Go to

http://www2.dailyprogress.com/business/2012/feb/06/bank-cuts-wintergreens-line-credit-ar-1669036/
or
http://www2.dailyprogress.com/business/2012/feb/05/financial-woes-burden-wintergreen-ar-1666592/

I wonder how many other ski areas are going to be facing similar fates?

That is some very serious news and the ripple effect is sobering. If property owners think the real estate market has been tough so far, if the resort collapses they can kiss their investments goodby.

Some questions about the articles KWill linked.

Who owns Wintergreen? Is is wholely or partially owned by the homeowners association? Looks like at a minimum, some homeowners have to pay dues to the ski area/resort.

What's the deal with those conservation easements? You can sell them? To whom? Also, the initial property assessment, the easement sale and subsequent assessments all occured in different years. Given the real estate bubble, I can see how "current market price" would have varied a lot. I guess that's why we have so many lawyers.

Regardless, it seems that after two good snow years in a row (I realize WTG is a 4 Seasons Resort), there should have been more cash buffer to not default on the BOA loan payments.

I think it's sort of like a big HOA with property owners having a major stake in how things are done. I know they have infused a great deal of dollars over the past five or more years in snowmaking and upgrading lifts, neither of which are cheap. There are two golf courses too which are expensive to maintain. I've never had any trouble getting a tee time so that's an indication that they may be under utilized.

Still, you would think that they would have not been running the place on such a shoestring unless the realestate bubble had a major effect.

Real estate coupled with no snow makes for a bad combo, but they are still charging $50 mid-week and $70 weekend rates for poor conditions. We have not been skiing at all this season. I can't justify spending close to $400 for a family of 4 (includes gas and a modest lunch) in this economy for limited terrain. I feel bad, but I just can't support them at this time, and I bet I'm not the only one.

What's this, they have nice lifts I'll bet they're fast. Maybe Timberline should put in some nice lifts and charge $70 for a lift ticket too?

Who the hell is the daily progress? I looked for a masthead and a name and location of the publisher and did not find any. I always like to know who stands behind what I am reading.

Denis, just Google da internets. I don't think this is some conspiracy piece.

http://en.wikipedia.org/wiki/The_Daily_Progress

Actually I did google it and never got to the Wikipedia article. I am not good with google; apparently don't think the right way. I used to be good with DOS and Edlin and was good with web pages until web page designers started writing them. Sigh!

Bad news but not surprising. This is a tough business especially in this part of the country and I have heard of close shaves in the years prior to the last 2.

I feel sorry for the property owners but it seems if they terminate ski operations, there goes their bigges revenue source, and since many homeowners are there for the skiing property values will tank along with that.

As for golf...golf courses are struggling everywhere and they have 2 of them. So double whammy.

I will be shocked if they shut down though. Hate to say it but they should get through Feb or wherever the cost vs revenue lines cross and shut it down for the year. Lick wounds, maybe restructure, come up with a different plan. I would pay double for my season ticket if they took the damned blackout periods off.

I would like to know also, where do the concession dollars and related revenue wind up. Does food and beverage revenue get plowed back into ski operation or go into general fund. I bet the latter.

Tough deal but they have to solve it. I predict skiing at Wintergreen next year but with a new more sustainable outlook.

I agree with others here that it is odd that they came into the season needing a $3M short term line of credit after two record setting ski years! I'm all for investing and expansion but they should always have a buffer for slim seasons like the one were currently experiencing.

Hey Langley...good point but I have always thought that this type of business needs seasonal startup debt just due to the fact that expenses are front-loaded and revenue trickles in with some obvious spikes throughout the season.

Even with the buffer I would still go with debt for startup capital. Maybe some MBA wizards out there know the scoop.

But to your point...they appear to have no choice. Wonder how common that is. I was thinking it was very common but maybe I am wrong.

Hmm. Not very clear. They are saying a reduction in profit. That is ambiguous. That does not necessarily mean they are in the red although I am sure they are.

The telling sign is the "private debt offering." It's an oppportunity for investors to make interest at a higher rate than the markets offer over a shorter period. Could be a sweet deal but there's a risk.

Not that unusual, as GRK gets at. It's a seasonal business - just like many others. The majority of your annual revenue is about to come in the door the next few months. A short term line lets you keep operations afloat until the payday comes. In this case, the payday didn't come (thanks warm weather) per the loan requirements. Yank.

Whether or not an adequate 'buffer' or margin was kept on-hand is only to our speculation. But leveraging a line of credit is not that unusual. I keep one at bay for my own business to smooth out fluctuation in revenue v expense throughout the year. Rarely used, but it's there.

...and that, I hope, is the only time I have to show the presence of my MBA (Go Gators!) on DC Ski. ;-)

As a data point Blue Ridge Real Estate sold Big Boulder and Jack Frost to JFBB which owns Peak n Peek resorts this year. The sale price was $9m and the assumption of debt.

Just paging through the 10k and it seems these companies sure do love debt. Blue Ridge Real Estate seemed to float a bond issue ever couple of years and had some sizable lines of credit.

I also looked at last year's 10k, Jack Frost and Big Boulder had revenue of $5.8m which resulted in a loss of $3.4m. Profit was spotty and paltry at best, here are the last few years:

Year Revenue Net Income (loss)
10/31/10 $5,887,230 ($3,409,080)
10/31/09 $15,896,666 $149,246
10/31/08 $10,158,113 ($1,285,630)
10/31/07 $15,585,962 $133,609
10/31/06 $13,329,620 ($420,058)

Looks like somewhere in the $14m revenue range they are break even.

The problem is resorts are capital intensive and most companies that own them don't start with much runway which means for any expansion or upgrades they need to raise capital and debt is the easiest.

I'm not sure why more resorts don't raise equity, I recognize that the cost of equity is much higher then debt. But there's a hidden cost to the debt that limits flexibility and can threaten operations in a bad year.

The ideal setup would be that someone buys a resort and are flush with cash, in bad years they take a hit but in good years they rebuild the surplus. Unfortunately most operators start in a deficit and never can escape.

I don't understand finance and accounting but I used to work for a major government agency and the problem of holding project reserves for unforeseen contingencies was a constant. Money does not sleep well. Someone will sniff it out and then the vultures descend. We had an expression "The Bank of -(insert name of major project in development here)."

Given Wisp's recent bankruptcy and Wintergreen's troubles and Laurel Mountain's endless problems, it appears that the Mid-Atlantic resort business is not all that lucrative. I also hear that the Buncher's are trying to unload Hidden Valley.
Given how long Snowtime has been in business with Liberty and Roundtop and the challenges they face, I think they are the model for a successful MA resort business.Note that they do not sell real estate. They rely almost soley on skiing. And they have taken their profits and re-invested the money into resort improvements.
I think you're correct, they need reserves to tide them over in a bad weather year.

The Timberline owner spends next to zero on infrastructure and capital improvements.
Apparently, he's a financial genius, it looks like.

The first time I saw all that new real estate around Wisp I wondered if the place got enough traffic year around to support selling all that real estate. I know Deep Creek Lake is a year round destination, but I never thought it was that big of a year round destination.

As for SnowTime, They do seem to run their operations well. They've made an effort to have all three of their resorts bring in some income over the summer, so they are not just a one season business. Whitetail and Liberty have golf courses and Roundtop has paintball and adventure courses and camps during the non-ski seasons.

You may be wrong about SnowTime staying out of the real estate market. I'm not sure if the townhouses next to Whitetail were developed by SnowTime or not, but I suspect they are. SnowTime may have just gotten lucky with timing in that market.

The townhomes were developed by a tie-in with an earlier owner (I believe), but have no relation with Snowtime. Recent additions as well. The only Snowtime funded housing project is Ledgewood (in/around trail of same name), which to-date, has not resulted in any homes being built. Wisely, it seems, they're awaiting buyers before building; not on spec. like others in dire straits.

hahaha... I wish we could "like" a post here, this is hilarious. Unfortunately, very true

My previous statement was probably incorrect. I do see the reason for some short term debt that would build up over the off season and carry into the beginning of the ski season or to simply cover things like wages/snowmaking/road work when there is a short term funding gap. That said, there were obviously terms in the short term $3M loan deal that could not be violated (hence why BoA rescinded the loan). If I was Wintergreen, I would ensure that the company has the cash or whatever collateral available to ensure with near certainty that the terms are fulfilled and the money keeps flowing.

This season has been bad, but for a true "4 seasons" resort like wintergreen with spa, golf, housing, etc I think there is something more behind this then just a poor ski season... probably still rough times from the housing bust. But if you own a resort in the mid-Atlantic you should always be prepared for a catastrophic season... this season is very abnormal but by no means record breaking in terms of warmth or lack of snow.... if you are in the business for the long term you have to know how to make your money in the good years and grind it through the down years.

Here's a link to a recent article on Firsttracks about latest legal situation at Wintergreen: 5/10/12

And here's the link to the original article and attachments from Charlottesville, VA: article