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An IR In-Depth Report: Want To Buy Montana? Skiing Is 'For Sale'

By Craig Altschul
February 28, 2008

There's certainly plenty of snow, the cash registers are jingling, and the future still looks bright. But, the bigger news from an industry standpoint seems to be as many as five of the state's 16 mountain resorts are seeing a turnover in ownership. They've been sold, are for sale, or probably will be for sale soon.

The Industry Report asked Becky Lomax, OnTheSnow.com's Northern Rockies regional editor, to peek behind the front yard signs and see what it all means.

Lomax tallies it up like this: Big Mountain (now known as Whitefish Mountain Resort) is in the hands of William Foley, CEO of one of America's largest title insurance firms; Red Lodge Mountain was sold to a California-based company last fall; Moonlight Basin is negotiating with a buyer or partners to join in.

The private Yellowstone Club for big spenders is looking for another big spender to buy it; The Big Kahuna in Montana - Big Sky - owned by Boyne Resorts, is likely to pull off a sale/leaseback deal with CNL sometime after the season's snow settles on its absorption of its 2007 acquisition/leasebacks.

Why the flurry, so to speak? "Montana ski areas in general are on the way up. People are getting tired of crowds in Colorado," Moonlight Basin General Manager Greg Pack told the IR. "We offer incredible terrain, and don't have lift lines, maybe only a 2-3 minute wait."

Pack says the wide-open spaces for which Montana is famous means fewer crowds and less-harried lifestyle go with its mountain resorts. He points out the entire state had 1.5 million skier visits last year, but one busy resort in Colorado represents what Montana resorts get an entire season.

There's more, says Lomax. "The mortgage market is collapsing across the country, but Montana ranks 41st on the list in foreclosures. Construction is still happening here, and that's attractive to potential buyers."

Then, there is Montana's neighbor to the north and the return of its dollars, at least to those resorts in the drive market. "Historically, we always have had our share of Canadian visits due to our proximity," says Rob Ringer, Red Lodge General Manager. "This year, we have seen more than normal which I'm sure is attributable to the strong Canadian dollar." Red Lodge, in eastern Montana, is one of the big hills accessible from Saskatchewan and Manitoba.

Whitefish PR Manager Donnie Clapp backs up Ringer, attributing some of the resort's 15 percent increase in ticket sales this season to the strong Canadian dollar. Whitefish sits one hour south of the border and five hours from oil-rich Calgary. The parking lots at the ski area were jammed with Canadian buses in the late 1980s, and now the buses are starting to return. Moonlight's Pack says he has seen "more interest" from Canadian media, but it has yet to translate at the ticket window.

"Getting here is difficult without major airline hubs," the IR's Lomax explains. "Many airlines fly in via Salt Lake City and Denver - where lots of potential guests would rather get off and get skiing rather than catching an additional flight to Montana. The return of the Canadians helps to lessen the pressure for air markets for those who rely on destination visitors for revenue."

She notes that Montana is within the drive market for four British Columbia, Alberta, Saskatchewan, and Manitoba Provinces. "The stronger Canadian dollar also means more than lift ticket sales as, at least in Whitefish, real estate agents are seeing Canadians plucking up condos and second homes."

The new chapter in the Big Sky story has yet to be written. "Although I'm unable to verify any details related to the suggested rumor of the sale of Big Sky, I can confirm that Boyne Resorts and CNL Income Properties continue to look at ways to work together," Boyne Resorts Communication Director Julie Ard told Lomax.

OK, so no confirmation. However, Boyne was more than active last year with acquisitions and leaseback deals with CNL, an important and relatively new player in the mountain resort world. CNL is a Florida-based REIT. It appears to be safe enough for the IR to speculate Boyne is simply absorbing its 2007 shopping spree and a deal with CNL will likely happen once the snow melts and everybody at Boyne takes a deep breath.

Big Sky is attractive to CNL - and others, of course - because it has name recognition, tradition, and its core key skier-heavy fly-in markets of the Midwest, Southeast, New England, and Northeast Metros like New York and Philadelphia.

"Big Sky has been on an upward curve for the past 10 years, and many factors are involved. A key element is the increased air service we've attracted to fly in," Big Sky's PR manager Dax Schieffer told Lomax. "A second factor is the attention we've received offering the biggest skiing in America with the partnership with Moonlight Basin."

The Big Mountain to Whitefish Mountain Resort story spans 60 years, Lomax says. It is a privately held company owned by Winter Sports, Inc (WSI). Fidelity Natonal Finance CEO Foley bought WSI's primary shares in 2004. Two reverse stock splits ensued, effectively eliminating more than 100 local small stockholders, many of whose families have held stock since WSI's inception in 1947.

The effect of the stock split was emotional, Lomax says. "Many locals felt they no longer owned a piece of 'their' mountain." But the new ownership brought in $20 million in capital upgrades, including a much needed new base lodge, lifts, restaurants, and more.

The resort opted to change its name to Whitefish Mountain Resort last fall, unleashing a backlash from a segment of locals who felt bonded to the Big Mountain name. The idea, Lomax says, apparently was to gain more marketing identity with the town of Whitefish and more separation from Big Sky.

Out-of-state visitors have long confused the two, even going so far as to have reservations at one, but fly to the other. The change, however, grated on locals who blamed it on Foley. The change came on the tail of the stock buyout and as Foley was purchasing several restaurants in town.

Ironically, Whitefish's Clapp says skier visits are up 10 percent for passholders and 15 percent for others. The national press with the name change and improvement helped, as did the great snow year.

"It was a perfect storm," he said. Whitefish is the only Montana resort on the rail line, so that's been another boost. "Amtrak is overjoyed and surprised at the jump up in traffic specifically from Seattle to Whitefish. People are excited about riding the trains."

Lomax points to the long-time identity conflict and the inevitable recriminations when it finally changed, particularly as the stock takeover fueled a "class struggle." Montana ranks 37 out of 50 states economically. Yet it's the land of multi-million dollar second homes. The mantra around the town of Whitefish became: "Don't make this another Aspen"

The Red Lodge situation is not dissimilar, says Lomax. The resort was acquired by JMA Ventures LLC of San Francisco, Calif., last fall. JMA fairly recently purchased Alpine Meadows and Homewood near Lake Tahoe. Red Lodge was formerly owned mostly by the Marbles, a local Billings, Mont., family.

"The Marbles had owned the company for many years and had come to a point where they realized they needed to sell it because the capital improvements required were beyond their capacity," G.M. Ringer explained to the IR. They recognized it would take an entity with a lot of resources to make the improvements to take the business to the next level and really grow it." He said JMA looked at Red Lodge as an "undercapitalized opportunity" with plenty of upside.

Red Lodge Mountain opened in 1960. It has a long history with many loyal guests. "Some have been coming here for generations," says Ringer. "Now that we have new ownership with the resources to really grow the business, I would say the state of our industry is very bright." The ski area is within one hour of Billings, the largest city in the state and still on a growth curve.

Locals were nervous early on, says Beth Hutchinson, Executive Director of the Red Lodge Chamber of Commerce. They were concerned about the sale turning their ski area into a mega-resort. "People moved here from Aspen and Steamboat to get away from that," she said. "We would like to see growth, but without becoming another mega-resort." But, unlike Whitefish, there wasn't extreme opposition to the sale.

Capital, once again, was the impetus for Moonlight Basin going on the block. Owner Lee Poole, a local rancher who started the ski area in the mid-1990s, put the For Sale sign up before Christmas.

"Moonlight has been Lee's life's work for the last 15 years. He sees a strong commitment to see his vision implemented," Russ McElyea, Moonlight's general counsel told Lomax. "The development plan is more or less complete, but the execution is not. Construction and infrastructure are needed."

That, says McElyea, is why Poole is looking to remain involved at some level. Poole is apparently open to either a sale or a partnership, but the preference seems to be for additional partner(s). "We want build out at an accelerated pace," McElyea says. "The sale is an effort to speed up the plan." He said there seem to be "all sorts of potential suitors interested."

Some locals, Lomax notes, worry about what a potential sale of Moonlight will do to the home-grown intimate character of the resort, a recurring theme in Montana. She believes much will depend on what role Poole will play down the line.

The last of the resorts in the classifieds right now is perhaps the least important to most skiers and riders without gazillion dollar balance sheets. Nevertheless, the Wall Street Journal reported in January that the ultra-exclusive and relatively new Yellowstone Club is for sale. It is a members-only, high security, private golf and ski resort developed and owned owned by Tim and Edra Blixseth, an apparently not-so-happy couple.

Their divorce settlement reportedly meant they divided up their nearly $2 billion in assets, but planned to remain co-owning partners. That didn't work when things got progressively nasty. The new buyer will probably pay an estimated $400-$600 million. The likely buyer is rumored to be club member Samuel Byrne of Boston-based Crossharbor Capital, a real estate and private equity firm.

The club has about 300 members (getting in costs a cool $300,000, plus dues of $18,000 per year), plus property purchase (vacant lots start at about $1 million). The buildout was set for another 500 members before locking the gates.

Yellowstone Club President/CEO Dieter Huckestein did not return phone calls nor respond to e-mails from the IR asking him to confirm status of the sale and other questions Lomax wanted to explore. No matter. You probably don't care.

The glorious landscape of "wide open spaces that we love" under that big blue sky is clearly changing horses. But the snow is still falling and the forecast looks pretty good for tomorrow. Hee-yaw.

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