Monday, August 14, 2006

Dumb Money



"Rhetorical question: Is private equity "dumb money"?"

Does Fortress taking Intrawest private for a 50% premium answer the question? All that debt won't go away but all the asset valuation backed by resort area land holdings will. This isn't a deal that has to happen unlike the Homebuilders who had their buyback programs to prop up the price while the insiders cashed out of Lyons who by going private can report awhole lot less. When Intrawest is carved up and sold off for debt repayment things will get interesting. There seems to be some weird bet that the Vancouver Olympics will enhance their BC holdings but I want the name of the bank that okayed this white elephant deal.

5 comments:

Yasser said...

interesting article; i missed the whole turn of events after pirates made the initial push....

Anonymous said...

According to the PR, Lehmann Bros., Bear Stearns, & Deutsche Bank provided the financing for Fortress.

I don't understand the $$$ paid either. Maybe Intra struck oil at Blackcomb when they were replacing a lift tower.

Lex

Rob Dawg said...

Other than the specialty retail stores what isn't core? Man, the exposure to resort houisng in Mammoth alone gives me chills. They've paid a huge premium at a time where they'll have little pricing authority for their products. Sure, they'll want to chop it up. The buying spree never made sense. I'd go so far as to claim the buying spree was supposed to depress the stock price so that the breakup could be arranged.

The operation of destinations and RE development interests are, and I'm embarrased to use the word, synergystic. Slap me now and let's move on. At Mammoth the investment in the resort allowed Intrawest to charge a superpremium for their real estate development interests, both sales and condotel and lease pricies. It also allowed them in Mammoth to run roughshod over any form of community opposition. So while a great many oldtime residents have been screwed a friend was a benificiary. The gondola is a block away from his home thus making his home more valuable while the people who have the gondola running through (yes, through) their backyards at the second story window level were shouted down. NIMBY in the truest sense. The gondola was on the books for decades so I'm not all that distrubed. Anyway, back to my friends, their house went from $240k to $2.4m in 10 years. Fortress probably expects to reveal similar hidden value in their Mammoth holdings. Bagholders in my opinion. Whatever investment portfolio is left owning the paper on this deal is on my watch list.

Anonymous said...

Didn't Intra & McCoy sell their interests in Mammoth to Starwood?

I do agree that Intra has picked all the low-hanging fruit from their properties.

Anyway, it won't be the first time in the ski/resort industry that the financiers are left holding the bag. Can you spell ASC?

Lex

Rob Dawg said...

Anon,
Like most dirty deals this one is twisted. Starwood owns a majority interest in the Mammoth Mountain Ski Area. They bought out the founder and Intrawest for that interest. Even at that Intrawest kept the surrounding real estate and sundry elements.

Mammoth is one of those places where any scheme involving real estate is available. Condotel? No problem. Timeshare? Step right up. REIT? Fractional interests? Passive loss generators? How many and what color?