June 9, 2003

Aspen, ex-Vail chief are Telluride suitors

By Jason Blevins, Denver Post Business Writer

From The Denver Post

Aspen Skiing Co. and former Vail Resorts president Andy Daly are two of a dozen suitors looking to buy the Telluride ski area and the prime real estate that flanks the southwest Colorado ski hill.

"We are interested," said Pat O'Donnell, chief of Aspen SkiCo, which is owned by the Chicago-based Crown family. O'Donnell dispatched a team to peruse the Telluride ski hill, which has been on the market since March. The Aspen team gauged Telluride Ski & Golf Co.'s cash flow, debt, airline-guarantee program and value of the real estate attached to the resort.

"It's a well-respected gem of the Rockies," O'Donnell said. "There's no question about that. It's a good fit for our type of customer, and it fits our value system."

"I do like what I see," Daly said. The 56-year-old Daly headed Vail Resorts for a decade that saw the resort company absorb Breckenridge and Keystone before being ousted in a cost-cutting move last fall. He also piloted Eldora and Copper Mountain during his 32- year tenure in Colorado's resort industry. "As you look at Telluride, it's one of the truly unique resorts in the United States," he said.

Telluride's 1,700-acre ski area is in a small box canyon that affords skiers vertiginous views of the rock-hemmed mining hamlet that anchors the ski hill. Its first ski runs sprouted from the decaying mining town in 1971, and the area quickly established a reputation for its funky vibe and steep skiing. The hard-core skiing reputation has been tempered over the years, most notably with the recent expansion of the largely intermediate Prospect Basin, but the town's rough-edge feel remains intact.

The resort company began to flourish with Ron Allred and Jim Wells, who bought the resort in 1979. They sold a portion of their resort company to Hideo "Joe" Morita in 1999. Two years later, Morita became sole owner of Telluride Ski & Golf, known locally as Telski.

Morita, scion of the late Sony Corp. founder Akio Morita, recently doubled the mountain's skiable terrain with a $14 million expansion. In March, Morita announced he was courting investors who could share the resort's financial future or buy it outright.

"It's being, in effect, auctioned," Daly said. "The resort is for sale. I think owner Joe Morita is anxious to sell the resort and the real estate associated with it."

Both O'Donnell and Daly recently have made bids on the resort without knowing an asking price.

Tim Mueller, owner of the Okemo ski area in Vermont who lost a bid to buy the Steamboat ski area last year, is also rumored to be among the investors circling Telluride. A spokeswoman for Okemo declined comment but said Mueller may have something to share next week.

Morita's team is mulling the bids, and those that land closest to Morita's undisclosed asking price will move to a second phase.

Morita began buying resort property in Beaver Creek in 1989. In 1999, Morita's Netherlands company, Morita Investments, spent $19.6 million for more than 20 parcels of real estate in Mountain Village, the glamorous town on the plateau above Telluride. The deal marked the beginning of Morita's partnership with Wells and Allred. Morita has since sold some of that real estate, but still owns undeveloped land for single-family homes and high-density condominiums as well as retail space leased by retailers in Mountain Village, said Robert Stiles, a principal in Sonnenblick-Goldman, the real estate investment firm handling Morita's search for investors or buyers. "There is a variety of real estate assets," Stiles said.

Morita also owns Aria, a Japanese ski area, and a 17-room fishing lodge at Princess Royal Island, British Columbia. Last June, Morita sold a 180,300-square-foot shopping center in Mililani on the island of Oahu, Hawaii, for $30.2 million - $1 million less than he paid in 1999. In 2000, the Morita-owned Asiatech company acquired Peugeot Sport, promising to create a Formula One racing team. Last fall, Asiatech quietly folded its plans for a new team, citing "problems with previously firmly guaranteed funding," according to an Asiatech statement.

In March, Stiles said Morita was "in the process of rebalancing his portfolio." Stiles on Friday declined to discuss the names of investors who had placed initial bids on the Telluride ski area. "There has been a tremendous amount of interest in Telluride, with up to 12 bids submitted to date," Stiles said. "We are in the process of reviewing and clarifying offers."

A pending change of ownership has not disrupted the local real estate market. "Our market is hopping right along right now, and the sale has not really concerned our second- home buyers or investors at all," local real estate broker TD Smith said.

In Telluride, where the phrase "We don't want to be another Aspen" was often uttered during the resort town's adolescence, a change of ownership at the local ski hill doesn't quite carry the town-rattling premonitions of yesteryear. "I think the community has kind of evolved. Everyone used to be kind of fearful of new ski operators, but that's changed now," Telluride resident Lance McDonald said. "I think what's important is that the ski area continues to be well- run and improved."