Resort lease battle begins
Judge Bruce Lubeck hadn’t ruled Friday whether those who lease ski slopes to American Skiing Company could move to evict the embattled firm from The Canyons.
Attorneys for Wolf Mountain Resort, the company that leases land to The Canyons, argued Wednesday during a testy five-hour hearing that American Skiing Company has defaulted on the lease.
American Skiing owns The Canyons and at stake in the Third District courtroom battle could be more than $60 million the company has spent improving the resort and more than $220 million in real-estate development.
The owners of Wolf Mountain sold the resort with exception of the land to American Skiing Company in 1997.
ASC renamed it The Canyons and leased property from Wolf Mountain "with the goal of developing a major North American ski resort in Park City," court documents filed in Third District Court June 14 by attorneys for American Skiing state.
But Wolf Mountain managing partner Kenny Griswold was preparing to terminate the lease when a temporary restraining order was obtained in June by ASC to prevent him from doing so.
"If the notice of termination is issued, it becomes disastrous for the company," testified American Skiing Chief Executive Officer William J. Fair.
Scurrying creditors and travel agents could decrease sales next season at the company’s seven other North American ski resorts, he added.
At issue is 550 acres the Osguthorpe family owns in the "heart" of the resort. After the Osguthorpes leased the land to Griswold in the ’90s for his Wolf Mountain Resort, Griswold subleased the property to American Skiing Company in 1997.
Griswold operated Wolf Mountain Resort until he negotiated in the late 1990s to lease the land to American Skiing.
He now claims ASC officials violated the lease when they negotiated with members of the Osguthorpe family several years ago to amend the contract.
A "restatement of agreement" entered into by ASC and the Osguthorpes in 2001 "purports to reduce Wolf Mountain’s leasehold interest in the property to nothing more than an easement," Wolf Mountain attorney Victoria Fitlow states in court documents.
ASC officials improperly represented themselves as agents of Wolf Mountain during the talks, Griswold said, adding that changes made to the lease could result in a "cannibalized ski resort."
"It was a glaring misrepresentation, they are certainly not Wolf Mountain," he said, adding, "there is a dispute we don’t really have much other recourse."
Documents filed by ASC with the Securities and Exchange Commission warn shareholders in the publicly traded company that termination of the lease "would significantly reduce the value of ASC Utah’s operation at The Canyons."
If the lease is terminated ASC would salvage from the mountain "as much personal property as we can," Fair said, adding that ski lifts would be used at other resorts.
To prevent that, however, ASC attorney John Lund asked Lubeck for an injunction against Wolf Mountain.
"Mr. Griswold deliberately kept this issue in his back pocket," Lund said, adding that ASC has satisfied Wolf Mountain’s concerns. "Every time we try to get somewhere with Wolf, they have a different argument."
But Wolf Mountain attorney Jesse Trentadue claimed ineptness at ASC also has the Osguthorpes threatening to dispute the lease.
ASC’s share price since the company went public in 1997 has reportedly dropped from $18 to about 18 cents per share.
The company has lost about $600 million, Trentadue said.
Losing the Osguthorpe land would "put a stake through the heart of the resort," he said while asking Lubeck to deny ASC’s request for an injunction and allow Wolf Mountain to proceed with terminating the lease.
"[ASC officials] have told us that they are on the brink of bankruptcy several times," Griswold testified. "We were very concerned with the protections of our property."
Lubeck isn’t expected to rule on ASC’s injunction request for several days. The temporary restraining order against Wolf Mountain stands.
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