Hotel Mogul to Buy Mammoth Ski Area

The storied Mammoth Mountain Ski Area on Tuesday announced plans to sell a controlling interest in its sprawling holdings in the eastern Sierra to a private investment firm led by luxury hotel mogul Barry S. Sternlicht.

The $365-million acquisition by Starwood Capital Group promises to bring a more upscale character to the resort, in contrast to the unpolished and independent style of the resort’s pioneering founder and co-owner, Dave McCoy.

“Mammoth has phenomenal skiing but has never had the sex appeal of Vail or Aspen,” said hotel industry analyst Bruce Baltin of PKF Consulting. “There’s interest now in taking it more upscale.”

Locals and longtime visitors, however, expressed concerns over whether Sternlicht’s reputation for upgrading dowdy properties with Ralph Lauren-style decor could make Mammoth too pricey. They fear it would lose some of its character as a hodgepodge of motels, condos, A-frames, small malls and parking lots.

“What is coming will be more upscale, but there is a certain charm to this old stuff,” said Mammoth Lakes Mayor Rick Wood. “We’re still not an over-hyped glitzy area that appeals only to wealthy or sophisticated travelers.”

The deal for the area about 300 miles north of Los Angeles off of U.S. 395 is the largest ski resort sale in history, according to investment banking firm Houlihan Lokey Howard & Zukin, financial advisors to Mammoth Mountain.

Starwood will have the right to operate the 4,000 acres of ski terrain at Mammoth and June mountains and do some development, but the land itself is still owned largely by the U.S. Forest Service. The operators have a 40-year lease that expires in 2024.

The new owners plan to develop 60 acres around Mammoth Lakes with Canadian resort operator Intrawest Corp.

“The goal is to bring in other hotel brands, a mixture of both boutique and large hotels,” said Marc Perrin, managing director of Starwood Capital. “We’re also focusing on bringing in hip restaurants as well as new residential, hotel and entertainment experiences.” He predicted that changes would be evident in three to five years.

McCoy, who started the resort about 60 years ago with a rope tow powered by a truck engine, will retire but continue to live in the area and play on the mountain. Surrendering control of it played on his emotions.

At one point Tuesday during the signing of more than 100 pages of documents in a conference room at Mammoth, McCoy and his wife were overwhelmed. Their eyes filled with tears as they held each other.

“It’s like selling your heart,” said Roma, who has been married to McCoy for 64 years. “We practically grew up here. We raised our kids and grandchildren here. There’s never been a man like Dave McCoy and there never will be. Nobody knows what he went through for the mountain.”

McCoy took a deep breath and said, “Well, we had a lot of fun and a lot of heartbreak.”

Later, after finishing the paperwork that is expected to bring him more than $80 million, McCoy vowed that he would keep riding mountain bikes and exploring the countryside in his off-road vehicle. He said he would hold off celebrating the sale with champagne until he proves he is still able to ski when the snow gets deep enough in the coming months.

The agreement, which was announced a month after McCoy’s 90th birthday, would include 185 ski trails served by 35 lifts and facilities, a lodge and more than a dozen stores and dining venues.

“We are excited about the opportunity to work with Mammoth on their transformation into a world-class resort destination with a real estate component to match one of the continent’s finest mountains,” Sternlicht said.

Until May, Sternlicht, 45, served as chairman and chief executive of Starwood Hotels & Resorts Worldwide Inc., which grew under his leadership by building up such internationally recognized brands as Westin, Sheraton, W, St. Regis, Luxury Collection and Four Points. Greenwich, Conn.-based Starwood Capital is not affiliated with Starwood Hotels.

Sternlicht’s reputation for being a tough, hands-on boss prompted speculation over what will become of this venerable resort community.

News of the impending sale sparked expectations of a real estate boom in the landlocked 4-square-mile community where average home prices already hover above $1 million.

“Everyone’s been holding their breath over this for months,” said Mammoth Lakes real estate agent Stacy Bardfield, a close friend of the McCoy family. “We expect things to go crazy around here: Inventory is going to disappear, and our volume of calls is going to soar tenfold for rentals and sales and overall interest.”

The area was already in the process of moving upscale. A new Craftsman-style hub of lodging, entertainment and shopping called the Village at Mammoth -- built by Canadian resort developer and operator Intrawest -- includes a gondola to shuttle people up and down the mountain. A 230-unit, $140-million Westin condominium/hotel in Mammoth Lakes is scheduled to open later this year.

In a town that recently imposed higher development impact fees to help pay for infrastructure and civic improvements including street repairs and new municipal government headquarters, local officials are considering proposals to build a new St. Regis condominium hotel and a Hard Rock hotel in the Village.

Therese Hankel, a Mammoth Lakes attorney who a week ago was forced off the local planning commission by the Town Council because of her objections to certain real estate developments, said she feared what more construction would do to the character of the region.

“Looking ahead, I see a lot of big development bringing more problems,” she said. “It’s going to be like, wow, what hit us?”

The resort, which is debt-free and enjoying record sales, was one of the nation’s three most-visited ski areas last year, drawing 1.5 million skiers, most of whom drove here on weekends from Southern California. It ranked in the top 10 of Ski magazine’s 2005 reader resort survey.

A chronic criticism of the resort is that it is a hassle to reach: a five-hour drive from Los Angeles and three hours from Reno. Mammoth Mountain Senior Vice President Pam Murphy is pushing to have 80-passenger aircraft make two daily trips between Los Angeles International Airport and Mammoth Lakes Airport during the 2006 ski season.

“They are making an investment in us for the brand we have developed to date, but they also see us poised as the next major destination resort in North America,” said Mammoth Mountain Chairman and Chief Executive Rusty Gregory, who began working for McCoy 28 years ago as a ski lift operator. “That was an important factor in our selection of Starwood to buy the company.”

Starwood Capital edged out more than 35 other credible offers, ski area executives said. Among the competitors were Colorado-based Vail Resorts Inc. and computer billionaire Michael Dell.

Starwood is not known as a resort operator, said hotel consultant Jim Butler, but Intrawest is one of the industry’s “premier operators,” he said.

The number of ski resorts has been declining over the last 20 years, he said, but prospects are good for the survivors, and next year is expected to be a record year for the industry.

Mammoth co-owners Intrawest, which teamed up with McCoy in the mid-1990s, and Gregory would sell significant portions of their stakes in the transaction expected to close in 90 days. Starwood would own 70% and be the controlling shareholder. Intrawest and Gregory would each own 15%. Gregory will continue to run day-to-day operations of the resort.

*

Sahagun reported from Mammoth Lakes, Vincent from Los Angeles.