcKQeYmQndA - Investment or social good?
As for risk, not much. These are non-voting D Shares. If the current owners sell for any reason, the D Shareholders get paid back their investment after debts are paid and before major investors. Valuation is over $50 million and debt load is around $4 million. It's taken a while and a chunk of investment by the current owners, but the place is making money.
Must say I'm not sure why anyone who has never been to Red Mountain would support the effort. Then again, for $1000 it would be cool to be welcomed as an owner in the yet-to-be-built lodge on a first trip. Assuming all goes well, the goal is to get that built in 2018. Meant to be cozy, not like Snowbasin/Sun Valley. The lift tickets are good for five years.
As of 11/4/17, about $1 million from just over 400 Canadians (since August 2017) and about $270,000 from about 100 Americans (in about a week). I think the goal for the Canada is $C1.5 million, perhaps based on the amount that came in as Reservations during Phase 1. The U.S. investment website, StartEngine, will also handle investors from Australia, New Zealand, and the UK. Those are the countries outside North America that had enough Reservations to make it worth doing the paperwork.
The Reservations total was well over $12 million. The StartEngine target is $8 million. The offering can be closed at the end of any month. Current thinking that the offering won't be left open beyond the end of this season, meaning April 2018. Money from investors will be held in escrow until closing, just in case there is any reason that can't happen and money has to be returned to the investors.
EDIT: only Canada, U.S., Australia. Still working on paperwork for a few states like Texas. Found info in a Memo issues 10/26/17. All sorts of legal documents easily accessible on the Canadian investment website.
Interesting, the President and GM of Red Mountain is a Canadian who worked at Snowmass, Keystone, and Copper before moving to Rossland. He was part of the original partnership that bought Red in 2004. Don Thompson was the VP of Planning of the partnership for a while before moving into an operations role in 2012. To me, that probably means Don knows what he doesn't want to see at Red based on what's become standard at destination reports that have been built by Vail and Intrawest.
Red Mountain's CEO, Howard Katkov is certainly not a typical owner-operator of a ski resort. He's a Californian who first skied at Red in 2000. A lawyer who built a successful cosmetic company that was sold to The Estée Lauder Companies in 1997. When he was at the head of the group that bought Red in 2004, seems pretty clear that locals were worried. By then he was already considered a part-time resident of Rossland.
https://www.skimag.com/ski-resort-life/howard-katkov-leads-purchase-of-red-mountain-resort
By 2012 locals were calling him Uncle Howie. He'd learned a lot in 8 years. Red had 1700 acres and two triple chairs. Has certainly been a lot of terrain expansion since then. Total acreas is a little over 2500 acres, with more planned. Here's a short interview from well before the idea of raising capital by offering relatively inexpensive ownership shares.
https://youtu.be/yelJXnqzyTE
From the video's description:
"Tremendous steeps, abundant snow, major vertical, value and a skier first mentality is what Red Mountain Resort is all about. No pretense or frills, just great skiing in the classic Canadian community of Rossland. About a 3 hour drive from Spokane Washington just over the border, Red Mountain is a treasure with well over half of all adults from Rossland owning season passes. The ski hill is not marketed for US skiers and riders, so it remains a secret for American skiers and riders. Owner Howard Katkov has no interest in attracting corporate involvement which has been the trend at most North American Ski Resorts. Maintaining a community culture with soul and core values based on the skier rather than shareholders is "Uncle Howie's" mission. Locals have adopted that moniker for him through his 8 years at President and CEO of Red Mountain Resort. But Rossland residents were skeptical of a San Diego attorney who happened to make it big in the cosmetic industry bringing in investors to run the hill. Their concerns have morphed into a family relationship with Howard's regime. Red Mountain Resort in extreme south central British Columbia within the Kootenay range offers 1700 skiable acres, access primarily by 2 triple chairs. Motherlode and Paradise lifts service major steeps, epic tree skiing, and wide open slopes. Saturday was a powder day at Red, yet there were never more than a few skiers or riders on any run all day long. Zero lift lines. A lift ticket is priced $40 below Whistler."
Found the best summary of key points. It's a 2-page memo written for potential Canadian investors and is on the FrontFundr webpage. Heard the same info on the webinar but hard to remember the numbers. Also learned that Howard Katkov is a Californian, was a surfer in high school, started skiing at Mammoth when he was 16 but really got into skiing at Mt. Rose while in college, has a J.D., has been married 40 years, and has four kids who grew up taking ski vacations to destination resorts. A ski buddy told him about Red. He's been in a variety of successful business ventures in the last 35 years.
http://www.redresort.com/pdf/letter_to_investors.pdf
Now the idea of converting debt to equity that Howard talks about makes sense.
"Secondly, as noted in the Canadian Offering Memorandum, on June 30, 2017 two lenders to RMR Acquisition Corp. ("RMR"), a wholly owned subsidiary of the Partnership, converted a little over C$23.5M in principal of loans to Class C Units in the Partnership. These lenders agreed to convert their loans on a principal only basis and to waive all accrued interest owing by RMR to such lenders. In exchange for doing so, these lenders received a profits participation interest in the form of a new Class C2 Unit as described in the Canadian Offering Memorandum. The conversion of this debt has a very positive long term impact on the income statement, balance sheet and the business of the partnership. All of the Class C and C2 Units issued in connection with this debt conversion rank behind the Class D Units with respect to repayment of capital. "
The clubhouse membership is not actually tied to Class D shares. Meaning someone can transfer ownership, while retaining the clubhouse card. That's the same way the Gold Card can work at Massanutten. It's theoretically possible to be a Gold Card holder but no longer own a timeshare at Mnut.
" Regular membership to the clubhouse and RedHead membership to the overnight on-mountain cabins will be transferrable by the holders thereof but may not be divided amongst two or more individuals. These memberships will not be attached to the Class D Units and are being provided as special incentive under this Offering. Subscribers wishing to transfer their Class D Units (in accordance with applicable securities laws, including restrictions on resale set out elsewhere in this Offering Memorandum), may choose to transfer their membership to the subsequent purchaser of Class D Units, or not. "
Discovered another business model while learning more about what OPO means. OPO stands for Online Public Offering and is an alternative to the more traditional IPO (Initial Public Offering) on a stock exchange. Having worked for a start up that had a successful IPO in 1993, I have first hand knowledge of how a successful IPO can change a company and the lives of the early employees (40 people when I joined Quintiles in 1987, a bit over 1000 at IPO). The first OPO happend in June 2015. There are two categories of OPO, "small" and "large."
Better World Spirits in York, PA had a Small OPO ongoing at StartEngine, the same website as Red Mountain. They raised about $14,000 not quite a year ago in Promissory Notes for 8% interest, just over their $10K minimum. The max for a Small OPO is $1 million. The max for a Large OPO is $50 million. BWS makes canned cocktails. Think fruit flavored soda with vodka added that comes in a pretty soda can. BWS is a for-profit company that is a Benefit Corporation under a PA law passed in 2013.
https://www.betterworldspirits.com/blog/what-is-a-dpo-and-why-raise-funds-this-way/
The SEC regulates OPOs. There is a strict limit on the amount of money an investor can invest annually based on their net worth and annual income. The idea is to limit the risk to small investors, especially those with net worth less than $100,000 who cannot afford to lose money put into an investment.
https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html
StartEngine is not the only company that helps bring in funds for OPOs. Stonegate has a good FAQ about OPO.
http://crowdfundingonlineinvestments.com/faq
One more example of a successful business that was built on crowdfunding. In 2014 Scotty's Brewhouse in Indiana "offered investors a revenue-sharing deal, a loan that would be paid back as a percent of revenue until investors received 1.5 times their principal investment. In addition to the financial return, Wise offered discounts on food and even an opportunity to join him at a Pacers game. The campaign raised more than $380,000 from 116 small investors." Those investors all made the 50% return in less than two years. Scotty's has gone from 18 locations to 150 and continues to expand after finding a more traditional corporate partner.
https://www.locavesting.com/crowdfunding/a-crowdfunding-exit-in-indiana-as-scottys-brewhouse-is-acquired/
The Red Mountain OPO on StartEngine has 141 investors and a total of $372,740 as of 8am on Nov. 11, 2017. This is a Large OPO, with the max set at $8 million.
The numbers on the Canadian investment website haven't changed much in the last week. Still not quite 500 investors for about $C1.1 million.
Red Mountain has passed the $1 million mark for investments based on the amount of money in escrow brought in via the Canadian and U.S. OPO investment websites. About 60% from Canadians (opened in August 2017) and 40% from Americans/Australians (opened in late October 2017) as of mid-November. Red is putting on another media push to pull in money during second half of November. The goal is to reach $1.5 million by Dec. 1, 2017 (probably in Canadian loonies). That's the amount that will allow Red to commit to the capital improvements such as the cabins for which owners will get priority reservations and the small owner lodge (and their guests) in time to build for the 2018-19 season. The ultimate goal that's approved in the paperwork is $10 million. Regardless of the amount raised, the idea is to close this campaign before the end of the 2017-18 ski season.
16Nov2017 article in Pique, an online news outlet based in Whistler
Is Red Mountain an alternative to the ski industry's growing corporatization?
Looks like Red Mountain will make it to the $1.5 million target for Dec. 1, 2017. Not surprisingly, after an updated was issued that there was $1.3 million with 3 days to go, quite a few people who jumped on the bandwagon.
Close to 700 Canadians and about 260 Americans/Australians have invested as of late afternoon Nov. 30. Total in the bank is about $1.4 million with another $700K "processing" on the Canadian investment website.
With a few hours to go on 12/01/2017, just over 1000 people from Canada, U.S., Australia have put the total over $1.5 million if I'm reading the numbers correctly. A little confusing since the goal is in Canadian currency and I'm not sure what the exchange rate is right now. That doesn't include another $C700K+ still processing on the FrontFundr website for Canadians. The count of investors is up to 294 for StartEngine.
It's official! The CDN $1.5 million minimum was met, with quite a few new investors in the last 24 hours. There is a 12/01/2017 Update letter posted on FrontFundr from Howard Katkov, who signed it "Lifelong Skier, CEO, and Fly in “The Man’s” Soup." The official total was "approximately CDN $1,720,258" with quite a bit more money still processing in Canada.
Just over 700 Canadians and 300 Americans/Australians invested. Canadians account for almost half of the total in the bank, with more money still processing. With the minimum met, there will be "rolling closings" until April 2, 2018. There is a maximum of $8 million on the U.S. investment website. Next closing date is in 33 days. Initial investors will be able to get their season passes or lift tickets to use as soon as opening day, which is expected next weekend.
To see the letter, go to FrontFundr, scroll down to see the menu bar, and click on Updates.
https://www.frontfundr.com/Company/redmountainresort
" . . .
Some of the subscriptions came in big $10K and $25K digital dumps””like waking up to find out that two feet of fresh just blanketed every surface, changing everything. Most of the subscriptions piled up $1K and $3.5K at a time, though, as regular skiers and snowboarders who maybe don’t normally invest in companies, directly took our message to heart and threw down for a cause they truly believe in. Some tried to talk us out of setting such a low $1,000 minimum buy-in, but we knew that many of our most passionate fans could be comfortable investing at this level and we’re incredibly grateful that they have. Every investment, large or small, in this historic campaign is a big one. Believe that.
Skiers and snowboarders are accustomed to pulling the trigger at the eleventh hour, packing up the truck for a powder mission on a moment’s notice”¦ I think that’s what we saw here as dozens of investors came in during the final 24 hours to help us hit our subscription goal ”“ it’s been fun to watch that needle move. . . ."
To fill in background, in Sept 2016 the initial "test the waters" campaign had been open for three weeks and 1000 people had pledged $3.9 million. That was soon after Vail Corp. purchased Whistler. The "magic number" to make it worth starting legal and financial paperwork for Phase II was $5 million. By mid-February 2017 a press release went out from Red that the total for "reservations" was up to $10 million. Eventually, Phase I ended with just over $12 million in reservations. Phase II started in Canada during the summer of 2017, with the U.S. investment website going live in late October. Australians were also included. There were people in other countries who put in reservations, in particular the UK and New Zealand, but not enough to make the paperwork worthwhile. By the time StartEngine opened up for real money, several hundred thousand loonies had already be invested by a few hundred Canadians.
Reaching and surpassing the minimum of CDN $1.5 million for perks to work in 2017-18 (season passes, lift tickets) or 2018-19 (owner lodge, on-mountain cabins) happened about a month after StartEngine was open to American and Australian investors. The money came from just over 1000 people, with most of them investing $1000 or $3500 (skis or snowboard) at the two lowest Tiers.
Now the question is how much more money will be pulled in over the next few months. The final close is expected in early April 2018, with rolling closes happening more or less monthly. The next close is early early Jan 2018.
https://www.powder.com/stories/news/become-an-owner-at-red-mountain-for-1000/ - 13Sep2016
A little more history of the crowdfunding investment process. There is no question that what Red Mountain is doing is unique in the ski industry. I would guess that other independent ski resorts are watching the OPO evolve. Online Public Offerings came into existence as an option for raising capital in 2015. Clearly the Internet is the reason Large OPOs (> $1 million) are possible.
https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html
Phase I began in August 2016 and ended in February 2017 with about 3000 people putting in Reservations for over $12 million. About 1000 people joined in during the last month of Test The Waters on StartEngine to add the last million to reach the $10 million goal. Reservations could come from any country because no money was changing hands. Pretty clear that most of the Reservations came from Canada, U.S., Australia, plus New Zealand, France, Germany, and a few other countries. The plan after the end of Feb 2017 was to start Phase II by Fall 2017. The Canadian investment portal on FrontFundr opened in August 2017. StartEngine was ready to take money from Americans in late Oct 2017, about a week early, and the Australian paperwork was done soon after. The perk offerings and future plans were well thought out before Phase I started.
The first closing on 01Dec2017 was based on CDN $1.5 million from about 1000 people in Canada, U.S., and Australia. Putting the actual numbers in context of the Reservations, it was a realistic goal but still a stretch to reach in just four months.
Red Mountain had been owned and run by the local community for a long time before being bought by the RED partners in 2004. The partnership learned a lot in the 12 years before they officially opened the investment Test The Waters phase for crowdfunding investments in 2016.
http://www.redresort.com/startengine/pdf/red_press_kit.pdf - for Test The Waters starting August 2016
"As an investor, you would become an actual owner of RED Mountain Resort. That’s right ”“ OWN: The mountain, the chairlifts, the lodge, condos, snow making, and even that one tree your buddy relieved himself on last winter. Every asset we’ve got, man. (Think of it as “Shred Equity”...)
What we are offering here on StartEngine is truly the opportunity of a lifetime. We’ve been at this for 12 years and could use the help of the people at this juncture to stay fierce, independent, proud, and a little bit odd. We’re focused on building and growing this community and this love for the sport.
Money raised in stage 2 of this campaign will go toward improving the adventure here at RED. We like to think of it as investing in one’s own happiness, like a cold craft beer or getting their car detailed at the end of a long winter. Plans include remodeling the Paradise lodge; additional run development for expanded cat skiing on Mount Kirkup; building a new restaurant, clubhouse, and overnight on mountain cabins at the top of Grey Mountain; and the extension of the Silverlode chair to allow access to both Granite Mountain and Grey Mountain. For spring and summer activities, we’ll be building a multi-use trail for hiking and mountain biking from the base area to the top of Grey Mountain connecting to the Seven Summits trail system.
Investment money will also be supporting the creation of an annual local academic Scholarship fund for higher education. As an investor, you can be part of all of this - and more importantly, an owner of all of this. "
The early Feb 2017 video outlines the basics about the D Shares. The people who made Reservations were sent all the legal paperwork directly, probably via email from StartEngine.
https://youtu.be/BaoueWksFtE - August 2016
https://www.youtube.com/watch?v=yzPd8PNtJTU - 03Feb2017, $9 million in Reservations from 2000 people worldwide
https://www.youtube.com/watch?v=gAmHmE4AsKw - 09Feb2017, reached $10 million, starting paperwork for Phase II
Found one more interview with Howard Katkov worth noting. An organization that has been following the Red Mountain OPO closely is the Mountain Rider Alliance. Howard was interviewed by MRA twice in 2016 during Phase I when no money was changing hands. The latest interview was done on Nov. 23, 2017. At that time there was about $1.2 million in the bank from the first stage of Phase II. I found the second half of the interview very interesting because Howard talked about the actual process, talked about the international aspect of the campaign, told a story about an investor from MA, and made it clear that he understands the importance of following thru during the next few years and later decades to make the new D share owners happy in the short run, as well as long term.
http://www.mrablog.com/ever-wanted-piece-ski-area-interview-red-mountains-howard-katkov/
dt3 wrote:
First time I saw this I thought it had to be a scam. Even after seeing it get some mainstream coverage I still question if it’s really on the up/up.
Why would anyone pay $1K for 5 day tickets when “Red’s two-day lift pass sells for C$184”? Normally the appeal of these crowdfunding deals is a prepurchase something and receive a considerable discount for taking on the risk.
i don’t see anything on the site that makes this any different than other crowdfunding sites... which means none of these prizes or rewards are guaranteed. My reward for “investing” and prepaying $1,000 dollars is getting a few lift tickets at well over the counter price?? What about the risk of this whole thing not working out? I hope investors know that means they get nothing. No lift tickets. No refunds. Nada.
After reading more and listening to interviews with the Red CEO, I'd say the big difference between an OPO and a crowdfunding campaign such as on Kickstarter is that an OPO is regulated by the SEC in the U.S. There is not much financial risk for the lower Tiers. In fact, SEC regulations for the amount an investor can invest in an OPO is based on their income or assets in order to make sure someone doesn't get too far over their head. Suppose someone invests $1000 and makes use of their lift tickets in the next year or two. Then suppose the Red Mountain voting partners decide to sell in 2020, presumably because they get an offer too good to refuse. The investors who hold D Shares will be paid out after any outstanding loans and before any other owners who hold other types of shares. Valuation is currently almost $54 million, with about $4 million in loans.
https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html - OPO rules as of May 2017
The fact that major lenders opted to convert existing big loans to equity shares in the recent years instead of continuing to get interest payments says something about the expectation of long term success of Red Mountain. Ski operations is only one piece of the business.
That said, Red didn't need thousands of people to invest $1000 or more. There were about 3000 worldwide who put in Reservations totalling just over $12 million during Phase I. So far 1000 people have invested just over $1.5 million, mostly at the lowest two Tiers. My guess is that those D Share owners won't have any regrets.
In case you're wondering, I didn't invest but I did think seriously about it. Haven't ruled it out completely yet. I've also supported quite a few Kickstarter campaigns for varying amounts from under $100 to close to $500.
Hmm, there are clearly people watching crowdfunded investing who probably used to pay attention to potential IPOs. The Crowdfund Insider noted in early November that the Red Mountain campaign is one fo the first to "provide a cross border offer."
https://www.crowdfundinsider.com/2017/11/123969-red-mountain-ski-resort-cross-lists-startengine-frontfundr-duel-us-canada-crowdfunding-offer/
* * * * * excerpt
So how is Red Mount Resort accomplishing this cross border securities offer?
The company filed a Reg A+ offer in the US and the OM exemption in Canada. The Offering Circular for the Reg A+ offer is available here.
This past Monday, Red Mountain Resort say the Test the Waters (TTW) portion of the Reg A+ Offer had topped $12 million prior to opening the offer to investors.
“We launched in Canada a few months earlier due to differences in securities regulations,” said Red CEO Howard Katkov, “.. and we’re very happy with what we’re seeing North of the border on FrontFundr.com, our Canadian crowdfunding portal. As of today, we’re over $900,000 of investments waiting to close and we are hopeful our American offering to be snatched up at an even higher rate.”
* * * * *
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