Steamboat Sells for $265 Million

Happy New Year!

Unbelievable. It seems like it was only yesterday we were watching Tim and Diane Mueller’s (new owners of Crested Butte Mountain Resort) attempt to purchase Steamboat ski area for $92 million. They came very close to clinching that deal but alas, when the deal fell apart they showed up in Crested Butte and the rest is history.

This past month the ski resort developer giant Intrawest purchased Steamboat from the American Skiing Company for a whopping $265 million bucks. How did that happen? What did Steamboat do to create such value and such a high asking price for their properties in such a short amount of time?

Its interesting to think about what might have happened to Crested Butte if the Mueller’s had locked down the Steamboat deal. We might still be that under $20 million/year real estate market we were in 2004. Property values would be stagnate and the ski resort would still be languishing.

Tom Ross’ article in the Aspen Times today sheds some light on this major transaction. Read on and have a Happy 2007!

Channing Boucher


By Tom Ross
Steamboat Pilot & Today

December 20, 2006

Aspen, CO Colorado

STEAMBOAT SPRINGS — The $265 million price Intrawest ULC has agreed to pay for the Steamboat Ski Area and related assets reflects a dramatic increase in the ski area’s value since five years ago.

Triple Peaks LLC, led by Tim and Diane Mueller of Vermont, had a deal to purchase the ski resort for up to $92.5 million in February 2002. Today, in a different market, Steamboat’s value has increased 186.5 percent.

"Creating value is what it has always been about," B.J. Fair, CEO of owner American Skiing Co., said Tuesday. "We were able to create tremendous value. But it’s also the absolute right thing to do for Steamboat. In addition to the price, [Intrawest] did a good job of articulating what the future of Steamboat can be."

The deal, announced Tuesday, already has made an impression on industry insiders.

"Good for them," former Intrawest executive David Hill said. Hill is the former senior vice president of resort development for Intrawest and the current president of Resort Ventures West. His company is undertaking a major hotel and residential development in the area, Wildhorse Meadows. Hill was a little surprised by the price.

"How is it that [Steamboat] could go from the price Tim and Diane Mueller contracted to pay for it to where it is today?" he asked.

The sale, expected to close by the end of March, would include the commercial spaces in the Steamboat Grand Hotel, employee housing units at Walton Pond Apartments (owned with other partners), four parking structures and lots with development potential, and Steamboat Central Reservations. The Steamboat Grand has the potential for the addition of a south wing, which might add 70 new units, resort officials said. The deal also calls for Intrawest to assume $4 million in debt.

A major difference between the Triple Peaks and Intrawest deals for Steamboat is that the former did not involve the Steamboat Grand. Fair said the Grand has matured into a solid revenue generator in the intervening five years.

Intrawest is a developer of resort villages and ski area operator based in Vancouver, British Columbia.

Six years after leaving Intrawest, Hill is leading the development company building the Wildhorse Meadows project in Steamboat.

Hill, whose development will be tied closely to Steamboat’s Gondola Square via a people-mover gondola, said he would welcome Intrawest’s arrival as a positive development.

"The credibility in Intrawest and Fortress in the business sense, is extremely positive for us," Hill said.

Hill confirmed Fair’s stance that the performance of management in both Steamboat and American Skiing Co. headquarters in Park City, Utah, has built Steamboat’s value.

"B.J. [Fair] is right that their management team has done a lot to improve their business," Hill said.

He’s also intrigued with the high value of ski resorts today.

"That’s where the market is. We’re seeing that the capital markets have had a heavy focus on the ski industry. Why is that? Is it that it’s in vogue?"

Hill said Intrawest’s December 2005 sale of a majority share of Mammoth Mountain in California for $365 million seems to have a set a new benchmark for the acquisition of ski resorts.

Fair said it’s important to understand the different economic climate in which this sale is taking place. First, he said, the substantive part of the previous sale process in late 2001 took place in the post-Sept. 11 era when capital markets tightened severely.

American Skiing Co. was in much more difficult financial straits at the time, Fair said, and it was widely known among prospective buyers that the company was in a situation of having to sell a major asset. Those factors combined to put downward pressure on the price in 2001-02.

Despite the fact that its quarterly earnings reports still suffer from the company’s longstanding debt, American Skiing has been able to improve the financial performance of its resorts.

"The sale is confirmation of that," Fair said. "Every year we’ve hit what we said we were going to do."

In July, he said American Skiing’s board of directors was fully prepared to turn away from the sale process if it didn’t appear a Steamboat sale would realize its goals.

The Muellers purchased Crested Butte Ski Area in March 2004, after their deal for Steamboat fell apart. They studied the latest Steamboat sale offering during the fall but did not take their renewed interest to a serious level after the price range became evident.

Tim Mueller would not divulge the amount of the Crested Butte sale, but said Tuesday the price he paid for the resort near Gunnison 33 months ago wasn’t comparable to this week’s Steamboat sale. That’s even when you adjust for Crested Butte’s skier visits [about one third of Steamboat’s in 2004].

"It certainly wasn’t the same magnitude," he said. "And we got a lot of developable real estate in our [Crested Butte] deal."

Mueller said the valuation of ski areas has tended to be cyclical, but if the price Intrawest has agreed to pay for Steamboat proves out over time, it will be a positive development for other ski area owners.

"We’ll see if it has lasting value," he said. "I’d certainly like to think it’s sustainable. If not, it adds a question mark."

Hill said he expects Intrawest’s leadership to continue to build on its reputation for being able to introduce new management standards without trampling on local sensibilities.

"I feel positive they will continue that," he said. "They have an ability to inject enthusiasm in the form of capital. That has been a consistent there no matter what ski area they acquire."

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