Park City, UT – Vail Resorts today announced that the Colorado-based ski resort owner/operator has entered into a long-term lease with Toronto, Canada’s Talisker Corporation for Canyons Resort in Park City, Utah. Under the lease, Vail Resorts has assumed all of the resort operations of Canyons while Canyons owner Talisker has retained its development rights for four million square feet of real estate at the resort.
“With 4,000 skiable acres, easy access to the town of Park City and $75 million in recent resort improvements, Canyons is a perfect complement to our collection of world-class mountain resorts,” said Rob Katz, chairman and chief executive officer of Vail Resorts. “I commend the Talisker and Canyons team for the outstanding work they have done to redevelop the resort.”
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 lease agreement with Vail Resorts marks an ironic twist of fate, for after losing out to Talisker’s bid to purchase Canyons from the now defunct American Skiing Company in 2007, Vail Resorts filed a lawsuit attempting to block the sale. Talisker was among the named defendants.
Katz added that Vail Resorts will honor its Epic Pass season passes at Canyons, it’s first foray into the Utah market.
“We look forward to building on that momentum and including Canyons in our industry-leading season pass products, which next season will offer guests access to Colorado, Tahoe and Utah on one season pass, a first in ski industry history,” Katz said. “We will also leverage our guest database and domestic and international sales and marketing efforts to continue to drive Canyons’ growth.”
Purchasers of the Vail Resorts Epic Pass for the 2013-14 winter season will now receive unlimited and unrestricted access to Canyons, as well as to Vail, Beaver Creek, Breckenridge, Keystone, Northstar, Heavenly and Kirkwood. The 2013-14 Epic Pass is on sale now at $689 for adults, a reduction of $160 from the price of a Canyons-only season pass this past winter.
The company’s entry into Utah also potentially impacts operations at nearby Park City Mountain Resort (PCMR), which operates on land leased from Talisker. The terms of that lease have been the subject of recent litigation between PCMR owner Powdr Corp. and Talisker, and the lease agreement with Talisker allows Vail Resorts to include that land without additional consideration.
“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,” Katz added.
Should Talisker (and therefore Vail Resorts) prevail in the pending litigation, they could theoretically evict Powdr Corp. from PCMR, opening the door for Vail Resorts to operate a second of the three Park City ski areas.
“We are thrilled to be able to bring in Vail Resorts to partner with us on our vision for Canyons,” said Jack Bistricer, chief executive officer of Talisker. “Vail Resorts is the clear leader in the mountain resort industry and I am confident that they can replicate at Canyons the success they have delivered at resorts such as Vail, Beaver Creek, Breckenridge and Northstar. I am incredibly proud of all that our team has accomplished at Canyons over the past five years and am confident that together with Vail Resorts, we can create one of the greatest mountain resorts in the world.”
Vail Resorts 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 Vail Resorts may receive from the Park City Mountain Resort land which is subject to the ongoing litigation.