PCMR Loses to Vail Resorts

hipslo wrote 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.

25 mil per yr must say a lot for the revenues generated by Vail to justify a lease like that. 25 mil = 250,000 - $100 dollar lift tickets.....im sure revenue isn't generated just with lift tickets but still. Thats just for the lease. Either there is some big money in park city area ski resorts or someone is losing their !*&.
 
Judge just estimated the fair rental value at 5m per annum and set the bond amount at 17.5m.

Judge also correctly, in my view, rejected the notion that Vail or Talisker is entitled to some or all of PCMR's profits, or Vail/ Talisker's lost profits, or anything other than fair rental value of the land, which is determined without regard to the profits earned by PCMR in its business. Even though the land is used in the PCMR business, neither Vail nor Talisker own or control other critical assets that enable PCMR to earn the profits that it does from the land.

Given that PCMR's annual profits are at least equal to twice the bond amount, I suspect we will have a 2014-2015 season, with the resort being run by PCMR.
 
The papers filed in connection with the appeal bond hearing, and discussions of the parties during the hearing (which can be heard in its entirety on KPCW radio's website).

vail/ talisker alleged that the 14.1m annual rent they sought to establish as fair rental value was only 1/3 of PCMR's profit. PCMR said it was more like half of the profit .(with PCMR likely understating those earnings for the sake of its argument).

The judge ultimately determined that the profit wasn't relevant anyway, but it made for some fascinating discussions during the hearing.
 
Last week PCMR attorneys said $14.8 million was more like 50 percent to 60 percent of earnings before taxes.

So I agree with hipslo that PCMR will post the $17.5M bond and operate the ski area for 2014-15. Judge Harris also said that PCMR would need to post an additional $19M to operate in 2015-16.
 
Solid decision by the judge. Preserve the status quo, while recognizing that one party has been found liable and therefore has to cough up some considerable cash.

In the end, Vail's going to win PCMR access. Just a question of how they get there: Full court win after the appeal or negotiated settlement.
 
ondeadlin":74e3egux said:
In the end, Vail's going to win PCMR access.
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If you mean that the eviction is likely to be upheld on appeal, I agree. The interesting question is, then what? Especially given that the powers that be in Park City have recently gone on record as stating that they are strongly opposed to any scenario where the resort does not operate as a single, integrated resort, using the existing base (there is a detailed report on this on the KPCW radio website).
 
The issue of "when" is probably the best leverage PCMR has in negotiations. The appeal itself is very iffy, but a party fully committed to availing itself to every avenue of appeal can sometimes tie up a dispute for a decade. These are big boys here, they all know that's possible. They all know PCMR has the money to do it. Yes, the bond is expensive and will get more expensive every year, but the Cummings can pay it.

They're both playing chicken right now. So far, nobody's blinked. They've both got deep pockets and they're both clearly stubborn. Maybe it'll go the distance.

The local authorities are wise to put out that statement. It puts pressure on both sides, and that's clearly in their interest. Could they make anything of that threat? Would they want to, given the parties' demonstrated willingness to litigate? Time will tell.
 
All speculation can now end - Vail just announced that it's buying PCMR for $182.5M

http://www.sltrib.com/sltrib/news/58402188-78/resort-vail-mountain-park.html.csp

"Vail Resorts has purchased Park City Mountain Resort for $182.5 million in cash, creating the country’s largest ski resort covering more than 7,000 acres."

"Vail said PCMR and Canyons Resort, which it operates for Talisker Land Holdings, would be combined for the 2015-16 season. But PCMR will be added immediately to the resort’s popular Epic Pass,..."
 
Marc_C":1aps70rl said:
All speculation can now end - Vail just announced that it's buying PCMR for $182.5M

http://www.sltrib.com/sltrib/news/58402188-78/resort-vail-mountain-park.html.csp

"Vail Resorts has purchased Park City Mountain Resort for $182.5 million in cash, creating the country’s largest ski resort covering more than 7,000 acres."

"Vail said PCMR and Canyons Resort, which it operates for Talisker Land Holdings, would be combined for the 2015-16 season. But PCMR will be added immediately to the resort’s popular Epic Pass,..."
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Thanks for posting this very interesting news.

Wall Street likes the deal:

http://finance.yahoo.com/news/vail-reso ... 17293.html

5-year chart of Vail's (MTN) stock price:

http://finance.yahoo.com/echarts?s=MTN+ ... N;range=2y
 
Well that makes that pretty definitive. I expected a result like this, but not until spring. I figured Cummings wanted to suck a bit of cash out of the place for one more season and maybe even remove some 'fixed assets' before handing it off.

Anyway, based on the numbers tossed about in Vail presser the ROI looks rather low on a standalone basis. The price just seems too high especially given that they already have/had the upper mtn 'owned'. They must feel that they can bring very significant value through the connection, base development and additional epic pass buyers.
 
>The price just seems too high

I couldn't possibly make that calculation. But. Vail's market cap is up around $300 million today.

This is really the best outcome for this year. For me. I bought an Epic Local Pass for the first time this year (along with Snowbasin and an Alta Gold Card). For $1200 total, I am now getting PCMR, Canyons, Snowbasin and $42 days at Alta. Park City, Northern Wasatch, Cottonwoods covered. Until there is a reasonably priced all-Wasatch pass, this works for me.

Why is it such a good outcome for this year? With all the uncertainty around PCMR, I bet hardly anyone bought their season passes and everyone in PC must've piled into EPIC instead. Ditto for tourists making early plans. So, this returns a balance to the daily skier load. I wonder if those numbers is the reason why Powder Corp decided not to hang around for another year.

I am also hoping that the presence of an oversized player in the field will bring in benefits down the line. Sort of like USA in international politics.
It already has, with season pass prices. Possibly, One Wasatch will also benefit.
 
EMSC":1bkulgxr said:
The price just seems too high especially given that they already have/had the upper mtn 'owned'.
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Not necessarily. Powdr Corp also owned the water rights. PCMR has 500 acres with snowmaking, over 400 of that on Talisker's land. PCMR would often be a non-viable ski resort at Christmas without the snowmaking since natural snowfall at the base is only 150 inches.
EMSC":1bkulgxr said:
maybe even remove some 'fixed assets' before handing it off.
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This was another level of uncertainty. The judge had yet to rule on how much of the lift/snowmaking infrastructure was "affixed to the land" and how much could be removed if Powdr Corp were evicted. So Vail is also paying something to keep all of that infrastructure.

The diminished value of split PCMR was a strong financial motivation for both sides (but especially Cumming) to settle. The enhanced value of PCMR + Canyons combined vs. separate is what got Vail into the picture in the first place. Canyons has serious flaws in its regional context as a stand alone area, even with Vail's marketing muscle.

Thus the deal has to be considered in the context of Canyons + PCMR combined.
http://www.denverpost.com/business/ci_26512934/powdr-sells-park-city-mountain-resort-vail-resorts":1bkulgxr said:
Vail capitalized its March 2013 deal with Talisker for Canyons resort — a 50-year lease — at $306 million. Add $183 million and Vail Resorts picked up more than 7,000 acres of ski terrain in Utah for roughly $489 million. Analysts estimate Vail will harvest $60 million to $80 million in earnings before interest, depreciation, taxes and amortization - or EBIDTA - from the combined resorts. That means it picked up the two resorts for roughly eight times annual EBIDTA.

"They got it cheap. This is the best case scenario for Vail," said analyst Whitney Stevinson, who covers Vail Resorts for JMP Securities. "The real opportunity is combining these two resorts someday and driving even more skiers and revenue."
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PCMR's EBITDA was minimum $29 million (Powdr version) and max $50 million (Talisker version) according to documents filed with Judge Harris.
 
EMSC":38ube9fa said:
Well that makes that pretty definitive. I expected a result like this, but not until spring. I figured Cummings wanted to suck a bit of cash out of the place for one more season and maybe even remove some 'fixed assets' before handing it off.

Anyway, based on the numbers tossed about in Vail presser the ROI looks rather low on a standalone basis. The price just seems too high especially given that they already have/had the upper mtn 'owned'. They must feel that they can bring very significant value through the connection, base development and additional epic pass buyers.
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Yea, always to hard to know up front whether or not a purchase like this will pay off for Vail, but, so far, investors on Wall Street seem to think it was a great deal for Vail. Vail stock (symbol: MTN) is already up about 12% - stock price has jumped from about 77 to 87 - since the deal was announced. Moody's has said that they consider it to be "credit positive" for Vail. Hell, even Jim Cramer on Mad Money on MSNBC was discussing the purchase last night (although he said he thought Vail stock was too high based on earnings). Vail stock is now trading at 73 times past year's earnings while the S&P 500 trades at 17 times earnings. Investors on Wall Street are not always right about these types of mergers and buyouts, but I would estimate they are right more than they are wrong. Time will tell. I have to believe that investors think that Vail can put its marketing muscle to work and better develop the base area at PCMR to increase skier visits. Plus, the planned combination of Canyons and PCMR may pay off.
 
Tony Crocker":3e9ewb6x said:
Not necessarily.
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Tony Crocker":3e9ewb6x said:
PCMR's EBITDA was minimum $29 million (Powdr version) and max $50 million (Talisker version) according to documents filed with Judge Harris.
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Two ways to look at it - again as a standalone deal which 14-15 will be:

35 Additional EBITDA per Vail presser
12 DA per vail presser
15 portion of Vail lease from talisker 'apportioned' to PCMR
9 I on 182M purchase price (bought with corp vs PCMR specific leverage, but still borrowed money as Vail has a heavy debt load)
3 T since interest is at Corp level, not directly on PCMR
-4 Income statement 'profit'
8 Cash flow

-2.2% Income statement simple annual ROI
4.4% cash flow simple annual ROI

OR if the $15M talisker lease portion is included in the $35M EBITDA (unclear from Vail presser) the simple ROI jumps to ~6% and cash flow to ~12% - OK, but far from a fantastic deal per a few wall street analysts who seem only focused on multiples of EBITDA to the purchase price not top to bottom financials which, frankly, they should be. For one thing DA is only going to go up, not down. If only I could put EBITDA in the bank instead of actual cash, why I'd be rich!

Anyway that's the basic gist the way I see it. The only thing they got from the eviction was leverage in negotiations to force the sale to happen, they didn't get much if anything on the price at all. So Vail better get that connection, build out the base(s) and leverage the Epic Pass sales to make it a decent ROI instead of a bad to mediocre one. Or maybe they'll just hike up day tickets to $130 like in Colorado.
 
Thanks a million for that analysis. Of course, that is EBITDA, not actual thanks in your pocket.

Park City has always seemed somewhat undervalued/underused to me as far as mountain towns go. Been to Jackson, Whistler, and Vail. They have better mountains but if one can access BCC & LCC from Park City that'd more than make up.

This is a real living town that has so many of the elements that are ascendant and prized recently. But low... or at least lower key. I don't want that to change. Not until after I make a purchase, at least. And not even then.
 
Evren":2zfjkdn2 said:
They have better mountains but if one can access BCC & LCC from Park City that'd more than make up.
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That won't be for another 5-10 years, if it ever happens.
 
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