Park City Mountain Resort faces eviction as judge orders mediation

By Karen D. Lorentz updated Wed, Jul 2, 2014 12:57 PM

Greater Park City Company (GPCC), which operates Park City Mountain Resort (PCMR) in Utah, has received a stay until August 27 before an order to vacate can proceed. GPCC is a subsidiary of corporate parent Powdr Corp, which also owns and operates Killington and Pico Mountains, among other ski areas.

Judge Ryan M. Harris of the State of Utah’s Third Judicial District Court heard oral arguments and signed an eviction order on June 19, but he postponed the enforcement date to August 27, thereby granting each party a “small win” on their respective motions.
He also ordered third-party mediation in the interim in hopes that the warring factions – Talisker Land Holdings, LLC/Vail Resorts and GPCC/PCMR – might figure out a resolution that would keep the mountain operating this coming winter. At stake are the livelihoods of many Park City businesses and residents as well as resort employees.

Park City ‘loss’ to Talisker/Vail
In a May 21 summary judgment, Judge Harris ruled that Greater Park City Company’s lease to operate a Park City Mountain Resort on Talisker owned lands had legally expired in 2011.

GPCC/PCMR had argued that it had renewed its 20-year lease and should be allowed to continue to operate the ski resort despite failing to file an intent to renew on time in 2011. (When landlord Talisker Land Holdings (TLH) and tenant PCMR subsequently failed to agree on a new renewal lease, GPCC sued Talisker in March 2012.)

Various rulings in the May summary judgment paved the way for Talisker to lease the ground underlying most of the ski terrain to whomever it wishes – in this case, Vail Resorts.

Vail Resorts (VR) had begun talks with Talisker about the nearby Canyons Resort in August 2012. Vail has wanted to acquire a Utah area since trying to purchase The Canyons from American Skiing Company (ASC) in 2007. (Vail sued Talisker and other parties in that attempt but eventually dropped the suit, allowing ASC to sell The Canyons to Talisker in 2008.)

In May 2013, Vail subsidiary VR CPC Holdings, Inc. signed a lease for The Canyons with a proviso that if Talisker prevailed in its lawsuit with GPCC/PCMR, Vail would also obtain the lease to the Resort Lands for no additional consideration. (A proviso also included that Vail would take control of the PCMR litigation.)

The lease stipulated that if Talisker did not win, the rental payments for the Resort Lands (underlying PCMR’s upper mountain area, about 85 percent of the ski area) would go to Vail until such time as the PCMR lease expired and Vail could acquire the leasehold.

Talisker/Vail Resorts seeks to evict
As a result of the May summary judgment, Talisker requested a court order evicting GPCC/PCMR and gave notice that it would seek their departure from the Resort Lands within 60 days of an eviction order. Talisker was also seeking a restitution order for back rent and damages.

In preparation for the June 19 eviction hearing, GPCC/PCMR responded with a memorandum in support of its motion to “postpone or stay the effect and enforcement of any ruling,” requesting “the Court to postpone any eviction and to adopt a measured and logical approach to the resolution of the remaining issues.”

Among the issues was a request to delay the eviction order until PCMR’s appeal of the May 21 rulings can be made, giving the company the opportunity to obtain a stay.

Additionally, GPCC/PCMR requested a delay for a decision on Talisker’s motion for an order of restitution, rent and damages claim for $7.7 million plus damages for loss of use. Several reasons and case law were cited to support that request, including a need to “resolve all claims relating to possession” and a pending negligent non-disclosure trial by jury.

The May ruling allows GPCC/PCMR to proceed with its own $7 million negligence suit against Talisker for not giving timely notice that PCMR’s lease had expired. (A PCMR lease renewal letter was due March 1, 2011 but through an oversight did not get filed until May 2. However, Talisker did not respond to that failure until December 30, 2011. So, although he ruled that the lease had legally expired, Judge Harris also said that a negligence case could proceed against Talisker under Utah law for negligent non-disclosure.)
GPCC/PCMR’s June filing also stated that if required to vacate the leased premises, they would remove all movable snowmaking equipment, furnishings in various restaurants and other buildings, and most of the lifts. GPCC has built and maintained ski lifts, ski runs, day lodges, restaurants and other winter and summer recreational and resort facilities associated with the operation of PCMR on the leased premises with an investment of over $100 million since 1994, according to the filing.

The PCMR leases stipulate that “all buildings, structures, facilities and improvements situated upon and which are affixed to the soil” (of the Leased Premises) … become the property of the Lessor” at the expiration or termination of the Leases. The Lessees are entitled to “retain all ‘machinery, equipment, personal property and supplies not affixed to the soil.'”

GPCC/PCMR noted that with three exceptions, the lifts on the leasehold are attached by bolts to concrete footings and are not otherwise affixed to the land, thus allowing for their removal along with related equipment. The time to remove all equipment was estimated to be 33 days and would cost $4 million if done in one construction season, the June filing noted.

Potential affects
GPCC/PCMR said it would be difficult for anyone to install all the equipment necessary to operate for the following winter in such a short time period, if it did remove its infrastructure.

If GPCC/PCMR were to vacate and subsequently be permitted to reoccupy the Leased Premises (as a result of its appeals), it would take approximately two construction seasons to reinstall the equipment and undo any lift modifications, at an estimated cost of over $7 million.

If Park City Mountain Resort were to be closed for one or several winters, based on the removal of some infrastructure and rebuilding of replacements, it could cost the region over 1,000 jobs and $100 million in annual economic activity and have “a catastrophic impact,” GPCC/PCMR’s memorandum warned.

A witness with 20 years of experience in applied microeconomic analysis and consulting stated, “In total, the PCMR contribution to the Utah tourism economy is over $400 million annually and out-of-state visitors to PCMR support approximately 4,600 jobs in Utah. (This includes surrounding ancillary businesses and services.)

The Impasse
“PCMR remains committed to finding a resolution that works for both parties and the community. PCMR supports the court’s order for third-party mediation, and hopes Vail will now come to the table with a concrete offer,” said GPCC/PCMR attorney Alan Sullivan.
Even though Powdr CEO John Cumming has viewed the lease to Vail as an unwelcome “takeover” attempt that capitalizes on a technical PCMR error (failure to file on time), he nevertheless remained hopeful that GPCC/PCMR could either lease or purchase the upper mountain terrain. However, in June statements, Cumming noted that “repeated offers” to Talisker and Vail met with no response and he couldn’t get them to engage in talks that would keep the resort open.

Likewise, VR CPC Holdings is hoping to purchase or lease the lower mountain from GPCC/PCMR (or be allowed to use its terrain so guests can access the upper mountain) as Talisker does not own the land underlying the base area, access lifts, and parking lots.
Cumming, however, has insisted that the base area property, which also includes water, snowmaking, and sewer infrastructure, is not for lease or sale.

The present impasse means a mediator faces a daunting task for the August 27 deadline.

If mediation fails to achieve a resolution, Judge Harris will address a further stay of the eviction or whether the order will go through, and presumably its terms – such as whether the lifts are attached to the land as Talisker contends.

If the eviction order goes through, PCMR would become a much smaller ski area of some 200-plus acres with four lower mountain lifts (three shortened to remain solely on PCMR’s land), terrain park, and ski school, according to their June filing.

The company also announced plans to create a Woodward Park City. Woodward is a successful action sports training center and camp that Powdr operates at places like Copper Mountain in Colorado and in China. It could continue to draw business to PCMR but full operations would not take effect until 2017, the filing said.

A smaller PCMR would no longer be a top ski resort in Utah and the surrounding area would likely suffer economically from the decreased skier visits.

If mediation fails and an eviction goes through, the problem for Vail Resorts would be lack of access to the upper mountain terrain. Even if Vail connects it to The Canyons via terrain between the two areas, it would be inconvenient for users. It would also take time to construct the facilities for an interconnect with lifts and trails.

Furthermore, the delay to August 27 plus the 60 days for GPCC/PCMR to vacate the leasehold premises would unlikely provide enough time for Vail to get ready for this winter if the lifts are removed.

Dollars and sense
This could prove problematic for Vail Resorts’ shareholders as the $25 million in annual leasehold “fixed rent” payments for The Canyons is an amount that defines the ability to be truly profitable without the operation of a second ‘Park City’ ski area. According to statements made by Vail Resorts CEO Rob Katz, volume is key to profitability and it’s difficult to be profitable on the 450,000 skier visits The Canyons does.

So far Vail Resorts’ stock price (MTN) has not declined. In fact, two financial analysts raised target prices to $84 or $92 per share respectively in response to third-quarter financial statements. Last week the stock traded at around $76. Some analysts anticipate the price rising in response to the potential for Vail Resorts to create another huge ski area rivaling the size of its flagship Vail Mountain by connecting the two Utah resorts for a potential of over a million skier visits.

In the interim, however, local businesses and PCMR itself remain in limbo.

In a rare interview with the Park City Record, John Cumming acknowledged that they won’t be investing in the resort due to the impasse.

He also said that when the Cumming family became majority owners of nearby Snowbird Ski and Summer Resort in Little Cottonwood Canyon earlier this year, they did not do so due to the uncertainty with PCMR. Nor was it a Powdr Corp deal. He said that the Cumming family chose to invest with the Bass family and co-founder Dick Bass who remains chairman of the board, due to longtime family ties to the ski area.

In ordering mediation, Judge Harris seemed well aware of the economic ramifications of the current impasse to the greater Park City community, the year-long negotiations that failed to reach a compromise, and Cumming’s more recent lament that “I can’t negotiate with myself.”

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