I want to post this article on my web site, but before I do I thought I’d throw it out to the Bears. I’m no expert on the subject and only gleaned my info from the many bits and pieces found on the web.
My typical audience will likely not know much more than the fact that the issue even exists. So, while I really don’t want to get into any greater detail, I do want to make sure my facts are sound, I haven’t overlooked anything really germane, and my speculation is reasonable.
If those of you with greater knowledge and insights have any corrections or additions, I’d love to hear them before I put out the final product.
Thanks in advance.
Utah: “The Greatest Snow (or Show) on Earth”
Due to a simple so-called “clerical error” back in 2011, a Utah judge has recently granted Vail Resorts the right to evict the current and long-time owners of Park City Mountain Resort and basically takeover. Sound crazy? The internet is replete with articles and maybe you’ve been able to keep up with this dispute as it has unfolded. But in case you haven’t, we’ll try to break down the complete story from start to finish and look at what the future may hold for the snow rider community.
When referring to this dispute between Park City Resort and Vail, it really means PCMR and Powdr Corp. vs Vail Resorts and Talisker LLC.
Park City Mountain Resort: Sandwiched tightly between the Canyons and Deer Valley resorts, this one-time Olympic venue, is considered the crown jewel of Utah’s multi-billion dollar ski industry. It is the original home, current headquarters, and biggest resort for Powdr Corporation.
Powdr Corp: One of the largest ski resort operators in North America, it also owns Copper Mountain, Mount Bachelor, and Killington among others. It was founded by Ian Cumming in 1994 with the purchase of PCMR and his son John is the current CEO. If not 100% family owned, they have total controlling interest. Powdr actually only owns the PCMR base area and infrastructure (lifts, equipment, snow making, etc) of PCMR. The vast majority of the mountain’s acreage is leased from Talisker Land holdings.
Talisker Land Holdings, LLC: This Canadian based company provides real estate development and management services. The company owns and operates ski resorts, including Canyons, and also bought United Park City Mines in 2003 which includes most of PCMR’s acreage. Since 1971 PCMR has leased this land, which Talisker has assumed, for $155,000 per year. The terms gave PCMR full use of the land—around 3,500 acres—for what insiders considered the biggest sweetheart deal in the industry. The lease has an option to renew every 20 years and became due on April 30, 2011 (a Friday).
Vail Resorts: We all know about VR, the largest ski resort company in North America, but relative to the issue at hand is that just over year ago, as part of a $25 million-per-year deal with Talisker, Vail assumed operation of the Canyons under a long term lease. Part of the deal is that VR takes over the PCMR lease dispute, pays the legal fees, and thus benefits from any legal settlement, which could leave it in control of both the PCMR property and Canyons. When combined (one lift would do it), this could result in a mega resort of nearly 7,500 acres.
THE MONUMENTAL SCREWUP
After 20 years, PCMR’s lease payment to Talisker was due on Friday, April 30, 2011. Why they even waited till the due date to pay a bill that amounted to pocket change is a mystery, but then, inexcusably, they missed the payment date and sent it the following Monday. Then, in what may have had an effect on future court decisions, they were caught allegedly trying to cover up the mistake by post marking the payment date, which they claimed to be an honest mistake.
On Talisker’s end, nothing was said about this late payment for eight months after. Then, in December, they sent PCMR an eviction notice. In the span of those months PCMR claims to have made $7,000,000 in capital improvements. They also stated in court documents that it invested $100 million in improvements in recent years with implied assurances that it could lease the ski acreage until at least 2051. They claimed an offer to renegotiate and raise their annual payment to several million dollars, but Talisker refused. PCMR then filed a lawsuit claiming Talisker was acting in bad faith.
To say that PCMR had a sweetheart lease deal with Talisker would be an understatement. At $155,000 per year for the majority of the resort’s acreage, it was a steal. As a comparison, Tallisker pays $3,000,000 for some of its Canyons acreage and Vail pays $25,000,000 for rights to the Canyons. The disparity in these numbers is a definite red flag. PCMR’s paltry payment had to be a thorn in the side of Talisker and Vail’s exorbitant amount can only be attributed to what it expects to gain in the long term from a legal settlement.
Over the years, VR has made unsuccessful overtures to Powdr about buying the resort outright. At this point, motives and agendas could not be more transparent and while Vail may come off as the villain, PCMR certainly did little or nothing to avoid the situation. It’s likely that Powdr was never truly serious about giving up a ridiculously low lease rate that was negotiated in the 1960s and left this to fester with Talisker over the years.
Within three months of VR assuming control in May 2013, and acting on Vail’s behest, the County Sheriff arrived at Powdr’s office with an eviction notice in August. The prospect of PCMR not opening for business as the season approached sent shivers through the spine of the local skiing community including retailers and employees. At the risk of losing all goodwill, VR quickly withdrew its eviction notice, and Park City Mountain opened on time, but no one knows what will happen next season.
VR contends that there are a lot of ways for the two companies to work together. But they boil down to this: PCMR continues to lease the terrain from Vail; or they sell or lease the base area and water rights to Vail. The first option is likely DOA at this point as PCMR claims Vail has not been receptive to what they say were offers above and beyond full market value. PCMR has been equally unmoved by Vail’s offers to buy the base, which he says were offensively low.
So finding themselves in a stalemate, where neither party can operate the resort without the property of the other, Powdr has even threatened to use its so-called “nuclear option”. At the cost of millions, they would remove most of the mountain infrastructure to include tearing down many lifts and snowmaking, denying access to the base area and water supply, and forcing Vail to basically start from scratch. Powdr claims it could run a “Training Camp” at the base area, but the viability of this option is rather doubtful. This is likely more posturing than anything since throwing big money away for spite’s sake is not the hallmark of successful businessmen. And although the Cummings may own Powdr, there are likely to be other invested interests not sharing such a suicidal zeal.
But, if PCMR plans to appeal the recent rulings, this option would be required in the interim while the wheels of justice slowly turned. And if they were to eventually prevail and win the right to return to the land, reinstalling the infrastructure and undoing modifications to lifts would require two construction seasons or longer and cost approximately $7.3 million. Not a very appetizing option for any of the parties involved.
WHERE DO THINGS STAND NOW?
On May 21, 2014, a Utah judge ruled that Park City was indeed late, and thus, did not renew its lease. Park City wants to appeal the decision, Talisker and Vail want to move in.
A month later on June 19th a District Court Judge signed an order and upheld the request by Talisker Holdings to evict PCMR from its land. However, the eviction will not be enforced until August 27 and ordered both sides to go into mediation. The deadline for mediation is Aug 15.
As it stands, Talisker has the right to lease the land it owns to Vail Resorts. PCMR has a choice: Deploy the nuclear option and remove the lifts and disallow access from the private land it owns at the base, or go ahead and sell its infrastructure and base-area operating rights to Vail Resorts.
WHAT MIGHT THE FUTURE HOLD?
Given what’s transpired so far, I’d guess PCMR working out a new lease deal with Talisker is off the table. So that leaves working out a deal to sell PCMR’s assets to Talisker, or walking away from mediation, accepting the eviction when Vail should decide to enforce it, and entering the extended litigation of the appeals process.
Whether mere posturing for the goodwill of the court, both sides have gone out of their way to say they’re willing to work out a deal quickly. But if mediation fails, and they didn’t work out a deal, Talisker would have the right to evict PCMR. And since it’s already too late to effectively join the resorts prior to the upcoming season, and to maintain community goodwill, VR has openly indicated that it has no intention of forcing a shutdown of PCMR. At the least, this could preclude the implementation of any “nuclear option” until after the season.
So in the near term and for the ‘14-15 season, it is hopeful a deal is worked out for the benefit of both parties prior to the end of August. PCMR gets fair market value for their properties, and a seamless transition of ownership takes place. If not, it’s still likely to be business as usual for the upcoming season at least.
Beyond that, we may be looking at a nearly 7,500 acre mega-resort second only to Whistler Blackcomb in North America. It would only take one lift to join the two areas. While it would be big, it would be very spread out and vertical drop would remain unchanged. For purists this would mean little beyond a common lift ticket. Unless you like riding lifts and contouring more than skiing the fall line, you would never traverse the extent of the area in a day. But for out of state visitors, it could be that special attraction worth more nightly stays and that’s where the real money is. Vail has never been interested in resorts that do fewer than 500,000 skier visits such as Canyons, but the combined resort should draw well over a million.
So, what about Vail? It instantly becomes the biggest player in the state. While Vail has positioned itself in a positive light with the skier community through the Epic Pass, and Wall Street through its profits, the rest of the industry (its competition) and conservationists (anti-expansion) are not big fans. Employees should fare well under VR, since they’re known to pay a fair wages and have some of the best benefits in the industry. And while Vail is known for its real estate and retail development, it’s also known to spend money on things that really matter to skiers such as lifts and terrain.
Among the three ski areas that call Park City home, Canyons is considered an underachiever. It gets roughly half as many skier visits as Park City Mountain, even though it has more terrain. Vail has both the resources and expertise to remedy this unrealized potential and plans are already being implemented.
And let’s not forget the Epic Pass - a great deal by any measure and an industry game changer. For less than $700 you’d get to ski the new mega-hill plus its 10 or so other areas with no blackouts.
What would happen to Powdr with this loss? It’s hard to know of the financial damage this may cause to their bottom line and whether it could ultimately affect other holdings such as Copper, Bachelor, and Killington. But the Cumming family (independent from Powdr) just recently bought Snowbird Resort from the Bass family and they could easily fold it into Powdr down the road. While Ski Utah’s dream of linking all seven areas may never come to fruition, at least two of the resorts could connect. Powdr maintains a foothold in Utah and keeps an uneasy alliance with the new big boy in town.
Folks have lined up in both camps and there are compelling reasons to agree or disagree with what Talisker and Vail are doing. But in the end, it is business, the players are all big boys, and they’ll do just fine. More importantly, we can only hope the end result is a positive for the local community as well as those of us just wanting to enjoy that famous Wasatch goodness.
The end of August is fast approaching so stay tuned!