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Conference Was Maine Event For CNL GMs

By Craig Altschul
September 21, 2007

"It is very important to us to facilitate the connection of the team that is essentially looking after our ski assets," Steve Rice, vice president for investments for CNL Income Properties, Inc., told us as the group was about to arrive. "Sure, it's a relatively small industry and we generally know each other, but this is an opportunity for the resort general managers to meet some of our key resource people face-to-face and to explore potential areas of collaboration with each other."

CNL VPs and directors, representing architectural, financial, engineering, and business development, joined the GMs, opening eyes through case studies and discussions of how the company services work. The extra services are "value added," Rice said. It's part of the deal. Some of the resorts represented had just joined the CNL fold.

To say this was a happy crowd is an understatement.

"The biggest thing we have noticed since becoming part of CNL is the quality of the people who are involved," said John Rice, Northstar's general manager. "Here's an example: Five of our employees lost their homes in the fires at Lake Tahoe this summer. We'd only been part of the CNL group for only a short time. They immediately received checks to help them out and CNL matched our contributions. People who care really do make a difference."

He added that the benefit of learning from CNL’s experience with its other leisure industry assets such as amusement parks, retail, marinas, and golf, and the innovations they are developing are bound to be helpful to ski resort management.

Bretton Woods GM Chris Ellms also hit on the "extra value" since the Mt. Washington resort became part of the new company. "CNL immediately made a gift to the Old Man of the Mountain Legacy Fund that is creating a park that will become a lasting legacy to the famous landmark that fell in 2003. That was very important to us in the community. The high energy and involvement with us is really important."

Sugarloaf's John Diller, a long-time industry veteran, said he was most impressed with the practical side of the relationship. "We've been undercapitalized for years and the willingness of CNL to jump into our industry for the long term – not a quick flip – is refreshing. We're seeing more needed capital infusion right now than we have in the past few years combined."

"The fact is that the CNL assets are first-class, quality resorts with good consumer track records," said Sunday River's Dana Bullen. "We are all bound to be successful with high quality levels of management combined with great natural assets."

The mutual admiration society worked both ways as the new relationships begin to form and take off. "I just look at the cumulative years of ski industry experience around the table and it's clear we can draw on each other's expertise and wisdom," said Matt Ragsdale, CNL's VP for Technical Services.

The GMs got an earful of data at the conference that was a true eye-opener for how deep the REIT has dug since its launch and first property acquisition in 2004. The current asset portfolio includes 61 properties and over $1.7 billion in raised equity. The REIT employees now number 60.

GMs received detailed information and had their questions answered on all segments of the company's assets in nine industries, including golf, lodging, attractions, and retail, even the Route 66 Harley Davidson dealership owned in Tulsa, Okla.

"The thing that everyone involved now seems to understand is that we are in it for the long haul," Steve Rice said, after the sessions had concluded. "We're not looking for assets that are going to bring us stratospheric returns. We're going to reinvest in our mountain resorts and, together with the individual resort leadership, we're going to take really good care of our assets. We know that market share among ski resorts in North America will continue to create winners and losers, and we need to help grow the market overall so our ability to invest capital is critical."

Quite a bit of proprietary information was presented to the group which we agreed not to divulge, but some of that is public knowledge – or close to it. CNL and Intrawest are presently tied in the top position in terms of number of resorts owned at 10. Best estimate is it ranks number three, behind Intrawest and Vail in skier visits at 3.9 million as of last season. The company's ski assets currently make up approximately one third of the REIT's portfolio.

The CNL model (see IR, 6/4/07) is to lease back resort operations on a long-term (20-years with renewable 20-year option) basis to the resort operators. Capital infusion is made available if CNL believes it to be a wise investment and is added to the lease payments. Boyne USA has become the largest lessee to date, assuming Booth Creek Holding's leases at Loon Mt., N.H., and Summit-at-Snoqualmie, Wash., just last week. (See IR Industry Alert, Sept. 25).

Each resorts are leased to independent management companies, and while resort GMs do not formally report to Steve Rice, he is clearly the REIT's "go to" man on ski portfolio management and capital investment approvals.

No formal decisions were made by the group, and none were planned to be made at the meeting. But, the opportunity for this pre-season face-to-face of a family that had never been in the same room before (except perhaps at a National Ski Areas Association convention) was well received. The group established ties with each other and the CNL leadership that will involve plenty of information sharing during the winter. Another session is planned at the end of the season.

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