Skip to content
Join our Newsletter

Owning up

As Intrawest reviews its strategic options Whistler may contemplate: does it matter who owns Whistler-Blackcomb? Bob Barnett charts the course of the corporation that lives, breathes, and just might sell, Whistler and Blackcomb.

Since the Feb. 28 announcement that Intrawest, Whistler-Blackcomb’s parent company, was "reviewing strategic options for enhancing shareholder value" there has been all kinds of speculation about the future of the company.

A couple of weeks ago Starwood Capital Group LLC, a Connecticut-based investment firm acknowledged it had its eye on Intrawest.

"It’s not a huge secret to say we’re looking at Intrawest," CEO Barry Sternlich, told Bloomberg news agency. "Everyone knows it’s sort of in play, and they own a lot of ski mountains."

But we know a little more than that.

The two companies have a history together. Starwood bought a majority interest in California’s Mammoth Mountain Ski Area from Intrawest last year, and most of Intrawest’s real estate at Mammoth in March of this year. The two companies are partnering in development and sales of the Mammoth real estate.

As well, Gary Raymond, the Whistler-resident who ran the real estate side of Intrawest for 20 years, until his departure was announced last Oct. 18, resurfaced Nov. 9 as president of Starwood Development. Based in San Francisco, Raymond oversees Starwood’s development activities and related resort and condo/hotel investments.

Amid the speculation and various efforts to read the tea leaves Intrawest representatives continue to say it’s business as usual and the company is not looking to sell all or part of it assets. And Joe Houssian, Intrawest chairman and CEO, has said that includes Whistler-Blackcomb.

"…our objective isn’t to sell off our assets. Our objective is to grow our assets and build our business," Houssian told Reuters in February when the strategic review was announced.

And part of that strategic review includes looking at partnership opportunities – which is what financial analyst Gail Mifsud of Raymond James thinks the company should be doing.

"Essentially, in my view, what Intrawest needs is an angel investor to come in and basically form a partnership with them…" Mifsud told Pique shortly after the strategic review was announced.

But does it matter to the community of Whistler who owns or controls Intrawest?

Whistler-Blackcomb may be the company’s flagship resort, but it is one of 11 North American mountain resorts the publicly traded company has a stake in. Intrawest, which bills itself as "North America’s leading developer and operator of village-centered resorts," also has six village developments underway and a number of related tourism and real estate operations, such as Abercrombie and Kent, Canadian Mountain Holidays, Club Intrawest, Intrawest Golf and Storied Places.

Despite that diversity most people, including many in the stock market, still associate Intrawest with ski resorts, and in particular, Whistler-Blackcomb. It was through Blackcomb that Intrawest got into the mountain resort business in the mid-80s. And it is Whistler and Blackcomb mountains’ big alpine bowls and thousands of acres of cut runs that initially draw most people to Whistler. The attractions have broadened over the years, as golf, mountain biking, cat- and heli-skiing, snowmobiling, bungy jumping and dozens of other activities have developed and shown people there is more to Whistler than lift-serviced skiing. But the catalyst for virtually everything that’s in the valley and on the mountains today was the development of Whistler Mountain in the early 1960s and Blackcomb in the late ’70s.

Early investors

There were only a couple of hundred people living at Alta Lake when Garibaldi Lifts Ltd. was founded in 1960 by a group of Vancouver businessmen keen on developing Whistler Mountain for skiing. Vancouver investors provided a lot of enthusiasm and some money to get the company going, but not the full $800,000 needed before orders could be placed for lifts and the real construction could start. At the 11 th hour it was Montreal’s Power Corp. that bought the last $400,000 worth of shares needed to get Garibaldi Lifts Ltd. off the ground.

In 1986, when Hugh Smythe convinced Joe Houssian to look at buying the Aspen Ski Company’s 50 per cent stake in six-year-old Blackcomb, Intrawest was an urban real estate development company. The Blackcomb investment came with the right to develop 7,500 beds on the 250-acre Blackcomb Benchlands, but importantly, Houssian and Intrawest realized the real estate only had value because of the skiing on the mountain.

After a few years running Blackcomb, and then acquiring Panorama and Mont Tremblant in the early 1990s, Intrawest looked at North American demographics – a wealthy baby boomer population approaching middle age and looking for quality leisure time with their families – and decided to jump whole hog into the mountain resort business, and abandon urban real estate.

Others had the same idea, as the ’90s were a frantic period that saw many of the major ski areas in North America acquired by a handful of companies. At the same time, a number of small ski areas couldn’t compete with the high-speed lifts and base villages that had become the norm, and required millions in investment, and went out of business.

Intrawest, along with Vail Resorts and the American Skiing Company, was one of the major players in this period of consolidation. All three are public companies, but they had different philosophies, different levels of expertise and varying abilities to finance deals – a fact perhaps overlooked by the stock market, which often saw the companies as equals, at least as far as investment risks.

Among the acquisitions of the ’90s, one of the biggest was the deal that brought Whistler Mountain into the Intrawest fold. From a corporate point of view it married the two largest ski areas in North America, which happen to be side by side, under one company banner creating a powerhouse ski resort, whether measured in physical size, skier visits, marketing impact or anything else.

From a community perspective, however, it was viewed a little differently. No longer were there two competing companies in town trying to outdo one another for customer attention. Now it was one company that controlled most people’s raison d’être in Whistler.

At the start of the 1997-98 winter, not quite a year after the merger of the two companies was announced, Doug Forseth, senior vice president of operations, talked to Pique about Whistler-Blackcomb’s perspective on its relationship to the community.

"We believe we need to be a co-operative partner in the community," Forseth said.

"It’s a little bit like our approach to our shareholders. We have a responsibility to perform well."

Whistler-Blackcomb tries to be a player in the community by making Whistler a better place to live, Forseth added, citing the company’s commitment to employee housing and its contribution to community activities such as minor hockey and the arts.

"To Whistler, we have a responsibility to create a healthy environment for the community," he said.

"There is a greater responsibility overall. With the competition gone now, we have to weigh what we do carefully and respect the community socially.

"But at the same time we have to be financially healthy."

He acknowledged it was a tight line to walk and "a huge responsibility."

But as a public company Intrawest was also expected to grow. Indeed, shareholders demand it. With a ceiling on development in Whistler Forseth said in 1997 that most of the company’s growth would come from Intrawest’s other resorts.

The Intrawest blueprint

Looking back at Intrawest’s 1997 annual report you find the company’s blueprint for the mountain resort business. A diagram showed eight gears, the first and smallest representing a mountain, where Intrawest enhanced the skiing. The second gear represented a village, "an animated place so people stay longer." That led to more skiers coming more often. That turned the gear that led to more real estate development, then more year-round facilities, more real estate value, more destination visitors and, finally, more mountain resorts.

Blackcomb, of course, was where this blueprint was developed, even though Intrawest didn’t develop the Whistler Village.

As resort acquisitions kept piling up Intrawest’s vertical integration continued through acquisition of complementary companies such the Colorado-based ski and snowboard equipment rental shops Breeze Inc. and Max Snowboards Inc. and the Resort Reservations Network, better known as RezRez. And while Intrawest was becoming involved in all aspects of a mountain resort vacation, it was also compiling a database of customers.

In the last few years Intrawest has restructured and diversified a couple of times as it tried to move beyond the village development model. The company’s efforts to reduce debt, become less capital intensive and more management-based included selling off some of its employee housing projects in Whistler in 2002, although the housing is still leased and operated by Whistler-Blackcomb.

In August of 2004 Intrawest announced a partnership with Florida-based CNL Income Properties Inc., a real estate investment trust, under which CNL acquired an 80 per cent interest in commercial properties at nine Intrawest resort villages, including Franz’s Trail at Creekside. The deal was worth US$160 million. Intrawest retained 20 per cent ownership and the management role.

"Creation of this partnership is another significant step in our transition to a management-intensive structure from a more capital-intensive one," Joe Houssian said at the time of the announcement. "This transaction will provide a significant recovery of capital as well as a partnership for future commercial development."

In April 2005 Intrawest announced the restructuring of its non-real estate holdings into a new Leisure and Travel Group. While the new entity included all of Intrawest’s resorts it also intended to take advantage of information technologies, direct marketing, e-commerce sites and other systems to go well beyond company’s resorts.

"The leisure environment that we operate in since Sept. 11, and probably even just a little before that… has changed," Hugh Smythe said at the time of the announcement. "And quite frankly, out there, it’s just a different leisure and travel world, so to speak. There’s a lot of capacity out there. Our competition, specifically Whistler-Blackcomb’s competition, is not just other mountains – it’s everything: cruise ships, and all of those kinds of things are out there.

"We need to really refocus on what that looks like in the new environment. There’s more golf courses, more resorts, more development in Vegas, more development in Orlando and there’s more all-inclusives in Mexico."

And the bottom line: "This is being done to have a platform for the next phase of growth," Smythe said.

The stock market understood Intrawest’s efforts to reduce debt, but whether it has fully understood the move into the leisure and travel market is debatable. Investors like Pirate Capital, which began buying Intrawest shares about 20 months ago and with just over 12 per cent of the company is now the largest single shareholder, continue to view Intrawest stock as undervalued.

Pirate Capital believes there are numerous potential bidders who would pay a substantial premium to gain control of Intrawest. In a March 1 letter to the board of directors – a day after Intrawest announced its strategic review –Pirate’s Stephanie Tran wrote: "We urge you to fulfill your fiduciary duties to all shareholders by immediately initiating a sale of the entire company."

That, of course, hasn’t happened. But there may be some pressure to get something done before next fall’s annual general meeting, as Pirate was rumoured to be putting together a hostile takeover bid of Intrawest prior to last fall’s meeting.

Options and implications

But what are the options and what are the implications for Whistler? Real estate seems to be a prime consideration for both Pirate and Starwood.

On its website Starwood describes itself as a "global investment firm… that specializes in real estate investments…"

"Starwood recognizes the cyclical nature of the real estate industry and therefore regards most real estate as a commodity with windows to buy, hold and sell. In all of our investments, we consider the exit as important as the acquisition. We add value through asset and financial restructuring, by attracting superior management, and through capital markets expertise."

That may work for some of Intrawest’s properties, but there are limited real estate opportunities in Whistler.

However, Whistler-Blackcomb remains the flagship resort in the Intrawest portfolio. As financial analyst Mifsud told Pique in March: "(It is) not efficient to segregate the assets, quite frankly. Whistler-Blackcomb accounts for about 40 to 45 per cent of (Intrawest’s) ski resort EBITA (earnings before interest, taxes and amortization), so if it sells Whistler, effectively what you would be left with would be a handful of other assets which don’t have as much intrinsic value as Whistler-Blackcomb, so you wouldn’t be able to realize full value for the other assets."

There are, undoubtedly, other potential partners out there whose expertise may include resort operations, rather than real estate development, and who might view Intrawest’s mature resorts as a good opportunity.

There’s also the possibility that Intrawest could find partners for specific assets or resorts, rather than one global partner.

Nippon Cable had a 23 per cent stake in Blackcomb prior to the merger of Whistler and Blackcomb. The Japanese company’s investment was extended to 23 per cent of Whistler-Blackcomb following the merger.

On a smaller scale, Whistler-Blackcomb is also looking for a partner to help finance the proposed Peak to Peak gondola. Such project-specific partnerships are not without precedent. In Breckenridge, Colo., the town is partnering with Vail Resorts to fund a $20 million gondola. Breckenridge is contributing $6.7 million while the resort operator is covering $13.3 million.

Which, of course, leads one to ponder the possibilities of the community of Whistler investing in Whistler-Blackcomb.

The mechanics of such a deal would obviously require some work, but the timing would seem to be right. The benefit would be more local control of the town’s largest employer.

It’s an idea that is gaining support in many places at a time when public-private partnerships are in vogue. In this case, rather than a public body representing the community inviting a private corporation to join it in a venture, a corporation – Whistler-Blackcomb – would be welcoming the community to join it in its operations. The Institute for Local Self-Reliance (www.ilsr.org) calls it the "new localism." It holds up entities such as credit unions, the Green Bay Packers and public utilities as examples of successful community-owned institutions.

But in the end it’s up to the community of Whistler to decide if it matters who owns Whistler-Blackcomb.



Comments