Ski Area Sells Again…Will The Third Time Be The Charm??
Market Summary: April 9 – April 23
The Mammoth MLS is reporting 18 real estate closings in Mammoth Lakes for the period ranging from a low of $200,000 to a high of $839,000. Of the 18 closings all 18 were financeable properties
and 13 were conventionally financed. Seven of the 18 sales were condos listed under $400,000. With the 10-Year Treasury down in the 2.2% range the 30-year mortgage rate has dipped below 4.0% again.
At the period’s end the condominium inventory is up four (4) to 97. There were 15 new condos brought to the market during the period. They are all essentially new to the market and throughout the spectrum of size, location, quality, etc.
Single Family Inventory
The inventory of single-family homes is down three (3) to 32. There are two (2) homes listed under $500,000 and one is a REO/auction.com property and one is a junker REO house in the “Ghetto” listed at land value. There are a total of seven homes listed under $725,000.
The total number of properties in “pending” (under contract) in Mammoth Lakes is up one (1) to 68 at period’s end. Of the 68 properties in “pending,” there are 51 in “Active Under Contract” status (formerly “back-up”). The total number of pendings in the aggregate Mammoth MLS (which includes outlying areas) is up seven (7) for the period at 113….So based on these statistics the announcement of the Mammoth Resorts “sale” some 11 days ago has had a neutral effect on the local real estate market. So far. Most are trying to wrap their minds around what is happening.
Market Updates and News
The weather and skiing was all over the board during the period. Precipitation events produced rain in town and snow on the Mountain. The annual snow total pushed over 600″ on MMSA and there was a variety of winter snow, incredible wind-blown snow and delightful spring skiing (until it got too sticky). Most local residents are ready for summer. But if you go skiing, odds are you want to go again the next day. The coverage is amazing.
Okay, so I know many of my readers are waiting for my take on the sale of Mammoth Resorts. I have intimate and different knowledge of the last two events; sales to Intrawest in 1996 and Starwood Capital in 2005. And there is no doubt that Vail Resorts has been chasing a deal for some time; Mammoth Mountain and the loyal skier following is a profound chunk of the North American ski industry (it was announced this past week that they have sold 40,000 ski passes for next year) .
Long-time local residents and business people also know that when Rusty Gregory starts talking about deals and finance it is imperative to pull out your bullshit detector and turn it on high. This time is no different. Rusty did his best “aw shucks” and “woe is me” act at last Monday night’s presentation to the community. It was likely the beginning of a thousands steps towards what will likely be an IPO on Wall St.. I’m betting he is practicing his sales pitch every day. This has become a high-stakes game.
The press releases have flowed through the system and some of the industry media have chimed in, so I don’t need to cover those details. The real question is; Will this be good or bad for Mammoth and will it create some sort of move away from the “Mammoth Malaise” we have experienced the past 10 years? All I can say is that it may be our best chance.
I don’t see the whole process as a traditional “sale.” Benjamin Franklin captured it when he said “we must all hang together or most assuredly we will all hang separately.” This new consortium of resorts all sit outside the publicly-held juggernaut known as Vail Resorts. Vail’s Epic Pass following now exceeds 650,000. Do some simple math; that’s ~$500,000,000 in ski pass revenue alone. Their stock price is at an all-time high. These resorts that make up the new consortium are getting their butts kicked by Vail. And some are also loaded with crushing debt.
So the solution is quite simple; imitate success!! Bundle it all together, hype the hell out of it, and sell 40M shares to the public. And obviously the deal has been in the works for some time. Rusty spoke of the $100M he had to play with last June. He hadn’t spoke much about it until last Monday night. The whole thing really came together with the group being able to purchase the Intrawest assets that were languishing around the investment world. The Mammoth “sale” announcement came only two days after the Intrawest announcement.
And since we live in this new “Art of the Deal” era, I would think Rusty is a big player at the table. Look at the leverage he had to get in. If he sells Mammoth to Vail Resorts (they were trying) then the rest of them are dog meat. Mammoth (and the customer base) is what puts the deal over the top. Rusty probably has the greatest to gain. I hope someone is watching the Mammoth farm while he swings for the fences. Now the people of Mammoth need to make sure we benefit from all of it too.
Meanwhile, the man on the street is fearful that lift tickets prices will go up. But the season passes that will ultimately be offered will compete with Vail’s Epic Pass. Competition is good. The prices may actually come down. The market price will be found. And for die-hards, consider that for the price of about a dozen walk-up lift tickets at Mammoth somebody could own both passes.
And Rusty has assured us that with the “sale” there will be an “acceleration of capital investment” in Mammoth. The caveat is that the community has to make some investment too. But he hasn’t asked for anything specific, yet. Except he wants revised Floor Area Ratio guidelines in Mammoth’s commercial district. This real estate column was written before the “sale” announcement. All of it still applies. The demographics are compelling. The risks are the same. But a publicly held company can spread the risk. Vail has proven that.
Mammoth has already been through the private equity template of heavy debt and cost cutting. A publicly-held company model might be refreshing. Rusty was quoted as saying that the other parties of the to-be-named consortium considered Mammoth to be “the biggest growth opportunity in the United Sates.” Ironically, we heard the same thing in 1996 and 2005. The third time needs to be the charm. Otherwise, Mammoth will just remain “Hicksville” as one long-time local said of the new prospects.
Ultimately, the risk of drought and other resort calamities are ideally spread over a larger geographic and demographic mix of resorts. That is why the Vail model works so well. This new consortium promises that each resort will maintain their “own character” rather than the “homogenized” style of Vail Resorts. They probably see the limitations in trying to Aspenize Mammoth, or Big Bear. They also said they are likely to attempt purchasing other resorts to make part of the group. There are a few plums left like Sun Valley, Jackson Hole and Mt. Bachelor. The pressure to compete and eventually sell will be significant. Just one of those resorts would bring the new consortium to a level playing field with Vail.
It will take five to six months to get all of the organizational and legal work completed. Then there will be a new entity and Mammoth Resorts will be part of it. Just seeing what they name it should be good entertainment. It will be business as usual in the meantime. Historically these “sale” announcements have had very different impacts on the local market. In 1996 it took three to four years for the Mammoth real estate market to see any significant rise in values. In 2005 it was a rush of transactions and 10-20% or more appreciation over the next 12 months. Upon the recent announcement, one local broker was quoted as saying the “market could increase by as much as 40%”. We’ll see.
Right now it is all a big “say tuned.”