You are being offered the opportunity to purchase a limited partnership interest in the Partnership. Each such interest is referred to herein as a “Unit” and is being offered for a subscription price of $500,000, which does not include the $50,000 administrative fee described below. The time period for the offer and sale of the Units began on the date of this private placement memorandum and will continue until the Partnership has received gross proceeds from the sale of Units of both partnerships totaling $52,000,000 (exclusive of the administrative fee), unless terminated sooner by the general partner in its sole discretion.
The minimum individual subscription and capital contribution to the Partnership is $500,000 which is the minimum investment amount prescribed for qualifying investments in a regional center under the EB-5 Visa Program. To the extent that the minimum qualifying investment amount is increased, the minimum subscription and capital contribution will be increased to match the minimum qualifying investment amount.
In addition to his or her capital contribution each investor must also pay an administrative fee of $50,000 to the general partner. The administrative fee will be used to pay (including reimbursement of previously paid amounts) the fees and expenses of the general partner and Mount Snow Ltd. incurred in structuring
41 and organizing the Project in compliance with the requirements of the EB-5 Visa Program, including marketing, consulting, escrow, legal and other fees and expenses and any fees of foreign broker/dealers, and coordinating with counsel and foreign broker/dealers with respect to the collection of information from potential alien entrepreneurs and other administrative matters arising in connection with their admission as limited partners of the Partnership.
In order to participate in the offering and purchase a Unit in the Partnership, you should make a check for
$550,000 for your subscription and capital contribution ($500,000) and for your administrative fee ($50,000) payable to “Peoples United Bank”. You should mail your check together with your completed and signed subscription agreement and consent to limited partnership agreement and investor
questionnaire, to the general partner at the following address:
Mount Snow GP Services LLC PO Box 2805
89 Grand Summit Way West Dover, VT 05356.
Alternatively, in lieu of check you may pay your subscription and capital contribution and administrative fee by wire transfer to the following account:
People’s United Bank Two Burlington Square
ABA# 221172186 A/C# 0019100316 Attn: Trust Operations
FBO: Mount Snow Carinthia Group Escrow
As described below on Page 53, the general partner may at its discretion cause a limited partner to exchange its interest in Carinthia Group 1, L.P. for an economically equivalent interest in the parallel fund, Carinthia Group 2, L.P.
Escrow Agreement /Acceptance of Subscriptions
Your execution of the subscription agreement and consent to limited partnership agreement constitute your offer to buy a Unit in the Partnership and to hold the offer open until your subscription is either accepted or rejected by the general partner or you withdraw your offer. To withdraw your subscription agreement, you must give written notice to the general partner before your subscription agreement is accepted by the general partner.
All capital contributions and administrative fees will be held in escrow by People’s United Bank (the
“Escrow Agent”) pursuant to the terms of an escrow agreement between the investor, the general partner and the Escrow Agent (the “Escrow Agreement”). Funds will not be released from escrow until approval of the first I-526 petition filed by an investor in the Partnership (the “Escrow Release Condition”). Once the Escrow Release Condition is satisfied, the funds will remain in escrow until released by the general partner to be used to fund the Project. Until such time as the general partner releases the funds from escrow, the general partner may, in its sole discretion, reject an investment in the partnership.
Subject to the foregoing, your investment will be accepted or rejected by the general partner in its sole discretion. The general partner's acceptance of your subscription is discretionary, and the general partner may reject your subscription for any reason without incurring any liability to you for this decision. If your subscription is rejected, then all of your funds, including the administrative fee, will be promptly returned to you without deduction for any fees.
42 There is no minimum level of aggregate subscriptions that must be received by the general partner before it accepts an individual investor’s subscription. Subject to the terms of the Escrow Agreement and the satisfaction of the Escrow Release Condition, unless rejected by the general partner in its sole discretion, each subscription may be accepted by the general partner as and when received. Accordingly, subject to satisfaction of the Escrow Release Condition, upon confirmation that the capital contribution and
administrative fee has been deposited in to the escrow account and receipt from the general partner of the executed subscription agreement and consent to limited partnership agreement, escrow agreement and investor questionnaire, the general partner may authorize the escrow agent to release the subscription amount to the Partnership and the administrative fee to the general partner.
Your subscription may be accepted before subscriptions have been accepted that would permit the Partnership to fund the loans to West Lake LLC and Carinthia Ski Lodge LLC in full and enable them to complete development of the Project.
To the extent that the offering is not fully subscribed and less than $52,000,000 is raised, the Partnership will allocate up to the first $30,000,000 of subscriptions received and accepted to West Lake LLC for the development of the West Lake Project. Further, the West Lake Project will be developed in three tranches consisting of $10,000,000 (tranche one), $12,500,000 (tranche two) and $7,500,000 (tranche three). To the extent that the general partner accepts subscriptions for any tranche and the proceeds resulting from such subscriptions do not equal the amount for such tranche set forth above, Mount Snow will be required to make alternative arrangements to finance the balance of the tranche. There can be no assurance that Mount Snow will be able to obtain such additional financing on acceptable terms, or at all.
If and when subscriptions received exceed $30,000,000, the next $22,000,000 will be allocated to Carinthia Ski Lodge LLC for the development of the Carinthia Ski Lodge. To the extent that the general partner accepts subscriptions for the development of the Carinthia Ski Lodge and the proceeds resulting from such subscriptions do not equal $22,000,000, Mount Snow will be required to make alternative arrangements to finance the balance required to complete the Project. There can be no assurance that Mount Snow will be able to obtain such additional financing on acceptable terms, or at all.
MANAGEMENT General Partner
The Partnership will have no officers, directors or employees. Instead, Mount Snow GP Services LLC will serve as the general partner of the Partnership. The general partner is headquartered at 89 Grand Summit Way, West Dover, VT 05356, which is also the Partnership's primary office. Mount Snow Ltd. is the sole member of the general partner.
Officers of General Partner
Since the general partner is a limited liability company, and not a corporation, it has no directors but is managed by a board of managers. The sole manager of the general partner is currently Richard Deutsch.
Mr. Deutsch is Vice President — Business and Real Estate Development and a Director of Peak Resorts.
He has served in these positions for over ten years. As the Vice President — Business and Real Estate Development, Mr. Deutsch is responsible for developing Peak Resorts’ growth strategy, along with Messrs. T. Boyd and Mueller, and identifying and evaluating acquisition targets and other potential growth opportunities.
43 FEDERAL INCOME TAX CONSEQUENCES
The following discussion is for informational purposes only and is not intended as tax or legal advice. Each potential investor should seek advice based on the investor’s particular circumstances from an independent tax advisor.
Introduction
This discussion is based on the Partnership’s intended plan of operation, as described in this private placement memorandum and the Partnership Agreement, applying the federal income tax laws as
currently in effect as contained in the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, and relevant judicial decisions and administrative guidance. The federal tax laws are subject to change, possibly with retroactive effect, and any such change may materially affect the tax consequences of an investment in the Partnership. Neither the General Partner nor its counsel has any continuing duty to advise the Partnership or any limited partner of any changes in the tax law that may affect any party or cause any part of this discussion to become inaccurate. No rulings or opinions of counsel have been, or will be, requested with respect to any tax-related matter discussed herein. There can be no assurance that the positions the Partnership takes on its tax returns will be accepted by the Internal Revenue Service (the “IRS”). This discussion relates only to U.S. federal income taxes and not to any local, state or foreign taxes or U.S. federal taxes other than income taxes.
Because this discussion is a general summary, it does not address all aspects of federal income taxation that may be relevant to a particular investor in light of the investor’s particular circumstances, nor does it address, unless explicitly noted (and only to the extent so noted), certain types of investors subject to special treatment under the federal income tax laws, including but not limited to the following:
tax-exempt organizations (except as discussed under “Tax-Exempt Partners” below);
insurance companies;
financial institutions,
broker-dealers;
dealers in securities or currencies;
traders in securities that elect to use the mark-to-market method of accounting for their securities;
investors who are themselves partnerships or other pass-through entities for federal income tax purposes;
regulated investment companies;
real estate investment companies;
real estate mortgage investment conduits;
expatriates;
persons liable for alternative minimum tax;
persons whose “functional currency” is not the U.S. dollar;
persons holding their investment as part of a hedging, constructive sale or conversion, straddle, or other risk-reducing transaction; and
persons acquiring their interests in the Partnership in connection with the performance of services.
Except as otherwise explicitly noted under “Non-U.S. Partners” below, this summary addresses only (i) individual citizens or residents of the United States (including dual residents treated as a U.S. tax resident under an applicable tax treaty), (ii) corporations (including entities treated as corporations for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia, (iii) estates with income subject to United States federal income tax regardless of its
44 source, (iv) trusts subject to primary supervision by a United States court and for which United States persons control all substantial decisions, or that were in existence on August 20, 1996 and have elected to be treated as a U.S. person; or (v) persons whose worldwide income or gain is otherwise subject to U.S.
federal income tax on a net income basis. The discussion below assumes that a partner holds its interest in the Partnership as a capital asset within the meaning of section 1221 of the Code.
Portions of this discussion address the ability of investors to utilize items of loss or deduction allocated to them by the Partnership. Potential investors are cautioned that the Partnership will not be operated for the purpose of generating tax deductions, losses, credits or other benefits. Investors should not anticipate that an investment in the Partnership will yield items of deduction, loss, or credit to offset items of income or gain from other sources.
Tax Status of the Partnership
The Partnership intends to be treated as a partnership for federal income tax purposes. In general, as discussed below, partnerships are not separate taxable entities. However, certain “publicly traded partnerships” are taxed as corporations for federal income tax purposes. A partnership is “publicly traded” for this purpose if its interests are traded on an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof), as defined in the Code. The Partnership Agreement may contain restrictions on the transferability of any interest in the Partnership and other terms designed to prevent the Partnership from being treated as publicly traded for this purpose.
If the Partnership were classified as an association or a publicly traded partnership taxable as a corporation, the Partnership would pay federal income tax at corporate rates on its net income, and distributions to the partners would in general be dividends to the extent of the Partnership’s “earnings and profits” (as defined for tax purposes), with distributions in excess thereof being treated first as a return of capital and thereafter as capital gain. Any such tax at the entity level would reduce the amount of cash available for distribution to the partners. This discussion of material U.S. federal income tax
consequences assumes that the Partnership will be treated as a partnership (other than a publicly traded partnership taxable as a corporation) for federal income tax purposes.
Taxation of Partners on Profits, Losses and Distributions of the Partnership
As a partnership, the Partnership will not be subject to entity-level federal income tax. Instead, each partner will be required annually to take into account and report separately, on its own federal income tax return, its respective distributive share of the Partnership’s items of taxable income, gain, loss, deduction and credit for the taxable year of the Partnership ending with or within the partner’s taxable year,
regardless of whether the partner has received or will receive any distribution of cash or property from the Partnership. It is possible that partners will incur tax liabilities attributable to the Partnership that exceed the amount of cash distributions made to them. Generally, ordinary income or loss earned or incurred by the Partnership will be ordinary income or loss to the partners, and capital gain or loss earned or incurred by the Partnership will be capital gain or loss to the partners. Whether such capital gain or loss is long-term or short-long-term will generally depend on the Partnership’s holding period for the underlying capital asset and not a partner’s holding period for its interest in the Partnership.
Distributive shares of income, gain, loss, deduction and credit are allocated in accordance with the Partnership Agreement. The Partnership expects that such allocations will be respected by the IRS as either having “substantial economic effect” (or be deemed to have substantial economic effect) or being determined in accordance with a “partner’s interest in the partnership.” However, the Treasury
Regulations regarding when allocations are respected for tax purposes are very complex, and there can be no assurance that the allocations described in the Partnership Agreement will be respected by the IRS.
45 Generally, cash distributions received by a partner from the Partnership (as opposed to allocations of taxable income or loss) will only be taxable to the extent such distributions exceed the partner’s basis in its Partnership interest. Distributions of property (other than cash) received by a partner from the Partnership are generally not taxable. However, if the Partnership does not qualify as an “investment partnership” within the meaning of Section 731(c)(3)(C) of the Code, a partner receiving a distribution of marketable securities from the Partnership may recognize taxable gain to the extent the fair market value of the distributed securities, plus any distributed money, exceeds the partner’s basis in its Partnership interest. A partner selling appreciated securities distributed to it tax-free by the Partnership will generally recognize taxable gain based on the total appreciation in the value of the securities (subject to certain adjustments and exceptions in the case of a distribution in liquidation of a partner’s Partnership interest), including such appreciation that accrued while the securities were held by the Partnership.
Although the Partnership itself will not be subject to federal income tax, it will compute its taxable income like an individual, except that certain deductions are not allowed, and certain items must be separately stated on the Partnership’s annual federal partnership information tax return. The Partnership’s taxable year will be determined in accordance with the requirements of the Code and is expected to be the calendar year. The Partnership also will provide partners with statements to assist partners in determining and reporting on their federal income tax returns items of taxable income, gain, loss, deduction and credit arising from their investment in the Partnership. While the Partnership will endeavor to provide timely tax reporting to all partners, it cannot guarantee that this can be accomplished in any year or at all. It may be that, in any given fiscal year, such reporting may not be available until after April 15 of the following year. Partners, therefore, should be prepared to obtain extensions of the filing date for their income tax returns at the federal, state and local level.
Limitation on Use of Partnership Losses and Certain Deductions
The Code and Treasury Regulations limit the ability of partners to utilize losses and deductions that may arise from the Partnership’s activities. For instance, allocations of loss or deduction from the Partnership, or the ability to utilize such allocations, may be limited by a partner’s adjusted tax basis in its interest in the Partnership at the end of the Partnership’s taxable year in which the loss or deduction incurred.
Additionally, individuals and certain closely held corporations are subject to the “at risk” rules that limit a partner’s ability to utilize losses to the amount the partner has at risk in the Partnership’s activities. A partner’s at-risk amount generally is equal to the partner’s adjusted tax basis in its interest in the Partnership, except that it will generally not include any amount attributable to liabilities of the
Partnership or any amount borrowed by the partner on a non-recourse basis. To the extent that a partner’s allocable share of Partnership losses is not allowed because the partner has an insufficient amount at-risk in the Partnership, such disallowed losses may be carried forward by the partner to subsequent taxable years and will be allowed to the extent of the partner’s at-risk amount, if any, in subsequent years.
The use of capital losses is subject to significant limitations, as is the use of deductions for “investment interest” should the Partnership use leverage in its investments. The Partnership’s organizational expenses are not currently deductible, but may be amortizable only over a 15-year period, if at all.
Certain syndication expenses incurred by the Partnership in offering and selling Partnership interests will be non-deductible altogether. Partners that are individuals, estates or trusts may deduct so-called
“miscellaneous itemized deductions” (e.g., fees paid to the Management Company) only to the extent such deductions exceed 2 percent of the partner’s adjusted gross income. Further, the amount in excess of that 2-percent floor is subject to an overall limitation on itemized deductions.
The Code restricts the deductibility of losses from a “passive activity” against certain income which is not derived from a passive activity. Except to the extent the Partnership invests in entities operating a trade