Intrawest ULC has sold its second ski resort in three months, this time unloading Panorama Mountain Village as the heavily indebted owner of Winter Olympics venue Whistler Blackcomb tries to stave off a planned auction of its assets by lenders threatening foreclosure.
Even with the sale, observers yesterday said New York-based Fortress Investment Group LLC, which bought Intrawest for $2.8-billion in 2006 at the peak of the real estate bubble, is likely to still lose control of the resort operator. Olympic ski races on Whistler Mountain are not expected to be affected.
The price for Panorama - located in southeastern British Columbia - was not disclosed but the buyer, a new company led by B.C. real estate developer Rick Jensen, said it was far less than the estimated $100-million (U.S.) paid by Utah-based Powdr Corp. to Intrawest late last year for Copper Mountain in Colorado.
A portion of the Copper proceeds went to reduce Intrawest debt but Fortress didn't pay the full $524-million due in December, which led lenders to push Intrawest toward foreclosure with an auction of assets set for Feb. 19 - right in the middle of the Olympic Winter Games.
The value of Fortress's equity is reported to be down 96 per cent from its purchase of Intrawest in 2006. Fortress could avoid the auction by putting Intrawest into court protection from creditors but its equity would likely be wiped out by such a move. Fortress, a hedge fund operator and private equity player, has tried to convince lenders to refinance debt owed with a new five-year loan.
"It seems very likely the lenders will take it over," said James Brander, a business professor at the University of British Columbia. "Whistler will keep operating. The Olympics are fine."
The situation is "complex," said Intrawest spokesman Ian Galbraith. The company's official position is unchanged from last week when the auction notice was posted.
"Serious" talks are ongoing with lenders to refinance the debt and business at Intrawest continues as usual, the company said in last week's statement. Mr. Galbraith yesterday described the auction as a "tactic that our lenders are using."
Another source close to the company described the planned auction as "brinkmanship."
Fortress did not return a call for comment. It has not commented publicly on the situation, beyond oblique remarks during quarterly financial conference calls.
A spokesman for Davidson Kempner Capital Management LLC, one of the main lenders, declined to comment on the Panorama sale yesterday.
"Fortress is cornered," said business professor Lindsay Meredith at Simon Fraser University. "The banks have pretty much had it with Fortress."
The deal for Panorama is slated to close next week. The new owners plan to build more real estate at Panorama, expand the beginner terrain at the mountain and make it Canada's No. 1 destination for skiing families, Mr. Jensen said.
Mr. Jensen led a group of 18 investors - owners of vacation homes at the resort and local business people - who have formed Panorama Mountain Village Inc. to make the purchase. Mr. Jensen is co-owner of a development company that started building for Intrawest at Panorama in 2000.
Intrawest bought Panorama in 1993 when the ski area was losing money and developed it in the model of Whistler Blackcomb, two large mountains underpinned by lots of expensive vacation real estate. Panorama has about 200,000 skier visits each winter, which is roughly one-eighth of the traffic at Whistler Blackcomb.
Mr. Galbraith said Intrawest's new strategy is to focus on its larger resorts that can attract international guests.
Intrawest now owns eight winter resorts, including Blue Mountain in Ontario and Mont Tremblant in Quebec, as well as a golf-beach resort in Florida.
