Alaska fishing, hunting, recreation, and wilderness guiding lodges are world-class. Ranging from rustic to regal, these unique properties and businesses present some common challenges and considerations in a purchase or sale. This primer is designed to familiarize readers with recurring issues we often encounter that pose obstacles to successfully closing these transactions.
Consolidating Ownership
While it might seem obvious, Sellers need to make sure they actually own what they are selling. Alaska lodges have many assets, and who owns what is not always as clear as it seems.
For example:
- Are all titled vehicles (boats, vehicles, trailers, etc.) owned by the Seller company, or are they owned by a subsidiary, affiliate, or the owners of the company individually?
- Is the real estate owned by the Seller company, by a separate LLC special purpose entity, or by the owners of the company individually?
- Are the various licenses and permits necessary for the business issued in the name of the company?
Clarifying ownership can take significant time (and money) to resolve but is essential for an efficient sale of a lodge business.
For Buyers, determining ownership of disparate lodge assets is a key due diligence task. Pre-closing transfers are frequently required to prepare a lodge business for sale.
Transfer of Licenses and Permits
Many Alaska lodges rely on key permits or authorizations for operations, such as National Park concessions, liquor licenses, charter halibut permits, U.S. Coast Guard vessel authorizations, tidelands leases, or agreements with private parties such as Alaska Native Corporations.
Transferring these rights can be burdensome and time-consuming. Approval of these transfers can take time and should be initiated well in advance of the lodge’s operating season. Do not assume that all licenses and permits are transferrable.
Unpermitted Wastewater and Septic Discharge
Many remote lodges do not have properly engineered or permitted wastewater discharge and septic systems, particularly if located in an unorganized borough. Purchasing a lodge without a permitted, engineered wastewater system is an invitation for liability. It takes time to properly permit these systems, and for financed purchases, non-permitted systems can be a non-starter for lenders.
Deposits and Reservations
Buyers and Sellers need to think carefully about how reservations and deposits will be treated in the transaction. Does the Seller “keep” the deposits? Are they “transferred” to the Buyer or left as operating cash in the business post-closing? These negotiations should be flagged early in the process and not remain unresolved until the last minute.
Retain Legal Counsel Early
Many Alaska lodge transactions are delayed or fail because legal counsel was not involved early enough in the process to help spot issues. Consider retaining an attorney before entering into a letter of intent, so key terms aren’t overlooked, and late-stage negotiations don’t delay or tank the transaction.
If you are planning on buying or selling an Alaska lodge, the attorneys at Landye Bennett Blumstein are well-equipped to assist you.
