Peak Resorts to go Public

[Newpylong]

It may feel like ASC (with all of the purchases and the IPO) but they have not made significant investment in real estate yet - and that is where the ASC really tanked itself.

 

[drjeff]

I think this excerpt from the filing(especially the part I highlighted in red) is a key strategical difference between Peak and ASC:

"We monitor potential acquisition targets to build geographical diversity and increase market share. We believe that, given our profitable results at our current resorts and our proven acquisition history, we are positioned for further growth within the day ski area and overnight drive ski area markets. Our past acquisitions have been driven by our goals to diversify our locations and increase skier visits, which will continue to be the driving factors of any future acquisitions that we may complete."

If Peak maintains their strategy that they have to now, which is focusing on running ski areas that cater primarily to the day ticket market, instead of trying to develop ski areas that are destination resorts, their strategy could be quite good. I also think that in their combined acquistion of Mount Snow and Attitash that Peak is getting a feel for what it's like to not just run a ski area, but also hotel/condo/timeshare facilities, without having to go through the massive extra expense of building them.

True, they have submitted a master base area redevelopment plan for Mount Snow, and that will have a large cost associated with it for sure. However, if you look at the timeline that they're proposing, the buildout time is in decades, not years, and that's also a key difference to what ASC did where they came in, bought up many resorts and then quickly moved to add not just on hill improvements, but also lots of new real estate. Peak, and I think that us in the Northeast have seen this now over the last 6 or 7 years while making very tangible on hill improvements is proceding at a much more cautious pace than ASC did. Since if you think about it, even though Peak has been a ski area owner in the Northeast for a basically a decade now with Crotched, the 6 pack their installing at Mount Snow this summer will be their 1st new lift installation they've done at any of their Northeastern properties, a far cry from the rapid, and expensive lift building spree that ASC did not just across the Northeast, but all across the country.

 

[deadheadskier]

Wonder if Peaks will look at possible day market areas out west with the cash this generates or are they simply looking to pay down debt.

 

[riverc0il]

When has this ever been a good thing?

Depends how you look at it. All of the ASC resorts got a lot of lift upgrades on the backs of the stock owners which seemed to be to the benefit of most skiers. :lol:

It seems odd that they would do such a huge expansion (Wildcat purchase and Six Pack at Mount Snow) and then go public immediately thereafter. Did they over extend and need a cash infusion leaving them with no choice?

 

[bigbob]

Depends how you look at it. All of the ASC resorts got a lot of lift upgrades on the backs of the stock owners which seemed to be to the benefit of most skiers. :lol:

It seems odd that they would do such a huge expansion (Wildcat purchase and Six Pack at Mount Snow) and then go public immediately thereafter. Did they over extend and need a cash infusion leaving them with no choice?

It will be interesting to see if the owner keeps more than 50% of the stock for himself.

 

[roark]

It will be interesting to see if the owner keeps more than 50% of the stock for himself.

Isn't that almost always the case?

 

[thetrailboss]

So who is buying?

 

[riverc0il]

So who is buying?

I'll buy some

 

[thetrailboss]

One interesting fact that I saw was that they bought Wildcat for $5 million. To put that in perspective, that is about how much it costs to install one long HSQ and all the site work, etc. Make that a very nice one. This was a firebrand deal. Looks like the previous ownership was really desperate to dump it.

 

[UVSHTSTRM]

One interesting fact that I saw was that they bought Wildcat for $5 million. To put that in perspective, that is about how much it costs to install one long HSQ and all the site work, etc. Make that a very nice one. This was a firebrand deal. Looks like the previous ownership was really desperate to dump it.

If I understand the setup with the state of NH.......

...this sounds about right for a Mountain with zero real estate, realatively little infastructure, zero land (leased from state), and on the low end of yearly visits as compared with other 2000' mountains.

Or as you were saying (sort of) the family that owned it couldn't afford to run it.

 

[thetrailboss]

If I understand the setup with the state of NH.......

...this sounds about right for a Mountain with zero real estate, realatively little infastructure, zero land (leased from state), and on the low end of yearly visits as compared with other 2000' mountains.

Or as you were saying (sort of) the family that owned it couldn't afford to run it.

Absolutely. Not much to work with and in need of some TLC and capital improvements. But they have nowhere to go but up. A logical fit considering that they have a captive audience at Attitash.

 

[threecy]

Wonder if Peaks will look at possible day market areas out west with the cash this generates or are they simply looking to pay down debt.

If I'm not mistaken, some of their loans are interest-only loans - they aren't paying down that debt currently. Also, some of their loans may have increasing interest rates every year.

In essence, one could compare their New England purchases to homebuyers using interest only and/or adjustment rate mortgages. We all know how that worked out for many during the real estate meltdown.

It will be interesting to see if the owner keeps more than 50% of the stock for himself.

Peak has assets of about $180M. The IPO is apparently for about $40M of capital.

One interesting fact that I saw was that they bought Wildcat for $5 million. To put that in perspective, that is about how much it costs to install one long HSQ and all the site work, etc. Make that a very nice one. This was a firebrand deal. Looks like the previous ownership was really desperate to dump it.

If I'm not mistaken, Peak put $500K down on the Wildcat deal. The previous owner is essentially loaning Peak the $4.5 million at a 4% interest rate for 10 years. Peak has to pay about $1.825M+interest over those 10 years, then the balance ($2.675M) in November 2020.

 

[Geoff]

One big downside, and Les Otten said this with the case of ASC, is that Peaks will lose control over major decisions to an elected board and stockholders who are interested in making the most return on their investment.

I haven't read a prospectus but this isn't necessarily true. You can sell different classes of stock that have different kinds of voting rights. Besides, if the company is well managed, the board of directors has no incentive to change management.

...and when ASC went public, Les Otten had complete control of the company. That was actually the thing that killed the business. If he had sold enough stock to pay down all that debt, the company would have been solvent. All the interest payments on that debt ate them alive. Otten only lost control of the company when Oak Hill Ventures came in to bail him out. They got the majority of board seats and were the senior creditor so when they liquidated the ski areas, Oak Hill got their money out with interest before anybody else got a dime.

 

[mlkrgr]

I read the filings and it looks like first time Peaks made money was at the end of last year. They are IPOing 40 million and book value of the resort is 170 million. Definitely a small cap stock and definitely a crap shoot. Debt will not be too bad if they use IPO proceeds to pay it down, but I would like to see lower debt levels. They say Wildcat hasn't had a material impact on results which seems interesting. Though, they seem to be doing well so far this year in terms of comps. But we really had some strong holiday time weatherwise this year so this was definitely a sellers market this year when we talk about NE resorts. Bad weather during holiday periods can really cause a strong negative effect on ski resorts' results. Good weather seems to be allowing for an uptick in improvement activity. Though, IDK how much better it can get, especially with favorable holiday weather which is $$ to ski resorts especially since they can charge more. Worth at least a few bucks but I don't see how I would possibly pay more than $6/share after reading the proformas; $3/$4 is probably the right price vicinity when I assume profit growth not to be anything too high.

Though, the positive vibe helps a lot around Peak's resorts. I surely didn't know what to expect, but when I visited Wildcat this year, seems like everything is going well and people are happy with them. Can't say the same thing when Powdr moved into K.

 

[thetrailboss]

...and when ASC went public, Les Otten had complete control of the company. That was actually the thing that killed the business. If he had sold enough stock to pay down all that debt, the company would have been solvent. All the interest payments on that debt ate them alive. Otten only lost control of the company when Oak Hill Ventures came in to bail him out. They got the majority of board seats and were the senior creditor so when they liquidated the ski areas, Oak Hill got their money out with interest before anybody else got a dime.

That is the excuse that LBO made in his interview with Karen Lorentz for the Killington book. Whether that is valid or not is for us to judge. I don't agree with him either.

 

[skiatomic]

Reading the IPO, it is clear that Mt Snow is a huge, huge part of their bet, and @30mm debt dedicated to re-developing the base (condo, lodge, etc) -- of which they spent 7.3mm on the 6-pack...they are wagering on getting the permitting and moving ahead soon.

Mt Snow already has a lot of real estate development, but say good-bye to some parking lots and hello to parking garages...is my guess. At that rate, adding more real estate owner traffic to the hill, it makes more infrastructure improvements (more lift capacity) needed. Unfortunately, adding more lift capacity just jams the trails even further!

Interesting how few of their other resorts have summer activities incorporated, other than a couple of golf courses, of which Mt Snow has a great one. The summer revenue is a key, especially in the Northeast for a successful business model...especially if you sell stock and want a more rounded renune stream, (ie constant).

 

[Razor]

As a fairly active stock trader, I'd never in a million years invest any money into any business in which so much of its revenue is weather-dependent. Peak may do a good job with what it has, but why would anyone take a risk when so many other options to invest in are out there? The risk/reward ratio is too great. More power to them if they can improve their areas, but I think anyone who invests in their stock is nuts.

 

[thetrailboss]

Reading the IPO, it is clear that Mt Snow is a huge, huge part of their bet, and @30mm debt dedicated to re-developing the base (condo, lodge, etc) -- of which they spent 7.3mm on the 6-pack...they are wagering on getting the permitting and moving ahead soon.

Mt Snow already has a lot of real estate development, but say good-bye to some parking lots and hello to parking garages...is my guess. At that rate, adding more real estate owner traffic to the hill, it makes more infrastructure improvements (more lift capacity) needed. Unfortunately, adding more lift capacity just jams the trails even further!

Interesting how few of their other resorts have summer activities incorporated, other than a couple of golf courses, of which Mt Snow has a great one. The summer revenue is a key, especially in the Northeast for a successful business model...especially if you sell stock and want a more rounded renune stream, (ie constant).

Good points and welcome to the board!

 

[deadheadskier]

but why would anyone take a risk when so many other options to invest in are out there? .

skiing message board arm chair quarterbacks hoping to buy influence towards Peaks operating decisions?

 

[RootDKJ]

I found this pretty interesting

The leases for the land underlying Jack Frost and Big Boulder may be terminated by the landlord and if terminated, would eliminate revenues from these resorts.

We do not own the land underlying the Jack Frost and Big Boulder resorts. We have entered into a lease with Big Boulder Corporation and a lease with Blue Ridge Real Estate Company, both of which terminate on December 1, 2033. The terms of the leases provide that the landlord has a right to terminate the leases at any time, upon the payment of approximately $500,000 plus the net book value of the assets relating to the property. If these leases are terminated, we would not be able to operate Jack Frost and Big Boulder, and therefore, the revenues generated by these resorts would be eliminated. Jack Frost and Big Boulder generated 7% and 6% of our consolidated revenues for the fiscal year ended April 30, 2010, respectively.