This Real Estate Q&A was scheduled to run in this week’s The Sheet, but I guess they didn’t need the filler. I’m working on new Broker’s Report so I thought I better post this–don’t want to overwhelm my readers with thought provoking material.
“It Will Be Amazing”
Q: We have been second homeowners in Mammoth for the past 16 years. We bought before Intrawest came on the seen and we watched all the fanfare and hoopla when they arrived and started developing, but they appeared to lose real interest in Mammoth over time. How come?
A: Without transparency, which seems increasingly difficult in everything these days, it is really hard to know for sure. The exact reason(s) may be known to only a few insiders and I’m sure they’re not talking. But maybe a review of some of the circumstances can give us insight.
Intrawest’s marketing machines went to work shortly after their arrival here in Mammoth in early 1996. The first grab at everyone’s emotions (“selling is the transfer of enthusiasm”) was a 13-minute video used to introduce “Project Sierra.” They played the video over and over again at their sales office dubbed the Discovery Center and included copies (pre-DVD) in marketing packages sent to potential buyers. The video was titled “On the Shoulders of Giants” and put Dave McCoy on a pedestal with John Muir and Ansel Adams and made them the pioneering visionaries for how Intrawest would transform Mammoth. “It will be amazing, amazing, amazing…on the shoulders of giants” is how the video concludes.
Intrawest executives came to town and made comments like, “the best ski mountain in the United States” and “the greatest opportunity in mountain resort development” and the media spoke to “the biggest resort makeover in the history of skiing” and “the $1 billion facelift” and on and on. And we all believed it to be true. After all, these were the biggest and most successful resort developers in the world. And we believed Mammoth was worthy.
But things got sideways shortly after the ball got rolling. The first wrench in the works was the wrangling, and ultimately the protracted litigation, over the airport. Today we see that the airport and daily air service can work. Imagine if we were a good six to eight years into the program. My bet is that our local economy would be significantly different. We wouldn’t be “addicted to the heroin of development.” The other wrench was losing the opportunity to do a redevelopment district in North Village. That was more litigation and delay. Ironically, Andrea Lawrence was quoted in the Nov. 2001 issue of SKI magazine that the redevelopment plan “would have bankrupted the rest of Mono County within 20 years”, and today’s news is that the (relatively) financially healthy County is looking at ways to assist the financially strapped Town.
And ten years ago last month, Mountain Sports and Living magazine (now defunct) reported on the redevelopment controversy in a story titled “Intra-Town Squabble.” Then Town Council member Kathy Cage was quoted, “We were not able to attract Intrawest here without the promise of redevelopment…if we hadn’t done it, we would be sitting in the same financial and economic spot we were in five years ago.” Ironically again, those of us that remember the “financial and economic spot” we were in during the early 90’s are seeing many similarities to now.
Beyond the troubles with the airport and redevelopment, there were other problems. I remember the day I went to lunch with one of my former associates who was the sales manager for Intrawest. He had just come from an important meeting with “corporate” and they were cutting sales budgets and commissions because the development costs here in Mammoth had become so high. (Anybody who has ever built anything here knows this to be true.) Intrawest had apparently watched their profit margins squeezed hard by building in this altitude, with the snow load and engineering requirements, and California and Mammoth regulations. They told their sales staff that it was not like anything they had experienced in any other resort.
One thing I’ve thought plenty about, because I’m such a believer in Mammoth, was how Intrawest viewed Mammoth as real competition to their trophy Whistler/Blackcomb. Face it, Mammoth as envisioned with a functioning airport right here (better access) and quality service levels and exciting amenities would be real competition. When we recruited Mike Vance from Whistler to be our Planning Director we knew that the climate was an issue. (When I had met him years earlier he told me, “What Mammoth has Whistler will never have––the sun.”) Maybe they came to realize that if Mammoth became “amazing” the customer would like it better. And understanding that destination skier/snowboarder numbers are relatively finite, this alone could be enough to make them ditch Project Sierra.
And there is another, more real estate and development specific topic to discuss. The original boys at Intrawest proved to have uncanny vision, foresight, and timing (just look at the timing and valuation of their sale to Fortress Investment Group). Two of their BIG (and most profitable) business models, the condo hotel and the resort “Club”, have taken serious beatings in the global marketplace in the past couple of years. These models are unlikely to see any real resurgence for many years to come. Did they anticipate that? One would think so based on their actions. Again, proving uncanny foresight and timing. And that would be another reason to lose interest (especially with a buyer knocking on the door).
And something unresolved in my mind, I think Intrawest lost respect for Mammoth after negotiating a very sweet development agreement with the Town in the Village. Those “in the know” still believe we left so much money on the table that it was obscene. They may have looked at us as being so unsophisticated in this realm that we were theirs for the taking: do a “good enough” job while grinding out profits, commit as little to the community as possible, and sell out of the deal at a high price when the timing was right. Unfortunately, it’s all water under the bridge. Responsibility doesn’t seem to matter any more.
So here we are. The brilliant minds that built and drove Intrawest are gone (and probably toasting to us all the time). The remaining Intrawest ownership under Fortress is an uninterested fraction of the Ski Area, unsold units at the Westin and Woodwinds (although the bank probably really owns them), the un-transparent and disinterested ownership of the Village commercial through CNL, and the Rodeo grounds in June Lake (now basically worthless?). I’m sure I’m missing something, but it’s all like a small scrap in a forgotten doggy bag after the best meal of your life.
So why did they lose interest in standing on the shoulders of giants? I’m sure it had to do with money and likely one (or more) of the aforementioned conditions. Or maybe they simply didn’t like us Californians hanging out in the sunshine. Meanwhile, we’ll just have to remain content and inspired while playing in the shadows of giants.
Intrawest didn’t loose interest, just milked this cow for all she was worth. Then sold her before her bag ran dry for a premium on their investment. They would be back in heart beat if the return on capitol fit their business model. They are experts at buying ski area$ in trouble and turning them over for a profit. Many people have made a lot of money following them around buying when they buy and just as important is selling when they sell. No doubt they sold as close to the top as possible and are glad to be rid of the problems that were starting to snowball. Talking about weasels, carpet baggers and sleeping with the devil, a round of kool-aide for the suckers they left behind. ” Brilliant “
“I’m sure I’m missing something, but it’s all like a small scrap in a forgotten doggy bag after the best meal of your life.” Perfect!
“So why did they lose interest in standing on the shoulders of giants?”
You’re kidding, right? I mean, you seem to be assuming that that whole marketing spiel had even an ounce of sincerity.
EVERYTHING that has happened in Mammoth was part of the plan. Just not the plan Intrawest, et al., carefully presented to the public all those years ago.
“I’m sure it had to do with money…” Thanks for this valuable tidbit of information. We look forward to even more insightful in the future.
This massive shift from boom to bust and no interest in development must be music to the ears of so many that hated Intrawest, the Pillage/Village and somehow thought Mammoth was no longer a sleepy little ski town.
Can you go back to the good old days or will the few remaining, long term local families and businesses be forced to move out for jobs? Will the character and demographic left in Mammoth look and feel nothing like the “old days”?
I never seem to hear or read anything about Chadmar or Starwood/Barry? I bet they are busy trying to see what they can or want to hold on to. With no exit or development opportunity on the horizon, looks like a good time to leave Rusty behind at the wheel, pack up the family jet and sit in Hawaii for a few years.
Maybe that is where this is taking us. Rusty and a private backer that lives on a ranch in Bishop buy the town back for pennies on the dollar, thus being able to offer affordable condo and shop rent rates to families that make big pasta and garlic bread dinners in their condos and only plan a night or two out at Robertos or a Pizza joint. Deja Vu
Oh, Mammoth is downgraded from a “Destination Resort” to a sleepy, not so chic, isolated, not so painted up little ski town served by a much improved HWY/395 and much improved MMSA infrastructue. mm1968
As all the land that Starwood paid Intrawest $165m for goes bank to the bank as we chat (the same land that Dave and Rusty had to “give” to Intrawest as part of the “deal” ), not to forget the $365m that they milked out of Starwood for the purchase of MMSA, which is also rumored to be on the verge of default! MMSA and the town is broker than when Intrawest arrived in 1996, losing ski visitors by the droves like in the 90’s, no development, like in the 90’s, falling T.O.T. and locals gone broke, again deja vu! Don’t hate the player..hate the game!
So everyone is now crying broke and the blues, what happened is the million dollar question? Real simple folks, Intrawest was pitched by Rusty/Dave to "show us the money" and we all will benefit the big bucks. So Intawest being the best in the resort development business said let's go out west and make a killing!
Dave and Rusty never wanted to lose control so they never gave Intrawest voting rights, therefor controlling and making or breaking Mammoth's destiny. Intrwast made something like 75% of their revenue stream from Mammoth alone, think about 75%? You really think they wanted out? So they could not take control, so they sold to the highest sucker they could find, Barry Sterlicht/Starwood. As Intrawest was busy getting out of town all the smart folks were getting in LOL. As Intrawest finally said and Dave & Rusty benifted by the money machine…show me the money!
Now you have your little non growth broke town back again, with incompetent council members and Rusty still in charge! Amazing!
A couple of questions and observations.
Assuming factual reality that Intrawest land purchased by Starwood is close to going back to bank, who is the bank? Some hedge fund or did Intrawest carry some of the paper? Not likely.
Assuming some truth that MMSA is near default, who is the bank? I belive Rusty has skin in the Starwood position, but surely Mr. McCoy got out clean with all his $$$, no future risk period.
Even if MMSA goes into default, Rusty is the bag holders best play for recouping some cash and future exit strategy.
Once the “bank” bites the ivestmnet write down bullet, a whole new game of rules and possibilities begin.
What I do not see in the near future is a new demographic (boomers are done) and/or investment engine for Mammoth Lakes (second home buyers or property developers).
I see a SoCal/395 economy for a long time ahead.
Mr. Poster to the north of me…yah you. Hey, I agree with you completely regarding the boomers blowing their wad and the flaccid future for second home ownership. The glamour is gone and the stark reality is it costs a lot of money and is a major headache. Furthermore, the VRBO world has made rentals much more affordable, flexible and clean. I can go when I want, where I want and rent the appropriate size home/condo depending on who is in my entourage. If it’s just my wife and I, fine…..I get a one bedroom. If I got one or all of the kids then we go bigger. And…when the spouses and grandkids arrive I get to be the hero and rent the entire compound. I love it…and best of all I never have to stick my meaty hand into a tool box to fish out channel locks to fix a thing! The only way I would buy at this point is if the deal was cash flow positive with 10% down and conservative income/expense assumptions. Otherwise, I just don’t see it in the cards.
btw…is Mammoth not one of the most wonderful places on earth…SoCal is so damn lucky to have it within striking distance. God bless the 395! 😉 Wilbur
“Assuming factual reality that Intrawest land purchased by Starwood is close to going back to bank, who is the bank? “
ISTAR financial, and guess who it is owned or in bed with… Starwood Capital,
Someone will purchase this land for pennies on the dollar, wonder who Rusty?
Perhaps I was a sucker. I bought 3 MVPs when they first came out, for me, my wife and daughter. The next year, just as MMSA and Intrawest planned, we bought an intrawest condo, a small one bedroom that we could barely afford not only because we now were skiing only at Mammoth but because we watched the video “On the Shoulders of Giants”, and still watch it occassionally, and we bought into that lifestyle hook line and sinker (split shot for us FFs). A few years later we upgraded to a 2 bedroom intrawest condo with perhaps the best view in Mammoth, and over time we have put over $200k into it, a brand new condo, customizing it exactly the way we want it. Nice thing about a tiny place is you can go first class on a limited budget. Just as Rusty and group planned, we have spent thousands (probably close to 25k not counting the remodel) at the Mountain Shop, Ski School, and various businesses and restaurants in town.
Would I do anything differently? Absolutely not. Since our first purchase in 2000, our quality of life has improved dramatically, and we now plan to retire to our little two bedroom condo in a couple of years. I’ve come to know the mountain and the towm like no other, and I love them both. And it just keeps getting better every year. I love the upgrades on the mountain and the sidewalks on Main and Old Mammoth. For the first time in my 45 years of skiing, I may get 50 days in this season at what I think is the best mountain in North and South America. How good is that? Sorry, but I just don’t have any regrets.
Why did intrawest sell out? They probably read Harry Dent (2006), saw the handwriting on the wall, found a ready buyer after 10 years of remarkable growth taking annual skier visits from 450,000 to 1,600,000, and bailed with a nice profit for Dave, Penny and themselves.
One mans ceiling is another mans floor. When you upside down you don’t have a lot of choices but to be happy with your decisions or try to weasel out of them.
“Don’t hate the player..hate the game!”
YOU HIT THE NAIL ON THE HEAD MY FRIEND!
Its because of the players that the game exist….
And who is the croupier in Mammoth?
ME!
I like the part above about $200,000 in improvements being a “limited budget.”
Only in California….
Hey its only 200 months pay! I enjoyed your blog keep it up!