Vail Resorts to Operate Canyons - Ski Area Management

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29 May 2013

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SAM Magazine--May 29, 2013--Vail Resorts (VR) announced today that it has entered into a long-term lease with affiliate companies of Talisker Corporation for Canyons Resort in Park City, Utah. Vail's history with Canyons has been an interesting one. VR attempted to purchase the area in 2007, but abandoned the effort in 2009 after much legal wrangling. Under this lease, VR has assumed all of the resort operations while Talisker has retained its development rights for four million square feet of real estate at the resort.

The transaction also incorporates the potential for the lease, without additional consideration, to include the land under the ski terrain of Park City Mountain Resort that is adjacent to Canyons and is currently owned by Talisker and is subject to pending litigation. "We look forward to the litigation being resolved and hope that Vail Resorts can play a constructive role in helping to arrive at a solution that offers the best outcome for guests of both resorts," said VR CEO Rob Katz. For more on this, read http://www.saminfo.com/news/park-city-season-not-doubt-talisker.

With Vail's first foray into the Utah market will come new season pass products. The Company announced that purchasers of the Epic Pass for the 2013-2014 winter season will receive unlimited and unrestricted access to Canyons, as well as to Vail, Beaver Creek, Breckenridge, Keystone, Northstar, Heavenly and Kirkwood. The 2013-2014 Epic Pass is on sale at $689 for adults, compared to the season pass price of $849 at Canyons this past year.

The lease has an initial term of 50 years with six 50-year renewal options. The lease provides for $25 million in annual fixed payments, which increase each year by an inflation linked index of CPI less one percent, with a floor of two percent per annum. In addition, the lease includes participating contingent payments to Talisker of 42 percent of the amount by which EBITDA for the resort operations, as calculated under the lease, exceeds approximately $35 million, with such threshold amount increased by an inflation linked index and a 10-percent adjustment for any capital improvements or investments made under the lease by Vail Resorts. The Company will be finalizing the accounting for the lease in the coming months but expects to record an obligation on the balance sheet of approximately $305 million in long-term debt (including capital lease obligations). The Company expects incremental annual Resort EBITDA from Canyons of approximately $15 million in fiscal year 2014 (excluding transition and integration costs) increasing to approximately $25 million in fiscal year 2017, not including any potential benefit the Company may receive from the Park City Mountain Resort land which is subject to ongoing litigation.