American Skiing Co. officials were cautiously anticipating a new era Tuesday, one in which they could make a deliberate re-entry into the real estate development game.
The key to the optimism was the announcement Tuesday that the gross proceeds of the March 18 auction of Steamboat Grand Resort Hotel units totaled $23 million.
"We are ecstatic at the market's response to our offer to sell the remaining Steamboat Grand inventory," said Betsy Wallace, chief financial officer for ASC. "Buyer interest exceeded our expectations. The successful sale of the remaining inventory allows us to look ahead to new development opportunities across the company."
ASC executives are optimistic they will soon be free of about $20 million in debt tied to the original construction of the Steamboat Grand in the late 1990s. When that is accomplished, the parent company of the Steamboat Ski and Resort Corp. is planning to court outside real estate developers to form joint ventures. Together, they would tackle new developments at some of their eight ski resorts.
"The company has a magnificent group of resorts and real estate assets," Wallace said. "We're interested in developments that can showcase our resorts."
Wallace said Stan Hansen was named senior vice president of real estate in planning in September in preparation for this change in the company's course. His job is to familiarize himself with the company's undeveloped land at resorts in New England, Colorado and Utah and look for development partners, she said.
Any development likely would proceed at a deliberate pace, but company executives took the success of the Steamboat Grand auction as a clear sign that the public values its product.
"This illustrates not only the quality of the product, but also the stature of the Steamboat Grand and Steamboat itself as one of the premier destination resorts in North America," Wallace said.
Wallace said it is premature to talk about where new developments might be built. The company divested itself of much of its undeveloped land here. However, the Steamboat Grand was built (it was completed in October 2000) so a new wing could be added to its south end.
ASC set out to auction 239 fractional units and 30 whole units at the resort hotel in Steamboat. The Steamboat Grand has 327 rooms. Initially, the company announced it would sell 100 of the total intervals at "absolute auction." However, the interest in the auction gave management enough confidence to release all of the units to the highest bidder regardless of price.
Company officials said the auction drew more than 500 total bidders at the site, via the Internet and by telephone. About one third of the purchasers bid via the Internet.
Wallace said the auction sales from the Steamboat Grand are scheduled to close April 17 or 18. Until then, she's reluctant to talk specifically about how the $23 million stacks up against the outstanding debt on the construction loans held by Textron Financial. In theory, if enough of the units fell out of contract, it could affect the effectiveness of the auction results, she said.
However, Wallace said the tentative proceeds (the auction commission has not been subtracted from the $23 million) roughly match up with the goal of retiring the debt.
Textron holds the original construction loan (the balance was $9.1 million on Jan 29) and a subordinate loan of $10.6 million. The bulk of the latter was extended in July 2000 to cover cost overruns tied to construction delays. It carries a fixed rate of 20 percent interest.
The senior loan was being repaid out of a trickle of Steam-boat Grand interval sales at a rate of 70 percent to 80 percent of proceeds. However, they were not sufficient to keep the company current with the payment schedule.
ASC spokesman David Hir-asawa said ASC's real estate division -- Grand Summit Resort Properties -- is separate from its resort division and that no resort revenues have been used to pay off debt on the hotel construction.
Textron negotiated an agreement with ASC giving it 85 percent of the auction proceeds. That rate applied to $23 million would yield $19.55 million -- very close to the $19.7 million in outstanding debt. ASC has other revenue streams and assets at the hotel, as well as other obligations, she said.
Until the sales close, the two companies won't know where they stand.
"American Skiing isn't worried, and neither is Textron," Wallace said.