Intrawest troubles grow, Tremblant spinoff possible.

According to a story in today’s Globe & Mail, time is running out for restructuring debt at Intrawest, the resort company who owns Whistler-Blackcomb, Mont Tremblant, Copper Mountain, Steamboat Springs, Mount Stratton and several other high profile resorts. The financing deal that was patched together last fall is coming apart at the seams, and, similar in a way to CanWest – the Canadian newspaper chain – the company is hobbled by high debt, lousy payback terms, and a falling real estate market. I have followed this story for years now and always wondered why ITW’s share price lagged so badly when the company was selling tons of real estate and putting up record-breaking attendance, year after year. Fortress, which started out with a minority position in ITW, believed that new management was needed to ‘get the most out of’ Intrawest’s holdings and its potential.

ITW founder Joe Houssian, in a remarkably prescient move, sold out pretty much at the top to Fortress Capital, a private equity fund with real estate holdings but little operational experience on the resort side. Much of the real estate that is for sale by ITW at it resorts is in the nosebleed fractional market (would you believe 1/10 shares for $200K and up? You can buy a two bed and two bath outright at a place like Big White for that price. I would be surprised if ANY of the units in the At Nature’s Door complex have sold this winter – as an agent put it to me “the resale and equity market for fractionals has yet to prove itself…” Well, guess what, it’s a concept that could be done like dinner; definitely some similarities to Tamarack in ID (see earlier post). Whistler, unlike Tamarack, is hardly located in the middle of nowhere and will receive a huge publicity boost with the 2010 Winter Games next year.

I predicted that last year when the sale to Fortress occurred was that we would now see where the profitability on the operational side of Whistler Blackcomb lay since the ‘easy real estate’ had been sold. While finances of the resort itself have not been laid bare, WB must be struggling under the costs incurred by the massively expensive (yet, it must be said, very popular) Peak 2 Peak gondola, the lousy start to the season and the general malaise that has descended upon the resort. There is talk now about spinning off Mont Tremblant into a separate company and I’m sure everything but the crown jewel of WB itself is on the table to the highest bidder. The challenge is, there just aren’t any bidders left. Recreational real estate at ski areas is likely to be in the tank for a long, long time. Hats off to Mr Ebner at the Globe for reporting on this story.

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