Stowe Likely to Increase Rates??? AIG Reports Record Losses

[Geoff]

Originally Posted by Tin Woodsman

Prior to the Spruce Hamlet development, maybe that would have been in the ballpark. Got to be well north of $100MM right now.

Spruce Peak at Stowe is 35 developable acres. Their permitting and Vermont environmental law won't let them touch the rest of that 2000 acre tract. Everything built there is condos or hotel/condos. AIG can only develop and sell those condos and hotel/condo units once and the value of the profit generated from the real estate development is gone.

As a related data point, when ASC defaulted on their note to Ski Partners (owned by the Eiger Fund), Ski Partners ended up with 75% interest in the huge tract of developable land at the bottom of Killington. The SEC filing valued it at $70 million. Ski Partners later bought the assets of Killington, including the other 25% interest in all that land plus other land held by ASC for $80-ish million. All told, Killington, with around 3x the skier visits and a solid 20x more developable land, went for a little more than $150 million. I think $50 million for Stowe is probably pretty close given today's real estate market.

[mondeo]

Incidentally, a significantly larger portion of AIG's business, ILFC (the largest lessor of commercial aircraft in the world by value,) is considering splitting off.
$48 billion worth of aircraft, at an inventory of 900. 2007 revenues of $4.73 billion, income of $604, 170 person staff.
http://www.reuters.com/article/ousiv...56400420080512

[ski_resort_observer]

Originally Posted by billski

Or perhaps Stowe is a veiled playground for AIG executives? The whole lift ticket, parking lot, advertising, real estate thing is just ground cover for a hugely expensive perquisite for AIG brass? Keep the prices high, keep the riffraff out, give the executives staff jackets and cut privileges, set aside a few of those multi million$ "cottages" Hey, if you're paying out $50M in exec salaries, what's another 100M for benefits?

I heard that AIG has a block of units set aside, not for sale. Wonder if Hank can stay there? Despite being the disgraced former CEO and Dictator he is still the largest stockholder. Probably worth more than the whole resort.

I assume the 35 developable acres does not include the new golf course. As soon as you drive thru the new entrance on the new road and all the land worked on both sides as you drive in plus the SML et al developement which is basically the entire base area of Spruce, plus the already built homes/townhomes on the hill above and the golf course seems way more than 35 acres to me.

I have no clue what the resort is worth but I think in a couple of years it will be worth alot more than it is today. I think Stowe had the #1 brand 20/30 years ago but it has become diluted with competition from Stratton, Okemo, the Bush and several others. While many of the other resorts were building slopeside developements and increased snowmaking, Stowe's proposals were shot down. They want to regain there prominence in the New England market. They want what their competition has... unfortunately Spruce was the only option vs Mansfield but it's better than nothing. The hotel opens next month it should be pretty impressive.

[thetrailboss]

Originally Posted by Geoff

I think $50 million for Stowe is probably pretty close given today's real estate market.

Not with a $100 million development..........

[Tin Woodsman]

Originally Posted by Geoff

Spruce Peak at Stowe is 35 developable acres. Their permitting and Vermont environmental law won't let them touch the rest of that 2000 acre tract. Everything built there is condos or hotel/condos. AIG can only develop and sell those condos and hotel/condo units once and the value of the profit generated from the real estate development is gone.

As a related data point, when ASC defaulted on their note to Ski Partners (owned by the Eiger Fund), Ski Partners ended up with 75% interest in the huge tract of developable land at the bottom of Killington. The SEC filing valued it at $70 million. Ski Partners later bought the assets of Killington, including the other 25% interest in all that land plus other land held by ASC for $80-ish million. All told, Killington, with around 3x the skier visits and a solid 20x more developable land, went for a little more than $150 million. I think $50 million for Stowe is probably pretty close given today's real estate market.

They don't need to touch the other 2000 acres to get them well over $50MM in value. they can only sell the condos once, but they enjoy revenue streams from the exclusive rental/management arrangements for those condos indefinitely. The hotel is clearly going to generate revenues into the future, as is the golf course. These are not "one and done" investments. Developable land is only valuable if people want to buy/build there. As you well know, K-Mart real estate is not exactly a hot commodity right now, and it's not just the current marketplace. In short, there is a lot of developable land in the backwoods of Maine too, but it's not worth much.

Now look at the skiing side of things. K-Mart does not have 3x the skier visits of Stowe, it's barely 2x and possibly less now depending on how much POWDR fudges the numbers this year. Second, look at the net realization for those skier visits. Given the disparity in day ticket pricing and season pass pricing, along with the substantial difference in the demographics of the two resorts, it's likely that the pure ticket revenue from Stowe is a LOT closer than the 2:1 disparity in skier visits would have you believe.

Now let's look at the expense side of things. K-Mart has 6 discreet entry points (Pico, K-1, Snowshed, RH, Bear, Skyeship) comprising at least 14 lifts (not including Magic Carpets and stuff that doesn't get you anywhere) accessible by just parking in a lot. All of those entry points and lifts require extra security and ticket checkers so that you can't sneak by and stay on the unmonitored upper mountain lifts. Stowe has three (Toll Rd., Manny, Spruce) entry points comprising 7 lifts accessible from the parking lots. K-Mart has 7 lodges spread around its system that it must staff and maintain. Stowe has 3, once of which is brand new. Stowe receives and retains snow better than K-Mart, and is philosophically inclined to make less snow as well, leading to significantly lower costs in that department. In sum, K-Mart costs a LOT more to run on a day to day basis than Stowe, so it's not apples to apples.

Finally, let's look at capital. Surely the good folks at POWDR priced the value of deferred maintenance into their bid for the resort. As you are painfully aware, very little in the way of capital has been injected into the physical plant for about a decade now. The base facilities and lifts are run down. The back-office systems are known to be a mess. Should we even discuss the amount of capital that will be needed to upgrade what has long been the world's most expansive snowmaking system (lots of underground pipes etc..)? Stowe has a new, massive source of water right at the base. It is pumping everything relatively close by instead of from miles away (and 1000' lower in elevation) at the Woodward reservoir. It also has an entirely new, computerized snowmaking system covering most of Spruce.

It also has am important intangible asset in the form of the Stowe brand, which means something in most of the skiing world. In sum, were Stowe to be sold today, I'd bet just about anything that it would fetch well north of what K-Mart did.

[GrilledSteezeSandwich]

Originally Posted by Tin Woodsman

They don't need to touch the other 2000 acres to get them well over $50MM in value. they can only sell the condos once, but they enjoy revenue streams from the exclusive rental/management arrangements for those condos indefinitely. The hotel is clearly going to generate revenues into the future, as is the golf course. These are not "one and done" investments. Developable land is only valuable if people want to buy/build there. As you well know, K-Mart real estate is not exactly a hot commodity right now, and it's not just the current marketplace. In short, there is a lot of developable land in the backwoods of Maine too, but it's not worth much.

Now look at the skiing side of things. K-Mart does not have 3x the skier visits of Stowe, it's barely 2x and possibly less now depending on how much POWDR fudges the numbers this year. Second, look at the net realization for those skier visits. Given the disparity in day ticket pricing and season pass pricing, along with the substantial difference in the demographics of the two resorts, it's likely that the pure ticket revenue from Stowe is a LOT closer than the 2:1 disparity in skier visits would have you believe.

Now let's look at the expense side of things. K-Mart has 6 discreet entry points (Pico, K-1, Snowshed, RH, Bear, Skyeship) comprising at least 14 lifts (not including Magic Carpets and stuff that doesn't get you anywhere) accessible by just parking in a lot. All of those entry points and lifts require extra security and ticket checkers so that you can't sneak by and stay on the unmonitored upper mountain lifts. Stowe has three (Toll Rd., Manny, Spruce) entry points comprising 7 lifts accessible from the parking lots. K-Mart has 7 lodges spread around its system that it must staff and maintain. Stowe has 3, once of which is brand new. Stowe receives and retains snow better than K-Mart, and is philosophically inclined to make less snow as well, leading to significantly lower costs in that department. In sum, K-Mart costs a LOT more to run on a day to day basis than Stowe, so it's not apples to apples.

Finally, let's look at capital. Surely the good folks at POWDR priced the value of deferred maintenance into their bid for the resort. As you are painfully aware, very little in the way of capital has been injected into the physical plant for about a decade now. The base facilities and lifts are run down. The back-office systems are known to be a mess. Should we even discuss the amount of capital that will be needed to upgrade what has long been the world's most expansive snowmaking system (lots of underground pipes etc..)? Stowe has a new, massive source of water right at the base. It is pumping everything relatively close by instead of from miles away (and 1000' lower in elevation) at the Woodward reservoir. It also has an entirely new, computerized snowmaking system covering most of Spruce.

It also has am important intangible asset in the form of the Stowe brand, which means something in most of the skiing world. In sum, were Stowe to be sold today, I'd bet just about anything that it would fetch well north of what K-Mart did.

One cool thing about the on-mountain develop is the town will remain the same. The Recreation path will be there..The Bagel will be there..The Rusty Nail and The Matterhorn will be there..I'm glad the McDonalds is now an overpriced Japanese restaurant..and I like how the Subway is tucked away in the back of a steezy mini-mart..

The Forerunner quad is a work-horse and runs more than any on-mountain lift..it's a 1980s High Speed Detachable quad and I could see that being replaced with a new High Speed Quad or Six-pack..A six-pack would mean more crowds on the hill but it would eliminate the long lift lines.

I really wish Stowe joined back up with Smugglers Notch for reciprical lift tickets...The true VT lift served Haute route is from Toll House lift..down to the Mountain triple..then down to the Lookout double then down to the forerunner quad..Up the Gondola..down to spruce..Up the Sunny Spruce Quad..Up the Sunsation quad..over to Smuggs via Snuffys..would require a short hike to the top of the former summit of the old Big Spruce(Big Pig) double..Down to the base of Madonna..Up Madonna 1..Down to the Base of Morse..lunch in Jeffersonville..Up Morse..down to the base of Sterling..Up Sterling..across the frozen pond to Spruce..Cut across #1 to the base of Spruce. Up the Gondola..Down to the Forerunner quad..last run down the Bruce trail..Apres ski at the Matterhorn where you have a car parked..Steezy...

[Geoff]

If you guys really think Stowe is worth $100 million, you should be in real estate development because you know something that's lost on everybody in the business.

[hardline]

Originally Posted by GrilledSteezeSandwich

One cool thing about the on-mountain develop is the town will remain the same. The Recreation path will be there..The Bagel will be there..The Rusty Nail and The Matterhorn will be there..I'm glad the McDonalds is now an overpriced Japanese restaurant..and I like how the Subway is tucked away in the back of a steezy mini-mart..

The Forerunner quad is a work-horse and runs more than any on-mountain lift..it's a 1980s High Speed Detachable quad and I could see that being replaced with a new High Speed Quad or Six-pack..A six-pack would mean more crowds on the hill but it would eliminate the long lift lines.

I really wish Stowe joined back up with Smugglers Notch for reciprical lift tickets...The true VT lift served Haute route is from Toll House lift..down to the Mountain triple..then down to the Lookout double then down to the forerunner quad..Up the Gondola..down to spruce..Up the Sunny Spruce Quad..Up the Sunsation quad..over to Smuggs via Snuffys..would require a short hike to the top of the former summit of the old Big Spruce(Big Pig) double..Down to the base of Madonna..Up Madonna 1..Down to the Base of Morse..lunch in Jeffersonville..Up Morse..down to the base of Sterling..Up Sterling..across the frozen pond to Spruce..Cut across #1 to the base of Spruce. Up the Gondola..Down to the Forerunner quad..last run down the Bruce trail..Apres ski at the Matterhorn where you have a car parked..Steezy...

i did that a few time bak when the pig was still there except i skiped the double and the tripple but substituted it with a run of the chin down to tafts for a snack down to the road. grabed the shuttle over to spruce. up the pig back down into the notch, rode down the road
had lunch at the lodge. then came back over. i took a friend form NJ on the tour and he was amazed that you could do something like that in the US. the only thing like it is the utah tour.

[Tin Woodsman]

Originally Posted by Geoff

If you guys really think Stowe is worth $100 million, you should be in real estate development because you know something that's lost on everybody in the business.

If you want to go ahead and raise the bar from $50MM to $100MM, go ahead. I've got less confidence that it's worth $100MM than I do that it's worth well more than $50MM.

[thetrailboss]

Originally Posted by Geoff

If you guys really think Stowe is worth $100 million, you should be in real estate development because you know something that's lost on everybody in the business.

Again, I've heard from many people that the total investment for the golf course, snowmaking, lifts, and the entire Spruce Mountain Development was around $100 mil. You just can't deny that....