They’re in a mountain of trouble

Reporting from Whistler, Canada — 

Hunched over a workbench in the back of his ski shop, trimming a pair of boot inserts, Scott Humby says he has read all the newspaper articles and heard the rumors.

He is talking about the ultimate Olympic irony: Whistler Blackcomb, a jewel among North American ski resorts, home to the Alpine competition at the 2010 Vancouver Games, could be on the auction block.

Creditors have set a Friday deadline for a foreclosure auction, according to numerous media reports. That’s the same day the women race down the hill in the slalom.

Intrawest, the company that operates Whistler Blackcomb, called reports of the deadline “speculation” and said it is involved in “serious discussions” with its lenders.

Amid dire headlines, Olympic organizers insist the Games will finish without interruption. Similarly, Humby and others who know this town suggest things aren’t as bleak as they might seem.

“This resort has always made money,” Humby said. “That’s not the problem.”

Instead, it seems, the uncertain future of Whistler Blackcomb has more to do with Wall Street than with gold medals or ski runs.

Whistler Blackcomb is actually two side-by-side mountains that combine to offer some of the most expansive skiing in the world. A cobblestone village filled with tony shops and restaurants lies at the base of the lifts.

Intrawest, which owns numerous resorts and holds a 15% minority interest in Mammoth Mountain, bought the property about two hours north of Vancouver in 1996.

Then, in 2006, the New York-based Fortress Investment Group acquired Intrawest for $2.8 billion.

In a statement released last month, Intrawest said that business with Fortress as owner continues “as usual.”

“Intrawest is looking forward to the success of the 2010 Olympic and Paralympic Winter Games,” the statement reads.

But at the University of British Columbia, professor Tsur Somerville blames Fortress for the reports swirling around Whistler Blackcomb.

Fortress, which was also involved in backing the Games’ controversial athletes’ village, stands to receive millions when the Vancouver Organizing Committee hands over “make whole” payments to compensate for business lost while the Games took over Whistler Village.

But that might not come soon enough for the embattled hedge fund manager, which borrowed a reported $1.7 billion to purchase Intrawest. One of the creditors is the defunct Lehman Brothers.

“This is a legacy of people borrowing a lot of money to buy things,” said Somerville, who teaches at the Sauder School of Business. “They bought at a peak price and then the economy collapsed.”

Now, the bill comes due and Whistler Blackcomb potentially represents a way out, a high-profile asset that might be sold to cover debts, he said.

The biggest value of a ski resort is real estate -- the shops, hotels and condominiums that spring up around the slopes. Property values in Whistler Blackcomb have weathered the economic bad times fairly well, the professor said.

“There has been nothing to suggest there’s a problem with Whistler,” he said.

Fiona Famulak, president of the Whistler Chamber of Commerce, said in an e-mail that she has seen “no indication of a negative impact on business within the resort as a result of the ongoing discussions.”

But, like other shop owners in the area, Peter Elzinga complains about staff layoffs and less-frequent trail grooming on the mountain since Fortress came along, changes that he believes have discouraged some local skiers.

“In non-peak times,” he said, “it’s the local, rubber-tire business that keeps us going.”

So it turns out that speculation about a new owner, which might look bad in the media during the Olympics, is welcome in Whistler Village.

“We want to see someone who knows the ski business,” Elzinga said, “not another corporate entity.”

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