The Silver Valley’s $25 million dream for a new economy has reached a crossroads.
Silver Mountain Ski & Summer Resort awaits snow and scores of skiers to start its sixth season. Its first five years, from a financial viewpoint, have been a disappointment.
The fledgling ski resort has managed to eke out small profits in recent years. But it has not made enough cash to cover even the interest payments on the bonds that gave life to its ambitious gondola and resort facilities.
Swiss ski lift manufacturer Von Roll AG remains on the hook for $16.8 million in tax-exempt bonds. Since February, Von Roll has looked for the least painful way out of ski resort ownership.
Meanwhile, Silver Mountain’s potential to be a regional skiing powerhouse remains its greatest asset.
As many as five suitors are working with Von Roll’s representatives to see if they can buy the resort. Silver Mountain could have new backers and a brand-new future before the year ends, said Murph Yule, senior vice president of Boston’s The Finch Group, the ski area’s broker.
“I’m selling a very buyable ski resort here,” Yule said. “Unless you’re in an area with a major population base, it’s extremely difficult to start up a ski resort. But things are looking in a positive direction.”
The seeds for Silver Mountain sprouted from the contaminated soils around the Bunker Hill Superfund site in Kellogg in the late 1980s. The daunting cleanup, paired with the valley’s sinking mining economy, sent the area’s leaders looking for new economic development opportunities.
The city of Kellogg teamed with Von Roll and, with the help of $6 million in federal money, Silver Mountain took shape. For an investment that now totals more than $27 million, the city - which contributed only a few million in property tax breaks and investment - has found some benefits:
A resuscitated residential and commercial real estate market, which was flagging in the late 1980s.
A revitalized Alpine Village retail area in downtown Kellogg.
Regional attention as a tourism area, and the beginnings of hotel and lodging construction to complement the resort.
The deal looks worse for Von Roll, which likely will have to write off the difference between what a buyer pays for the resort and the $16.8 million of bonds due in 1998.
A proposal to buy the mountain from Spokane-based Alliance Financial Group Inc. pegs the value of Silver Mountain at $7.7 million if its equipment were to be liquidated.
The resort will be bought on the basis of its revenues, suggesting a purchase price could be well under the liquidated value of Silver Mountain.
Yule agrees that any ski resort struggles in its infancy. Continued investment makes the difference in making a resort work over the long haul.
“This is patient, patient money we’re talking about,” Yule said. “It’s difficult to see any start-up resort succeed without tremendous investment. Not many resorts can survive with 25, 30 or 40 million in debt.”
Marginal snow conditions sometimes have crimped Silver Mountain’s financial results. Over its first five years, the resort has earned only about $640,000.
The 1995 fiscal year results show a healthy 11 percent increase in earnings, Yule said. That steady climb of dollars in Silver’s till is enticing buyers.
The complexity of selling Silver Mountain gives potential buyers plenty of ways to finance the deal.
Mike Koch, president of Spokane’s Alliance Financial Group, has teamed with Sun Valley skiing consultant Mountain Services to bid for Silver Mountain. A draft of the Alliance/Mountain Services proposal, obtained by The Spokesman-Review, outlines various financial options.
Koch has been frustrated in his attempts to formalize his proposal with Von Roll. After several meetings with Yule to discuss terms, Koch sent his proposal directly to Von Roll in Switzerland.
As of Friday, Yule had not heard of a formal receipt by Von Roll of the Alliance/Mountain Services offer.
Yule said the offer doesn’t quite meet the terms set by Von Roll in regard to earnest money and minimum purchase requirements.
If the Alliance/Mountain Resort offer becomes a formal one, and another offer is firmed up, Yule said five players will bid for Silver Mountain.
The other four are all U.S. companies, with one from the Pacific Northwest, Yule said.
Koch’s Alliance/Mountain Services proposal asks to retain the current management team at Silver Mountain. Koch supports Silver Mountain General Manager Terry Turnbow, who has roots in the Silver Valley.
“Each group of investors will have different ideas about management,” Turnbow said late Friday. “It’s just our job to continue running the resort like we have been.”
New ownership likely would bring in new management, although not necessarily during the upcoming ski season, Yule said. The owners also would replace the three Von Roll positions on the resort’s board of directors.
It also appears Hagadone Hospitality’s affiliation with Silver Mountain would end, according to the Alliance/ Mountain Services proposal.
Hagadone has managed the food and beverage side of the resort for five years and declined to take a management fee that ranged between $67,972 in 1990 to $82,966 in 1991.
Sources close to the resort said Hagadone refused the fee as a courtesy to the city of Kellogg and to foster the growing resort. Silver has benefitted from close ties to the Coeur d’Alene Resort, owned by Hagadone.
Whoever ends up running the resort, the chance to elevate Silver Mountain among the elite Pacific Northwest resorts creates excitement, Yule said. “It’s the fun part of this job for me,” he said.
According to studies by Yule’s Finch Group, Silver has captured 17 percent of the Inland Northwest skiers market. Major North Idaho competitor Schweitzer Mountain Resort claims 31 percent of the regional skier market.
Both Turnbow and Director of Sales & Marketing Tim Newhart agree the sale itself will be a launching point for the resort.
The question remains who will take the reins when Silver Mountain changes hands.
“Once people see our new direction,” Turnbow said, “they’ll start to see things happen quickly.”
, DataTimes ILLUSTRATION: Graphic: Silver Mountain’s slow ascent