Ski bums

This past summer, New York-based Fortress Investment Group purchased Intrawest, a Vancouver, British Columbia-based ski resort owner, while a Japanese conglomerate put its Alaskan resort on the block. Has the time come for a ski resort play? By Aaron Lovell.

New York-based Fortress Investment Group walked away with a number of popular ski resorts when it acquired Intrawest last month—including Colorado destinations Copper Mountain and Winter Park. It left some wondered if the spate of recent transactions signaled consolidation in the ski resort industry.

Ski resorts are a unique asset, a combination of operating business and real estate. They usually include hotels, restaurants and commercial components, as well as residential units. Because anti-trust concerns can sideline some of the large trade buyers like Vail Resorts, ski resorts could become even more of a logical play for private equity firms.

As a result of the Intrawest transaction—a company that also reportedly saw interest from LBO shop Kravis Kohlberg Roberts and the hospitality-focused Starwood Capital—Fortress now owns 10 mountain resorts in the US and Canada, as well as a number of real estate development projects across the US. But they are not alone.

Last fall, for example, Greenwich, Connecticut-based Starwood purchased the Mammoth Mountain resort, located in California’s Mammoth Lakes area, from Intrawest for $365 million. The resort, second only to Vail in terms of visitors, has more than 1,000 residential and lodging units and 30,000 feet of commercial space.

There could be more acquisitions on the horizon. American Skiing announced the possible sale of its Steamboat ski resort in Colorado and has been in talks with a private investor group led by Tim Mueller, owner of the Crested Butte Mountain Resort. It has also been speculated that Fortress could divest some of the properties in the Intrawest portfolio.

Seibu Holdings, the troubled, Tokyo-based railroad-company-turned-diversified-conglomerate, is also reportedly putting its Girdwood, Alaska-located resort Alyeska up for sale as it divests itself of its ski resorts.

Alyeska has restaurants, a tram, the Anchorage Golf Course and 55 undeveloped acres of land. “This will not be a fire sale,” longtime chief executive Chris von Imhof told the Associated Press this summer. “It is the complete operation.”

A portion of Seibu, which also has hotel and golf properties, was acquired by Cerberus Capital Management last year. The company still owns 30 ski resorts in Japan.  

Some question the ski resort strategy, but still see the value in the surrounding real estate.

“There’s no money to be made in skiing,” Burl East, a principal with La Jolla, California-based Silver Portal Capital, told Corporate Financing Week at the time of the Mammoth Mountain sale in 2005. “The business of deploying capital in season activities is a crappy business. But using golf courses and ski resorts as a centerpiece and surrounding it with real estate development makes sense. The demographics of resort housing and second homes are fantastic.”

The new owner of Intrawest might get some free publicity out of the deal, as well. Of the 10 resorts now in the hands of Fortress, one is the well-known Whistler in British Columbia. The resort will play host to several events in the 2010 Winter Olympics, which will be held in Vancouver.