Steamboat Real Estate Home Search and Blog

Call me an optimist. When the word came out that Fortress was in default for not meeting a loan deadline, the emails started flying around Steamboat:   Intrawest is in Foreclosure!  Bankruptcy!  Default!

Yikes!

Sources tell me that Steamboat is a highly profitable ski mountain.  (Intrawest has been privately held since 2006, so only a handful know exactly how profitable it is.)

Fortress bought Intrawest (the parent company of Steamboat Ski Corp.) at the market peak in 2006 with borrowed money.  At the time, ski resort deals were less about fresh air and skiing and more about real estate sales.  When the US real estate bubble burst, Fortress was left holding a lot of debt and started missing payments.   So the lenders foreclosed, just like lenders are doing to homeowners around the country.

They were just like other speculators investors who bought homes and condos at the peak hoping to ride the appreciation wave.  The over-leveraged-real-estate business model works great in a rising market, but leverage is compounded in a falling market. Fortress got caught in the downturn with a lot of debt and shrinking equity, just like millions of real estate speculators in Arizona, California, and Florida.

Fortress was like real estate buyers who used loan products like Interest only mortgages or worse, Option–ARMs, to buy as much real estate as they could with as little money down as they could.  (Option ARM mortgages let a borrower pay less than the interest owed then tacked the unpaid interest on to the loan.)  So loan balances went up while property values went down.  They were underwater in a hurry.

Back to Fortress…  This is my opinion, but I think having an investor come in and buy out Fortress for quarters (or whatever) on the dollar is a good thing.  After someone buys the “foreclosed” Intrawest—or parcels off Steamboat–we will have a solvent owner who can continue what Intrawest started.

Back in 2006, having Intrawest as the owner of the Steamboat Ski Area was great.  Intrawest came in and immediately re-graded the lower mountain, took out all the old lifts at the base to add the new high-speed Christie Express, greatly enhanced the snow making capacity, and did a whole lot of improvements the previous owner, American Ski Corp, couldn’t afford.  Oh, and the Steamboat real estate market appreciated up to 40% because of it.  (That’s the paper equity currently dissolving with every price reduction.)

Now we have a chance to have someone buy out Fortress (who can no longer afford to do the improvements to the mountain) and get someone committed to Steamboat, which consistently ranks in the Top Ten ski resorts in the country.

This will take some time to sort out. The main lender for Fortress was Lehman Brothers, which is now defunct.

Just as Fortress made money in a rising market, there are buyers who will come in and profit from buying Steamboat cheap.  Let’s hope this time we get an investor with some cash to polish Steamboat into an even better world-class resort.