$265M: Sale price gets attention in ski industry

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Intrawest timeline

1976 - Intrawest established as a residential and urban real estate firm by Joe Houssian in Vancouver, B.C., and Seattle.

1986 - Acquired Blackcomb Mountain in British Columbia.

1991 - Acquired Tremblant in Quebec.

1993 - Acquired Panorama Mountain in British Columbia, making it the largest ski resort operator in Canada.

1994 - Acquired Stratton Mountain in Vermont.

1995 - Acquired Snowshoe Mountain in West Virginia and 33 percent share of Mammoth Mountain in California.

1996 - Acquired Whistler Mountain in British Columbia and Copper Mountain in Colorado.

1997 - Increased ownership of Mammoth Mountain to 58 percent.

1998 - Purchased Mountain Creek in New Jersey; acquired Breeze Rentals and Max Snowboards, a rentals and ski and snowboard accessories company; signed agreement to build a village at Solitude, Utah.

1999 - Acquired 45 percent of Canadian Mountain Holidays, the largest heli-skiing operation in the world; increased ownership of Mammoth Mountain to 59.5 percent.

2001 - Selected by Aspen Skiing Co. to build a resort village at Snowmass.

2002 - Awarded contract with the city and county of Denver to operate Winter Park Resort.

2005 - Sold interest in Mammoth Mountain to Starwood Capital.

Dec. 19, 2006 - Announced purchase of Steamboat Ski and Resort Corp. for $265 million.

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American Skiing Co. CEO B.J. Fair said Steamboat has done a great job of creating value for the ski area in the past five years.

Intrawest hopes to keep Ski Corp. managers

Steamboat Ski and Resort Corp. President Chris Diamond said Tuesday that he hopes to stay in his post beyond the pending sale to Intrawest.

"I love Steamboat," Diamond said. "I hope to stay. Time will tell."

He likely will get that chance, Intrawest's President and Chief Operating Officer Alex Wasilov indicated.

"Absolutely," Wasilov said when asked if he intended to retain Steamboat's senior managers. "We're very pleased with the management team, and we have no expectation to make any changes. We think they're doing a great job, and we would expect them to continue doing that great job as part of the Intrawest family for a long time."

American Skiing Co. CEO B.J. Fair met with ski area employees at mid-morning Tuesday to discuss the sale.

He told Steamboat Today that his company would proceed with advance planning for Steamboat's 2007-08 season as if it would still be at the helm next winter.

That approach is necessary, Fair said, to be prepared for the contingency that the pending sale to Intrawest might not be consummated. Work on budgeting will take place as usual, airline contract discussions will begin early next year and planning for capital budgets will be undertaken.

"In the unlikely event this (sale) does not close, American Skiing Co. is absolutely committed to investing in Steamboat," Fair said.

- Pilot and Today staff

— When American Skiing Co. announced Tuesday morning that it will sell the Steamboat Ski Area to Intrawest, it was the price tag that grabbed everyone's attention.

$265 million.

That's a 185 percent increase over the $92.5 million that an investment group led by Tim and Diane Mueller contracted to pay for the ski area just five years ago. American Skiing Co. pulled out of that deal on closing day; a repeat of that scenario seems unlikely this time.

"Creating value is what it has always been about," American Skiing Co. CEO B.J. Fair said. "We were able to create tremendous value. But it's also the absolute right thing to do for Steamboat. In addition to the price, (Intrawest) did a good job of articulating what the future of Steamboat can be."

Intrawest's announced purchase of the Steamboat Ski Area came just a couple of months after it was acquired by Fortress Investment Group. Fortress, based in New York, is a private equity firm and hedge fund that manages assets totaling $26 billion. Fortress bought Intrawest, which is involved in 10 ski resorts in North America, for $2.8 billion in October.

The Steamboat deal already has made an impression on industry insiders.

"Good for them," former Intrawest executive David Hill said about what American Skiing Co. will get out of the deal.

Hill is the former senior vice president of resort development for Intrawest and the current president of Resort Ventures West. His company is undertaking the Wildhorse Meadows hotel and residential development in Steamboat.

Hill admitted to being a little surprised by the price.

"How is it that (Steamboat) could go from the price Tim and Diane Mueller contracted to pay for it to where it is today?" he asked.

Grand deal

The sale, expected to close by the end of March, would include the commercial spaces in the Steamboat Grand Resort Hotel, employee housing units at Walton Pond Apartments (owned with other partners), four parking structures and lots with development potential, and Steamboat Central Reservations. The Steamboat Grand has the potential for the addition of a south wing, which might add 70 new units, resort officials said. The deal also calls for Intrawest to assume $4 million in debt.

A major difference between the Triple Peaks and Intrawest deals for Steamboat Ski Area is that the former did not involve the Steamboat Grand. Fair said the Grand has matured into a solid revenue generator in the intervening five years.

Welcoming Intrawest

Six years after leaving Intrawest, Hill is leading the development company building the Wildhorse Meadows project in Steamboat.

Hill, whose development will be tied closely to Steamboat's Gondola Square via a people-mover gondola, said he would welcome Intrawest's arrival as a positive development.

"The credibility in Intrawest and Fortress - in the business sense - is extremely positive for us," Hill said.

Hill confirmed Fair's stance that the performance of management in both Steamboat and American Skiing Co. headquarters in Park City, Utah, increased the value of the ski area.

"B.J. (Fair) is right that their management team has done a lot to improve their business," Hill said.

He's also intrigued with the high value being placed on ski resorts today. "That's where the market is. We're seeing that the capital markets have had a heavy focus on the ski industry. Why is that? Is it that it's in vogue?"

Hill said Intrawest's sale in December 2005 of a majority share of Mammoth Mountain Ski Area in California for $365 million seems to have set a new benchmark for the acquisition of ski resorts.

Different era

Fair said it's important to understand the different economic climate in which this sale is taking place. First, he said, the substantive part of the previous sale process in late 2001 took place in the post-Sept. 11 era, when capital markets tightened severely.

American Skiing Co. was in much more difficult financial straits at the time, Fair said, and it was widely known among prospective buyers that the company was in a situation of having to sell a major asset. Those factors combined to put downward pressure on the price in 2001-02.

Despite the fact that its quarterly earnings reports still suffer from the long-standing debt the company carries, American Skiing Co. has been able to steadily improve the financial performance of its resorts.

"The sale is confirmation of that," Fair said. "Every year, we've hit what we said we were going to do."

In July, he said American Skiing Co.'s board of directors was fully prepared to turn away from the sale process if it didn't appear a Steamboat sale would realize its goals.

Lasting value

After their deal for Steamboat fell apart, the Muellers purchased Crested Butte Mountain Resort in March 2004. They studied the latest Steamboat sale offering during the fall but did not take their renewed interest to a serious level after the price range became evident.

Tim Mueller would not divulge the amount of the Crested Butte sale, but he said Tuesday that the price he paid for the resort near Gunnison 33 months ago wasn't comparable to this week's Steamboat sale. That's even when you adjust for Crested Butte's skier visits (about one-third of Steamboat's in 2004).

"It certainly wasn't the same magnitude," Mueller said. "And we got a lot of developable real estate in our (Crested Butte) deal."

Mueller said the valuation of ski areas has tended to be cyclical, but if the price Intrawest has agreed to pay for Steamboat proves out over time, it will be a positive development for other ski area owners.

"We'll see if it has lasting value," he said. "I'd certainly like to think it's sustainable. If not, it adds a question mark."

Hill said he expects Intrawest's leadership to continue to build on its reputation for being able to introduce new management standards without trampling on local sensibilities.

"I feel positive they will continue that," he said. "They have an ability to inject enthusiasm in the form of capital. That has been a consistent there no matter what ski area they acquire."

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