Wall Street: Canyons + PCMR terrain = ‘another Vail Mountain’?
June 3, 2014
A ‘chance to create another Vail Mountain,’ in Park City?
Credit Suisse analysts who cover Vail Resorts see that as possible as a result of recent favorable rulings in the closely watched lawsuit pitting Park City Mountain Resort against Talisker Land Holdings, LLC and the publicly traded Vail Resorts.
Vail Resorts is overseeing the lawsuit for the Talisker Land Holdings, LLC side as part of an agreement to lease and operate the Talisker corporate family-owned Canyons Resort. The deal could be expanded to include the disputed Talisker Land Holdings, LLC terrain underlying most of PCMR’s slopes depending on the ultimate outcome of the lawsuit.
The case centers on PCMR’s leases of the land. The PCMR side says the leases were renewed and that it was denied a right of first refusal when the deal with Vail Resorts was reached. Talisker Land Holdings, LLC says the leases expired. Ryan Harris, the 3rd District Court judge presiding over the case, recently issued rulings that heavily favored Talisker Land Holdings, LLC and Vail Resorts. PCMR indicated it would appeal.
Wall Street analysts who cover Vail Resorts have been intrigued by the prospects of the firm’s lease expanding to include the terrain at PCMR. It has been a topic of interest to them since the spring 2013 announcement of the deal between the Colorado firm and Talisker corporate family to lease and operate Canyons Resort.
The Credit Suisse report, issued May 21, carries a headline reading, in part: "Double Your Pleasure; Park City Decision Promising."
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"We see this ruling as a big catalyst for the MTN story going forward and a key driver for shares," the report says, using the Vail Resorts ticker symbol of MTN.
The stock jumped 4.7 percent on the day the rulings were issued, steadied at the higher range and then pushed a little bit higher. It was down slightly midway through the trading day on Tuesday.
The report puts a 12-month target price on Vail Resorts stock of $84 per share. The report rates Vail Resorts as a stock that will outperform the travel and leisure sector. The outperform rating is essentially a recommendation to purchase the stock.
The judge allowed PCMR to continue to pursue a claim that Talisker Land Holdings, LLC could have informed the resort sooner that the leases expired, before PCMR spent more than $7 million on improvements in 2011 based on its understanding that the leases were renewed.
The Credit Suisse report addresses the PCMR side’s point that survived the ruling, saying it "cannot change the broader judgment concerning the lease extension" and that a damages claim would be "negligible to the broader outcome in our view."
Vail Resorts sees possibilities of some sort of connection between Canyons Resort and the disputed terrain at PCMR. Details have not been publicized, but there has been widespread speculation that Vail Resorts will attempt to link Canyons Resort to the disputed terrain.
The analyst report talks of a "chance to create another Vail Mountain," which is the Colorado flagship of Vail Resorts and one of the behemoths among mountain resorts in North America.
"The ability to combine Canyons and PCMR . . . has the potential to create a world-class destination, helping MTN to ‘create’ another Vail Mountain with more terrain, phenomenal accessibility (30m drive from SLC), and a terrific mountain town that has all the amenities high-end guests want," the Credit Suisse report says.
It also notes that Canyons Resort and PCMR are situated on privately held land instead of public lands, like Vail Resorts properties in Colorado.
"This is a key difference and should allow MTN to ultimately upgrade these resorts more quickly (lifts, terrain, ancillary amenities) and find partnership opportunities to develop real estate," the report says.
The Credit Suisse report acknowledges that the PCMR side owns the base area. Vail Resorts in March offered to purchase the base area and parking lots from PCMR parent Powdr Corp. The overtures were rejected. The report says "there are multiple potential outcomes" for Vail Resorts involving the PCMR base area, including a purchase or a lease.
It mentions, meanwhile, the recent move by the Cumming family — the owner of Powdr Corp. — to purchase a majority interest in Snowbird Ski and Summer Resort.
"Given that Cumming family interests . . . are buying into Snowbird, effectively hedging their position in UT, it may signal an acknowledgement that their time at Park City may be winding down," the report says.
Wells Fargo: ‘favorable reaction’ expected
Wells Fargo Securities also issued an analyst report after the rulings, indicating the Vail Resorts stock price could climb as a result.
"Resolution was faster than expected, we felt a ruling might still be months away. We expect a favorable reaction to the stock although we think some of this outcome was already priced in," the report says.
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