PCMR Loses to Vail Resorts

[EMSC]

I'm sure Admin and other will have lots to say on this one....

http://www.denverpost.com/business/ci_25808742/utah-court-hands-park-city-mountain-resort-over

 

[Admin]

Working on it.

 

[Tony Crocker]

The actual judgment ruling:
http://files.shareholder.com/downloads/ ... _Order.pdf
To cut to the chase: See Events of 2011 starting on page 22.

The next steps involve a potential trial on Powdr's claim that Talisker fraudulently failed to tell Powdr that its Park City ski area lease had expired after March 1, 2011.

Not exactly correct. The judge dismissed the motion that Talisker's delayed notification was fraudulent, but will allow a trial on the question of whether it was negligent. All other motions were summary judgments in favor of Talisker/Vail, supported by quite precise precedents in prior cases.
No reconsideration of the old lease.
No right of first refusal for PCMR. Talisker can lease to Vail.

As noted above, PCMR was supposed to notify Talisker by March 1, 2011, so they were in fact 2 months late in renewing the lease.

The rent payment Talisker accepted in summer 2011 was for the 2010-11 season, payable after the season by terms of the old lease. Talisker rejected attempted PCMR payments for the 2011-12 and 1012-13 seasons. Vail's negotiations with Talisker began in August 2012, 8 months after the PCMR lease issue was publicly exposed, and was finalized in May 2013.

 

[EMSC]

I've been thinking that Cumming's own words might be part of the next steps used against him. In that he tried to use an argument of significant public benefit and interest in PCMR remaining whole. Given the supreme court precedent of private party to private party eminent domain transfer of land in Conneticut back a few years ago it seems Vail could ask for Park City to use those exact powers to keep the resort intact as a next step.

 

[ondeadlin]

This is my area of law - big company commercial disputes. My 10,000 foot view was that this always seemed to be the likely outcome, given the facts at hand. I don't see much chance of anything changing on appeal or the remaining count having much of an impact either way (especially given that it probably won't go PCMR's way).

The risk now shifts to PCMR for a variety of reasons. If they opt to continue this fight and lose, there is a significant chance they will owe Talisker/Vail a lot more money in damages than they owe now (and they will owe now). Yes, they still control the base area, but I'm not sure how much consolation that will be if they end up owing tens of millions in damages.

The obvious solution is a negotiated settlement, but Talisker/Vail now controls the leverage and has a lot less incentive to negotiate. The court should (and may very well) order non-binding mediation. Sometimes a third party's perspective can give the losing party a way to save face and exit gracefully.

 

[Skidog]

Much like has been said, and im far from any legal expert, seemed it would go this way..

cumming is going to have to eat his own words im sure. That base area will indeed but used by Vail that ski resort will not remain dormant just because Powdr has its panties in a bunch for being stupid. I dont have a clue what their numbers are on a whole, and I understand PC was their flagshhip resort, but they got the Woodward thing going on. They also obviously own a few more resorts, and it seems Killintgon is making a strong attempt to return to its old glory (ive always heard that was Powdrs cash cow anyway), I dont think im going to be crying any rivers for Powdr.

 

[Tony Crocker]

It seems Killington is making a strong attempt to return to its old glory (I've always heard that was Powdr's cash cow anyway)

PCMR was definitely Powdr Corp's biggest cash cow, especially with the cheap lease deal. Consensus is that PCMR does around 800K skier visits, of which at least half and perhaps as much as 3/4 are from the more lucrative fly-in destination visitors.

Killington's clientele are mostly weekend drive-ups like at Mammoth, and we all know those people spend much less. We also know that Powdr Corp got off to a very rocky start at Killington, alienated some of their customer base and only recently are turning things around. There was also a lot of deferred maintenance due to the final cash-starved years of ASC.

I don't think I'm going to be crying any rivers for Powdr.

Nobody in Bend or who skis regularly at Bachelor will be crying any rivers either. I'm guessing is the more common reaction.

 

[jamesdeluxe]

Working on it.

"Private Pyle, where is the article that you promised this platoon?!?"

 

[EMSC]

Latest skirmish in the saga:

http://www.parkrecord.com/park_city-news/ci_25995940/pcmr-v-talisker-judge-will-sign-eviction-order

So far ondeadlin's prediction of the flow of the case is right on target. Ordered mediation. With the eviction signed but only delayed, until PCMR can save face in mediation, PCMR's back is getting ever closer to the wall on this one. Of course the objectives for each side are still in theory to emerge as the final resort operator, by buying/leasing the others terrain; but I don't see how PCMR has much real chance to do anything but scorched earth or give in. We'll see if the recent PCMR rhetoric was negotiating ploy or true spite by summers end I guess.

Oh and where is that front page article??

 

[ondeadlin]

This is a very deliberate (and IMO wise) move by the judge.

He signed the eviction order, but stayed it and ordered the parties to fast-track mediation. At the same time, he set a hearing for Aug. 27 and made it clear that the stay might - but only might - be lifted at that point if the parties did not reach an agreement in mediation. So there is pressure on both sides. PCMR was pushed closer to the reality that they will (eventually) be evicted from the land, while Vail/Talisker still don't know if the eviction will proceed or the stay will remain in place after Aug. 27.

Is that enough? Depends on how hardball either side wants to play it IMO. The legal long game is in Vail's favor, but the long game is expensive in terms of money and PR. If they want a resolution now, they will either have to pay Cummings more to go away or ask him to pay them a lot more to continue to operate the report and agree to incorporate it into some sort of Epic Pass partnership (the unlikelier of the two scenarios IMO).

The water rights long game is probably in PCMR's favor. Some folks think they could just sit on the base area and the water rights and dare Vail to try and make a go of it, but this is probably a better threat than an actual business strategy. Under that scenario, PCMR will have to pay damages and will lose the cash flow of operating the resort. All for what? To inconvenience Vail? Can't imagine how that would seem like a good idea to anyone who is running a business.

Time will tell ...

http://www.parkrecord.com/park_city-...eviction-order

 

[hipslo]

Some folks think they could just sit on the base area and the water rights and dare Vail to try and make a go of it, but this is probably a better threat than an actual business strategy. Under that scenario, PCMR will have to pay damages and will lose the cash flow of operating the resort. All for what? To inconvenience Vail? Can't imagine how that would seem like a good idea to anyone who is running a business.

If pcmr vacates the disputed land, why would they have to pay any damages? Other than back rent, but they'd have to pay that whether they leave or not, and in any event, they have said they're willing to pay "more than" fair rental value anyway. And of course they'd lose the cash flow from operating the resort, but that would be the case if they are forced off the land, regardless. Meanwhile, Vail is stuck paying 25m per year to operate canyons, which they have acknowledged in their securities filings is a losing proposition to the tune of at least 10 to 15m per year. That cash drain puts pressure on Vail to reach some sort of agreement with pcmr.

The problem is, Vail wants to operate the resort and needs the base access and water rights. Pcmr wants to operate the resort and needs the talisker land. Both parties need something the other has. If I were the mediator, I'd be pushing a joint venture scenario pretty hard, since it is the only outcome in which both parties get an aspect of what they want, and neither side is seen as totally winning or totally losing. Whether either side will ultimately come to this realization in the face of this stalemate is an open question.

 

[jimk]

It's hard to believe Powder Corp will give up their PCMR holdings for a paltry sum, too much lost face. At the same time I have my doubts that VR would pay a kings ransom for it. If VR wrenches the base area away from PCMR in a hostile manner it will leave a bad taste with the public as a power hungry empire, not to mention screw up the tourist business in Park City for a good long while. If Powder considers PCMR their lynchpin/signature property they may dig in their heels and throw next season into chaos as the legal battle drags on with appeals, counter suits, etc. It will also be chaotic if the two parties try to operate the ski area in a bifurcated way.
I wonder if some creative horse trading will come about? Maybe Powder trading PCMR base area rights for Keystone or other VR ski area? Depends on how bad VR wants PCMR?

 

[ondeadlin]

If pcmr vacates the disputed land, why would they have to pay any damages? Other than back rent, but they'd have to pay that whether they leave or not, and in any event, they have said they're willing to pay "more than" fair rental value anyway.

Three years of back rent, but at a fair market price, which is going to be a significant increase. Holdover commercial tenants in most states are often forced to pay attorney fees as well, although that's state law specific and I don't know Utah law on that point. There's also the possibility of punitive damages for forging the date on the renewal letter.

And of course they'd lose the cash flow from operating the resort, but that would be the case if they are forced off the land, regardless. Meanwhile, Vail is stuck paying 25m per year to operate canyons, which they have acknowledged in their securities filings is a losing proposition to the tune of at least 10 to 15m per year. That cash drain puts pressure on Vail to reach some sort of agreement with pcmr.

If PCMR doesn't operate, Vail would certainly see a significant bump in revenue at the Canyons. So in that scenario, Vail is getting more revenue and PCMR is getting none. The cash drain is drop in the bucket for Vail either way, while PCMR is Cummings' largest revenue source. Big advantage Vail in that scenario IMO.

If I were the mediator, I'd be pushing a joint venture scenario pretty hard, since it is the only outcome in which both parties get an aspect of what they want, and neither side is seen as totally winning or totally losing.

Given that they're both big players in a small industry, there might be antitrust concerns with a joint venture.

 

[Tony Crocker]

If pcmr vacates the disputed land, why would they have to pay any damages? Other than back rent

PCMR is also on the hook for profits earned on that land during the 2012-13 and 2013-14 seasons, after they had been notified that the lease had expired. The meter is running on both rent and profits (and accumulated interest thereon) if the eviction order is stayed indefinitely to avoid closing PCMR during the appeal process. Therefore, the longer Cummings drags this out, the higher the bill for damages when the appeals are exhausted. The value of leasing the base and water rights to Vail is substantial annual income once Cummings accepts reality. Financially, the incentive to Cummings is clear to settle on the latter terms ASAP. I'm sure this is what the judge has in mind for the upcoming 2 months of mediation.

Oh and where is that front page article??

There is nothing on the news page after March 28. Server/spammer problems again? Supposedly the News is the key driver of FTO's web traffic (and therefore revenues).

 

[hipslo]

PCMR is also on the hook for profits earned on that land during the 2012-13 and 2013-14 seasons, after they had been notified that the lease had expired.

Though I am no expert on Utah landlord/ tenant law, I don't believe that "profits earned on the land" is the measure of damages attributable to a holdover tenancy. The damages owed to the landlord (talisker) would be the fair rental value of the land. However, talisker has been receiving rent from vail, so it doesn't seem that talisker has ANY damages. Vail would have a damages claim, which could presumably be EITHER for the fair rental value of the land, under a sublease scenario, OR for the lost profit that vail could have earned had vail been in possession under its operating lease from talisker, but not both.

Either way, the fair rental value, or the potential profit that vail could have earned, would be determined with reference to the fact that the talisker land does not include access to the base, or the water rights, or (potentially) the lifts. Even if the lifts are ruled to be fixtures which must stay with the land, all of the lifts rising from the base are mostly on pcmr's land, not talisker's land. Those factors would all tend to depress the amount of potential damages.

The reality is that the land is more valuable to pcmr than it is to any other third party that doesn't control what pcmr controls. For that reason, it is in pcmr's interest to continue operating on the land for as long as possible, since the damages will very likely be less than 100% of the profits earned by pcmr during that period. Whereas if pcmr stops operating on the disputed land, its profits likely fall to just about zero.

 

[Tony Crocker]

EITHER for the fair rental value of the land, under a sublease scenario, OR for the lost profit

Since PCMR paid no rent for those years, I would think Talisker/Vail will be asking for the profits. No it's not all of PCMR, but it's 85% of the land so far from a trivial amount. I believe Vail has requested via the judge for some accounting figures at PCMR, which I suspect is to determine what those profits are.

 

[hipslo]

EITHER for the fair rental value of the land, under a sublease scenario, OR for the lost profit

Since PCMR paid no rent for those years, I would think Talisker/Vail will be asking for the profits. No it's not all of PCMR, but it's 85% of the land so far from a trivial amount. I believe Vail has requested via the judge for some accounting figures at PCMR, which I suspect is to determine what those profits are.

Let's say you own some office space, and I am your tenant. The lease expires. We have a dispute about the rent, so I remain on the premises. My name is Mark Zukerberg, and while I am holding over, I create facebook, and operate it for several years, reaping billons of dollars in profits, while working out of your office space.

Do you think that you are entitled to (i) fair rental value for the use of your office space, or (ii) the profits I have earned while occupying your office space and running my business out of that space?

 

[ondeadlin]

From what I have read, Talisker has not accepted rent on the property since the dispute began. As I said earlier, I don't have enough familiarity with Utah law to speak authoritatively about damages. There are aspects that vary from state to state. I'd imagine they'd both hire experts and submit their theories and the Court would split the baby, as it typically does. But I don't think the Zuckerberg comparison above is very logical, because it doesn't take into account why the land is being leased, i.e. to run a ski resort. What the court would look at is what any third party would pay to lease the land to run a ski resort - and, quite frankly - the best comparison is what Vail is paying to lease the Canyons, which isn't good news for PCMR.

 

[Tony Crocker]

quite frankly - the best comparison is what Vail is paying to lease the Canyons

This is the assumption most are making on the 33-page thread on Epic. If you assume that the $25M/year that Vail is paying is for BOTH Canyons and PCMR (reasonable, since Vail knew about the expired lease when it signed the Talisker contract), you're still going to come up with something like 15M/year for PCMR based upon it having nearly twice the skier visits of Canyons.

The Zuckerberg analogy is ridiculous since the use of the land before/after lease expiry is identical.

 

[ondeadlin]

Vail/Talisker tell the court that they are willing to let PCMR operate this season if Cummings & Co. post a hefty bond:

Talisker Land Holdings, LLC will request the bond cover PCMR's rent over the course of at least four ski seasons, including the next ski season, attorney fees and interest, the firm's lead attorney, John Lund, said in an interview, adding the number would triple for the 2013-2014 ski season and future ski seasons.

Smart move by Vail in a few different ways. First, they're not holding ski season hostage. Second, they're making the first significant conciliatory move. Third, they're forcing PCMR to face reality about what losing this case is really going to cost. And, fourth, it probably gets them some credibility with the mediator at a critical time in the mediation.

http://www.parkrecord.com/park_city-news/ci_26217855/pcmr-v-talisker-surprise-move-may-save-resorts