News

Vail Resorts buys Park City Mountain Resort

There might be a business case study written about this some day.

The punchline is that Vail Resorts bought the Utah-based Park City Mountain Resort (PCMR) from its previous owner, Powdr Corp. PCMR will now be a part of the Epic Pass for the 2014-2015 season, and by the 2015-2016 season, PCMR will likely be connected to neighboring Canyons Resort to form the largest resort in the United States. 

This transaction might not sound remarkable, but the backstory is worth a few minutes of your time to learn about. Here is the short version:

  • A company named Talisker owned the land under Canyons resort and most of the land under neighboring Park City Mountain Resort.

  • Since the 1970s, Talisker leased the land to Park City Mountain Resort for about $150,000 per year. That’s a very cheap lease for PCMR.

  • The 20-year lease was up for renewal in April 2011, but PCMR forgot to renew the lease and submitted the paperwork a few days late.

  • Because PCMR was late in requesting a renewal of their lease, Talisker, the owner of the land under PCMR, took the opportunity to look for a new tenant. PCMR then sued Talisker, and a three-year legal battle began.

  • If Talisker won in the courts, they would have the right to change the lease terms (request more money) or evict PCMR from the land owned by Talisker.

  • After three years of legal arguments, during the summer of 2014, a Utah court essentially handed the victory to Talisker. It was a complicated case but a simple outcome: The tenant didn’t abide by the contract offered by the landlord, and now the landlord had the right to find another tenant.

  • The wrinkle is that in May 2013, Vail Resorts made an agreement with Talisker. Vail Resorts would pay Talisker to be able to run and profit from Canyons Resort, AND Vail Resorts would take over the legal case against PCMR from Talisker. The payoff to Vail from taking over the legal case would be that if they won against PCMR, Vail would reap the rewards of a victory.

  • Since the Utah court sided with Vail / Talisker and against PCMR, there was a choice. PCMR could pay a much higher rent to Vail / Talisker each year (set by the judge at $17.5 million per year, much higher than the $150,000 they were paying previously). Or, Powdr Corp, the owner of PCMR, could sell PCMR to Vail Resorts.

  • And the latter is exactly what happened last week with Vail buying PCMR for $182.5 million in cash. Since Vail expects to make about $35 million per year from PCMR, the sale price is about 5 times the expected yearly earnings, which is a great deal for Vail (see article below for more).

  • Overall, Vail bet it could get two resorts — PCMR and Canyons — if they just started with Canyons and helped the legal case against PCMR. And it worked.

  • And all of this was made possible because PCMR forgot to renew their lease on time in the spring of 2011. That is a very, very big “oops”.

 

For more on the final part of this story, see Jason Blevins’ excellent article in the Denver Post: 

http://www.denverpost.com/business/ci_26512934/powdr-sells-park-city-mountain-resort-vail-resorts

 

JOEL GRATZ

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