Base area developers said Wednesday that financial woes suffered by Fortress, which owns Steamboat Ski and Resort Corp. parent company Intrawest and is financing several base area projects, are not slowing planning for redevelopments including Ski Time Square and Thunderhead Lodge.

Photo by Matt Stensland

Base area developers said Wednesday that financial woes suffered by Fortress, which owns Steamboat Ski and Resort Corp. parent company Intrawest and is financing several base area projects, are not slowing planning for redevelopments including Ski Time Square and Thunderhead Lodge.

Fortress on shaky ground

Value tumbling for firm that backs Intrawest and base area projects


— Fortress, the financial foundation of Steamboat Ski and Resort Corp. and a backer of several base area redevelopment projects, is facing significant challenges that could affect construction on Mount Werner.

Fortress Investment Group, a public hedge fund and private equity firm, is the parent company of Intrawest, which owns Ski Corp. Amid the global economic downturn, the New York-based Fortress has made headlines because of financial concerns - Fortress stock declined from $31 a share in February 2007 to $1.45 a share when the market closed Wednesday.

A real estate document links a Fortress fund to base area redevelopment projects.

The Steamboat Ski Resort Base Area Village prospectus listed three partners for the Thunderhead Lodge and Ski Time Square redevelopments. The prospectus aims to secure development financing for the project. The Atira Group, Cafritz Interests and Drawbridge Special Opportunities Fund, which is a Fortress fund, are listed as partners.

"Intrawest ULC, a subsidiary of Fortress Investment Group, has agreed in principal (sic) to provide an additional $5 million equity investment in the Sponsorship entity," the document states.

Ski Corp. President Chris Diamond said he hadn't seen the document or heard about any Intrawest plans to invest in the project. It's possible that Intrawest is considering making an equity investment once the development permits are in place, Diamond said. He said he was not involved.

Despite Fortress' troubles, officials with The Atira Group and Cafritz Interests reaffirmed their progress on the base area redevelopment today. The project will replace the demolished Ski Time Square and Thunderhead Lodge with 1 million square feet of high-end residential and commercial space.

"We are proceeding. Let's be really clear on that," said Mark Mathews, a vice president for development with The Atira Group. "It's our intent to keep moving on this."

In city planning hearings, Mathews often has referred to a "five-star brand" that has signed a letter of intent to operate the Thunderhead property. The prospectus confirms that company is the Ritz-Carlton.

Holliday Fenoglio Fowler LP, a commercial real estate capital intermediary, created the prospectus. Kevin MacKenzie, a managing director for the firm in Dallas, declined to comment in an e-mail. Lilly Donohue, director of investor relations at Fortress, has not returned a call seeking comment.

Diamond said Ski Corp. was not involved in the Thunderhead or Ski Time Square projects.

"It has debt funding through Fortress through its Drawbridge fund," Diamond said. "It's a separate investment from Fortress' investment in Intrawest."

Intrawest deals with Fortress' private equity side, Diamond said, adding that Fortress' Drawbridge fund deals with real estate. That fund also is invested in the Edgemont project near the base area, Diamond said. Fortress is the umbrella group.

"The public company is just basically the management group that receives fees when they're successful in their deals," he said.

Feeling impacts

Last month, the Steamboat Springs Planning Commission supported a development plan for the Thunderhead site. Mathews said he plans to submit a development plan for the Ski Time Square site in March.

Mathews and Cafritz Interests Senior Vice President Melanie Domres were reluctant to discuss Fortress' involvement in the process. Mathews said the investment group had hoped to "stay out of the press on this."

"We have partner calls basically on a weekly basis, and all the partners are in line on proceeding," Mathews said. "Our financing is in place today, and we're proceeding with our development plan and then on to presales. : There's no question that the impacts of Wall Street are being felt, but we are still proceeding with this, and there's a process here."

After entitlements, Mathews said, the speed with which the project moves from presales to construction will depend on the threshold that lenders will require before they will finance the construction. In October, Mathews said that threshold usually has been 50 to 60 percent, but with the credit markets in turmoil, he and Domres said the requirement now is a moving target.

"It's really impossible for us to predict at this point," Domres said. "Our sole focus is on the site plan process."

Discussing new deals

According to Fortress Investment Group's third quarter 2008 filing with the Securities and Exchange Commission, the Drawbridge Special Opportunities Fund had $6.4 billion in assets under management as of Sept. 30, 2008. The filing also states that the fund was 18 percent below its peak value at the end of October.

In December, Fortress told investors they couldn't get their money back from several of its funds. The temporary move came after Fortress received requests totaling $3.51 billion in redemptions to investors for November and December, the firm reported Dec. 3.

Intrawest has faced its own money concerns.

The Vancouver, B.C.-based company refinanced $1.7 billion in debt by an October deadline. In November, Intrawest announced layoffs and "realignments" in its work force.

That affected 16 Steamboat Ski Area employees, Ski Corp. officials confirmed at the time.

Intrawest runs 11 North American resorts, including Whistler Blackcomb in British Columbia and Copper Mountain and Winter Park. Intrawest's deal to buy the Steamboat Ski Area from American Skiing Co. was finalized in March 2007.

Diamond said the ski resort was not for sale.

"There is an exploration of setting up a new financing deal by resort. : We want to have a new refinancing plan in place, and one of the options that's being explored is looking at setting up each company with its own debt," he said.

It's speculation now, Diamond stressed. If such a deal went through, it would mean that instead of one credit facility for all of Intrawest, resorts including Steamboat, Winter Park and Copper Mountain would have their own, he said.

"That's one of four or five strategies being discussed at the moment," Diamond said.


JusWondering 8 years, 2 months ago

All I can say is the city of Steamboat should be actively pursuing other industries besides tourism. No town can afford to have all of its future tied to one industry/organization.

Read the tea leaves by watching other industries that have performed similarly throughout history.

This should be a concern: "There is an exploration of setting up a new financing deal by resort. : We want to have a new refinancing plan in place, and one of the options that's being explored is looking at setting up each company with its own debt," he said.

Anyone who has spent any time in the M & A business for awhile would tell you companies do this for a reason beyond setting each company up with its own debt.


JusWondering 8 years, 2 months ago

Yep and the reconstruction of Ski Time Square sure places a significant debt burden on the 'boat don't you think.


Fred Duckels 8 years, 2 months ago

The lefties in their secure government jobs surely need to step in and share the wealth, it is only fair.


stillinsteamboat 8 years, 2 months ago

Fred, Take your blinders off man! Stop listening to Rush. It took a village of idiots to create the mess we are now in. It didn't happen in the past 3 weeks. Nor did it start when Nancy Pelosi came to Washington.


Steve Lewis 8 years, 2 months ago

This is an important article. A more certain light on the partnering behind these new developments at the base. They likely have little choice but to sell the parcels as they get permits vested for them.

Partitioning the Intrawest resorts also seems like assembling more pieces for future deals. These pieces will be keenly interested in spiffing up their own market values.

Affordable housing obligations at the mountain are on the wrong side of either ledger. Ski Corp is backing a reduction in housing requirements that Council considers at its next 2 meetings..

The water question out west falls in a similar light, given the prospectus for 700.

Parcels getting sold is unavoidable, but this lowering of our community standards to ehance the selling price of our town is unwise on several levels.


jhr2000 8 years, 2 months ago

Isn't the City being asked to extent the building permit for Thunderhead Lodge from 3 to 5 years? Given the information in this article, why do it? The developers can always re-apply later. Such extensions are not unusual if the developers have acted in good faith with the community.


jhr2000 8 years, 2 months ago

Isn't the City being asked to extent the building permit for Thunderhead Lodge from 3 to 5 years? Given the information in this article, why do it? The developers can always re-apply later if they are still in control.


ybul 8 years, 2 months ago

Now, now, them there people your are calling idiots are highly educated folk (well at least they have degrees), even though some of them were not very eloquent. ;-)

Maybe, some of them teacin's weez suposed to av learned in scool aint ryte. :-) r.r.r.r.r.


Steve Lewis 8 years, 2 months ago

jhr, Actually Thunderhead Lodge (Atira and Foundation-Intrawest) have asked for a Development Permit (DP) extension to 5 instead of the normal 3 years. The building permit extension may come later, but would mean paying building permit fees first.

Ask yourself the larger question. Why ask for an extension instead of simply waiting to apply when you can follow through and build? By waiting you would better know the shape of the market demand your are building for.

Thunderhead has a valid answer - they are halfway thru the DP process already. But Ski Time Square (same owners) has no valid answer - they have not even applied yet. This article says they'll do so in March. That erases any doubt in my mind. These DP's are meant to raise the selling price of the parcels.

No way should Ski Time Square get any extensions. If they need an extension, they simply should not be applying.

Relinquishing our standards of height and mass, as Planning Commission did in a big way for Thunderhead, is a disservice to this community. Relinquishing our affordable housing standards is next. It all amounts to selling out our town - and for what?


Fred Duckels 8 years, 2 months ago

I hope that Intrawest will not be badmouthed like American Skiing was. Being in business, I know good and bad times, and I don't judge others. Lets give them some room, back street drivers don't have any skin involved.


JoeNYC 8 years, 2 months ago

Don't normally bother with comments but being involved in the financial markets and development business and an owner of property in Steamboat, I'm certainly with Steve Lewis on his point about Ski Times Square. The developers are simply trying to ride the possible panic and fear within the city planning commission and city council to essentially help the developer walk away from the project.

By all means offer an extension to DP's for the Thunderhead parcel but certainly not for Ski Times Square. Plus the city must remain firm on your height and mass standards since to do otherwise is pure folly.

Remember the developer has to sell whatever it builds and the potential buyers with the discretionary spending $$ to buy what they are offering are simply not there anymore and probably won't be for a number of years. They know this and if they don't they are in denial.

The developer is simply trying to make the parcels more attractive to other buyers so they can walk away with at least not making a loss. Mark Mathews can bleat on about "everything going ahead" but Atira is not a financial backer in this game and does not call the shots. The new buyer / developer will also have to sell whatever it builds so what exactly has changed? Answer? Nothing you will have simply traded one developer for another possibly better financed one who will also have to wait till the economy improves.

The areas are prime real estate and will sell (at the correct market value ) despite not having development and building permits, albeit at a price that will not make Fortress, Cafritz and any other of the present financial backers a profit. But that is not the cities concern, their job is to ensure balanced quality development that will serve the community in the future not prop up the shareholders of speculative hedge funds and developers for their short term profit. Short terminism is what got this country into the hole it and the rest of the world is in now. All you are seeing is the market rectifying the what shouldn't have allowed to happen in the first place if someone had the guts to regulate it properly.

I can assure you the developers overriding concern is making a profit not ensuring Steamboat has affordable, well designed development that ensures Steamboats future as an attractive place to invest in and visit. Nothing wrong with profit but that is their real driving concern and that is a purely a fact of life. They will do whatever is necessary to get that profit.

And before some local conservative nutter jumps in and accuses me of being a pinko communist liberal my politics are just right of Attila the Hun! But that is just me whining - a 11 year legal resident, paying tax but not entitled to vote for what that tax is used for or for someone who can at least string a sentence together. Didn't you fight a war over that point not so long ago? ( the tax without representation issue not the being able to speak in sentences bit! )


JLM 8 years, 2 months ago

"I can assure you the developers overriding concern is making a profit not ensuring Steamboat has affordable, well designed development that ensures Steamboats future as an attractive place to invest in and visit."

Therein lies the problem --- these objectives are not only not mutually exclusive but they are also likely to be mutually inclusive. As a developer I have had the unique privilege and opportunity to work with some of the world's very best architects --- Jahn, Pei, Johnson, Smart, HOK --- and have learned that great --- not good but great --- design is the very best investment a developer can make in the success of a project.

Design philosophy, massing, orientation, appropriateness, siting, materials, regional flavor, dynamics are all considerations that great designers bring to a project long before they ever put a line on a paper. The design has to be right for the PLACE.

SBS is a great place and should challenge a designer to find within himself the RIGHT design. A great design. Philip Johnson said that every great architect really has only two great designs in his entire career. Every one thereafter is a variation of the two great ones. The lucky ones stumble on their two great designs as young men and have flourishing careers thereafter.

Good developers hire great designers.

Good developers, with the help of great designers, develop projects that are successful because they are appropriate for the site, the city and the market. Many times it has nothing to do with cost. It is creativity.

A lovely ingenue outfitted at Ross Dress for Less or Steinmart can outshine an otherwise beautiful woman outfitted in couture from Neimans. It is the entire package which ultimately makes the impression.

Good developers are drawn to good business climates. Resist the temptation to make SBS a more prickly market because of its business practices.

When the economy turns around (which is currently scheduled for Nov 11 --- just don't know which year), it will be important to get the work flowing smoothly.

It will be very important to be perceived as a marketplace which is fair and businesslike --- even if the development regulations are painstaking and demanding. Predictability is more important than anything else. Money runs from uncertainty.

Take a chance that a developer might actually take a bit of pride in his work. In 25 years, I never took a look at the proforma before I approved materials. Appeal to folks better angels.


Fred Duckels 8 years, 2 months ago

Steve, All bets are off on the vacant property in Ski Time Square. The market is now in the drivers seat, the city is in no position to extract an arm and a leg any more. Your social engineering burden will prevent development and the needed taxes generated. The economy may not support guns and butter for a long time and your "butter projects" will not find support. Your best hope might be for O to mandate AH.


JLM 8 years, 2 months ago

The market has always been and always will be in the drivers seat.

The market has taken its foot off the accelerator and has now stepped down on the brake.

The real challenge is --- are we smart enough to tell the difference? Are we clever enough to change the plan? Or is the car simply going to skid into the ditch?

Hang around, you'll be able to tell the difference when unemployment reaches 15%!

SBS will ultimately have to compete to attract development and the challenge is to not kill the industry during this downturn.


Steve Lewis 8 years, 2 months ago

JLM, You have never acknowledged community goals. Do they have any bearing on your argument?

It is ludicous to think that development will start or stop because of our housing ordinance. Demand is demand, you build when you judge there's enough demand for a profit to be made.

Telling a community to let go of its goals so the building cycle starts 6 months earlier is a "next fiscal quarter" philosophy, and its particularly bad advice to give a town listed in the nation's top 25 most desirable places to live.


JLM 8 years, 2 months ago

Steve ---

You are jumping to conclusions. I am a big proponent of long range planning and have only said that long range plans should be adjusted every election cycle to ensure relevance. In the purest sense the entire debate about AH is community goal driven.

I am focused on the outcome while others, perhaps including you, are wed to a single process or product to the exclusion of all others. I preach flexibility tied to reality. Don't give up the plan, make a small deviation based upon reality. If the market intrudes, bob and weave and get out of the way.

You further assume that a change to the plan is in opposition to the entire plan. I assume that plans are refined and become better with the passage of time --- more focused and more refined as reality intrudes into speculation. When good ideas wrestle, the resultant idea is made stronger and more profound.

There is a global competition for capital going on just now and the fact that SBS is a desirable place to live is probably not as important as whether it is a fair and equitable business climate in which to invest --- not the little dollars but the big dollars and that usually means real estate.

I reject the supposition that being perceived as a good business climate and having lofty community goals are mutually exclusive. Why do you think that to be the case?

I am a proponent of affordable rental housing --- not to the exclusion of affordable single family housing --- even having heard all of the arguments advanced as to why that will "not work" in SBS. Of course, I have the advantage of having built thousands of apartments --- at the end of the day, it's just numbers and almost nothing else.

There is nothing inherently wrong with keeping score each and every quarter, it's a good way to chart progress. There is nothing inherently superior to looking so far over the horizon that real progress never actually materializes. In the long run, we are all dead.


Steve Lewis 8 years, 2 months ago

JLM, Fair enough. Our plan is scheduled for an update every 5 years and we're due. The election has one or three issues out of the 25 plus issues addressed in the plan so we may differ there on the manner of the "update".

I don' think planning and profits are mutually exclusive. As others have said of our recently hot Steamboat property market, "We are a victim of our good planning".

If it seems I'm wed to a single process (this housing ordinance) it stems from its recent arrival. We waited 15 years to do anything at all. Its too early to judge the success or failure of this ordinance. When written, even the developers agreed 12 months after C.O. was a proper evaluation period of these units.

Also the ordinance can deliver housing built into other projects, and built by their builders. If the City really wanted to get out of the housing business, they would let this ordinance stand. Taking their "cash instead" truly puts the City in the housing business.

Only when there is enough demand to build is this ordinance applied.

In the end, we are all dead. Steamboat has to make things work well for a few generations beyond you and me.


Fred Duckels 8 years, 2 months ago

steve, The party is over, I don't think that in the future you and your pals will be the only ones at the table. You have worked hard to position yourselves, to control the valley and divide the proceeds of the "greedy". I just happen to think that the markets are exponentially wiser than mostly transplanted folks with a bushel full of degrees.


Requires free registration

Posting comments requires a free account and verification.