Here's an interesting read on the new approach to ski resort ownership. Not sure if we'll ever see Telluride gobbled up by one of these entities, but you never know. More and more resort owners are focussing on capital investment into their facilities, amenities, services, etc., instead of real estate development and instead letting third parties take those risks. Great read, enjoy:
When Intrawest arrived in Steamboat Springs in 2007, the place was booming.
The fact that the country’s then-largest resort operator paid $265 million for the ski area — almost three times the asking price a mere six years earlier — affirmed luxury projects under construction at the ski area’s base.
Demand for real estate grew even more. Buyers flocked. Developers doubled down. Sales hit an all-time high of $1.5 billion.
“We can’t figure out if it was just the tail end of the real estate boom or if it was Intrawest,” said David Baldinger, owner of Steamboat Sotheby’s International Realty. “We think it was Intrawest, because the financial crisis was underway but Steamboat had strong volume for another year. We think it was enthusiasm for a new owner.”
That’s a common theme across the high country: a resort trades hands and real estate sales spike as attention turns to a region that’s about to see new energy and investment.
It happened in Winter Park in 2002 when Intrawest inked a long-term operating deal with Denver, the ski area’s owner. It happened in 2003 when Tim and Diane Mueller bought Crested Butte Mountain Resort. It happened in Park City, Utah, in 2014 when Vail Resorts took over and merged Park City Mountain Resort with The Canyons.
And it will probably happen again with news the Aspen Skiing Co. and Denver private equity firm KSL Capital Partners have joined to purchase Intrawest’s six resorts, including Winter Park and Steamboat.
But it won’t be like it was in the roaring aughts, when resort home prices peaked, driven largely by overleveraged, overexuberant buyers hoping to make a quick buck on appreciation and rental income.
“We had locals buying condos in luxury developments purely as an investment, but it didn’t make sense given their capability if anything changed,” said Jon Wade, owner of The Steamboat Group real estate firm. “Then everything changed.”
The economic recession spanked resort communities and punished operators like Intrawest, which spent $70 million on a new village and two residential buildings at the base of Winter Park ski area that came online in 2008, just in time for the economic collapse. Back then Intrawest was the resort industry boss, with 11 major resorts and real estate sales mirroring resort revenues. The sudden decline in 2009 left the company limping, and it jettisoned resorts to pay down a crippling debt.
Following Vail’s lead
Today’s resort industry leader is Vail Resorts, and the company reached its mountaintop selling season passes — not condos.
Vail has spent the past decade focusing largely on the on-mountain experience and leaving real estate to developers. The company sold a mere 10 units and a land parcel in Vail and Breckenridge for its fiscal 2016 — generating less than 3 percent of its revenue for the year — and has about $95 million worth of condos and land left to sell before real estate disappears from its balance sheet.
The idea is that developers will plan and build new homes and hotels — and assume the economic risk — based on increased traffic and enthusiasm for a resort. Vail Resorts has invested more than $600 million in its network of resorts in the last six years, driving traffic that spurs development in resort communities.
Since 2007, Vail Resorts has replaced 10 chairlifts on Vail Mountain and built a table-service restaurant at midmountain. In that last decade, hoteliers and developers in the town of Vail have invested close to $2 billion in renovations and new construction, delivering hundreds of luxury hotel rooms, condos and homes to Vail Village and Lionshead Village.
The new Aspen SkiingKSL Capital Partners alliance hopes to take a page from the Vail Resorts playbook and deploy third parties for real estate development. The partnership picked up about 1,100 acres of slopeside land in the Interwest deal.
“We would love to see those areas developed in a responsible manner,” KSL Capital Partners chief Eric Resnick said. “But develop- ing that real estate is not our main driver.”
Since KSL Capital Partners’ Squaw Valley Ski Holdings took over Squaw Valley ski area in California in 2011, the company has invested about $70 million in new chairlifts, and improved snowmaking and infrastructure at Squaw and Alpine Meadows, which the company acquired in 2012.
Last summer, Squaw Valley Ski Holdings proposed a 25-year plan to finish the Village at Squaw Valley, which Intrawest began in 2002 and sold to the ski area in 2010. The proposal calls for hotel, fractional and owned units, worker housing and a year-round “mountain adventure camp” on about 93 acres of slopeside land now used for parking. The idea is to bolster the appeal of a resort that has lagged behind in base-area lodging while developing year-round, weatherproofed amenities for days when the mountain closes because of wind, or events like the prolonged drought that plagued California ski areas in 2013 and 2014.
Looking to inspire
But KSL Capital isn’t planning to build the village. The group’s Squaw Valley team is handling the planning; outside companies will go vertical.
“We’ve made it very clear to the community and everybody in this region that we are not a real estate developer. We are operators of these remarkable, legendary mountains,” said Squaw president Andy Wirth, a former executive at Steamboat. “But we do think that sea of asphalt can be something more inspiring.”
The Placer County Board of Supervisors last November approved the plan, but environmental and conservation groups are promising a fight.
While the development plan is half the size of what KSL Capital’s affiliate originally proposed in 2012, the new village development has stirred angst among Tahoe-area residents who see the project as “culturally incompatible” with the 68year-old Squaw Valley, said Isaac Silverman, the staff attorney with the conservation group Sierra Watch. The group has filed two lawsuits to stop the Village at Squaw Valley redevelopment plan.
“If I lived or played at Winter Park or Steamboat and I saw KSL had purchased them, I would be pretty worried and I’d want to keep a close eye on what they were planning,” Silverman said. “I think this opens up a whole bunch of unknowns. If KSL is really moving out of the real estate development business, this could mean great things for Squaw Valley and maybe they would be willing to settle for a smaller, more compatible development.”
The largest recent resort deal in the U.S. was Vail Resorts’ $182.5 million 2014 acquisition of Park City Mountain Resort, which it merged with its nearby Canyons in a $50 million, one-year upgrade. The real estate market in Park City soared on the arrival of Vail Resorts.
Around Park City, the village of about 8,000 at the base of the eponymous ski area, total real estate sales region’s Summit and Wasatch counties climbed to $2.2 billion in 2016 from $1.5 billion in pre-Vail 2013. Some of that boost can be credited to the investment by the world’s largest resort operator, said Sara Werbelow, principal with the boutique Chateaux Realty and president of the Park City Board of Realtors.
“Vail Resorts entering the scene in our community has had a significant impact, some of which can be quantified — directly or indirectly — some of which cannot,” Werbelow said.
There is a fear of the unknown with a corporate player suddenly in charge of the ski area, but the investment and expertise of Vail Resorts has certainly stirred activity, Werbelow said.
“We are in a significant growth mode,” she said. “Developers are in our town in a big way, partially related to the Vail acquisition and partially just coincidentally based upon demand in general.”
Like most of Colorado’s high country, Winter Park and Steamboat Springs also are in growth mode.
Grand County saw $450 million in sales in 2016, up 11 percent over 2015 but well below the exuberant $640 million high point in 2007, according to data from Land Title Guarantee Co.
Winter Park’s downtown is flourishing with a new conference center, grocery and condo complexes under construction in downtown. A record February — with $30.1 million in sales — is floating hope for a strong year. The new ownership of the ski area will only spur development, said Walter “Buz” Koelbel, whose 18year-old, 1,100-acre Rendezvous residential project in the town of Winter Park is booming with an array of offerings, ranging from cozy cabins to estates.
“These guys, Aspen and KSL, they live in a world of responding to what resort and travel customers are looking for. I think they will add new fresh thoughts to the mountain and the village,” Koelbel said. “Activity begets activity, and they will take experience they have learned from their multitude of properties and they will being new ideas to Winter Park and Grand County. It will shine a light on what we have up here.”
Steamboat’s Routt County saw $695 million in sales in 2016, roughly even with 2015 but still less than half the $1.5 billion sales-volume record set in 2007. January and February was exceptionally busy, with Routt’s $92 million in sales pacing 32 percent ahead of last year at this time.
The ski area has two prime areas of developable land at its base and the economic recession probably helped the resort by leaving those parcels at Ski Time Square and Gondola Square unchanged for new development that might cater to the changing taste of resort buyers, Baldinger said.
“Now the economic times and the enthusiasm over this acquisition will make that potentially more attractive for developers over the next five to 10 years,” said Baldinger, who cochairs the Steamboat Springs Urban Redevelopment Authority Advisory Committee, which directed $25 million in public infrastructure improvements during the last several years.
After watching the demise of American Skiing and Intrawest — previous Steamboat ski area owners that faltered under real estate debt — Baldinger said the future of Steamboat looks bright if the new operators keep real estate and skiing under separate roofs.
“I like the idea that the people in the ski business will be focusing on the ski business and the talent in the development community can focus on the development pieces,” Baldinger said. “This type of consolidation makes the ski industry more competitive and … positions the industry better than its real competitors, which are beach resorts and other experiential vacation destinations.”