Shawnie - I got this from an article printed in August published in Forbes in Aug. 2014:Park City found itself in this dilemma after somebody in the organization missed the deadline in March, 2011 to renew leases that it had the option to continue until 2051 on the bulk of the acreage on the mountain. People in Park City familiar with the matter say the slipup was discovered internally but the Canadian owner, Talisker, wasn’t aware of the mistake and cashed at least one rent check while Park City spent $7 million on improvements including a new chair lift. Talisker eventually learned of the mistake and seized the opportunity to try and raise Park City’s rent from its reported $150,000 a year. Park City sued, claiming the lease was still intact. Park City’s lawyer, Alan Sullivan, said “everyone assumed it would go on until 2051 and beyond,” and the renewal was “a technicality.” But Judge Ryan rejected that argument, hewing to Utah law that dictates a strict adherence to the terms of a lease renewal. Earlier this year, he upheld the eviction of Park City from the premises, pending appeals and the imposition of a bond. Cumming acknowledges his company screwed up. “I am the CEO and I take responsibility,” he told me. Vail’s strategy doesn’t look so smart, either, however. The company, which tried to buy the Canyons in 2007, entered into a 50-year lease in May 2013 under which it will pay Talisker $25 million a year plus inflation adjustments of up to 2% a year, and an additional 42% of any earnings before interest, taxes and depreciation over $35 million a year. That price strikes most people in the ski industry as steep for the Canyons, an also-ran among Utah ski resorts that boast world-class mountains like Alta and Snowbird. The Canyons has 400,000 to 500,000 skier visits a year. Based upon the average revenue per skier visit of $160 that Vail reported in 2013, the resort probably generates no more than $65 million a year in sales. Vail’s system wide EBITDA per skier visit was $40 last year, suggesting cash flow of less than $20 million, hardly enough to justify the $300 million Vail has booked as the value of the combined Canyons/Park City leases. Vail reported $60.9 million in revenue from the Canyons in the 2013-14 ski season, according to its most recent 10-Q report, but it also reported $36.7 million in incremental expense in its mountain operations, including $8 million in litigation costs, plus an unspecified further amount in lodging-related expenses. In total it may have earned $10 million or so from the resort before taxes. The company referred questions to Lund, who said he spoke for Talisker, not Vail. Vail’s argument is Park City is threatening to block skiers from the mountain. Park City argues it is Vail that will block access if it refuses to lease the mountain on “reasonable” terms and evicts Park City from the acreage. Neither side will discuss those terms further, as they are in mediation and under the judge’s order not to discuss the financial back-and-forth. Each side’s demands will be fleshed out on Friday, when Vail and Park City file papers explaining how large they think the bond should be to allow Park City to continue using Talisker’s acreage while it pursues its appeal. Lund said Talisker and Vail (which controls the litigation on behalf of Talisker) will argue they are entitled to at least the amount of money Park City has been earning by using its land. Utah law provides for treble damages in such landlord-tenant disputes, he added, as a spur for tenants to leave property they no longer have the right to occupy. Park City will argue the land is practically worthless without any way for skiers to get on it. And they have a compelling case. Not only does Park City own the water rights, but the development rights were traded away years ago and Vail’s oft-cited plan to install cable cars to connect the top of the mountain to the Canyons would take years and require city permits that may be difficult to obtain. It would also require the consent of landowners including a local ranch family that has already engaged in litigation with Talisker.
Posted on: Mon, 05 Jan 2015 19:30:29 +0000
Trending Topics
Recently Viewed Topics
© 2015