Kellogg Anxiously Waits What Does Eagle Crest Have In Mind For Silver Mountain?

Like a nervous father about to give away a daughter, the city of Kellogg, its businesses and thousands of skiers, have a simple question for resort developer Eagle Crest Partners:

What are your intentions with my ski mountain?

The Redmond, Ore.-based developer has been mute since announcing April 16 that it plans to lease the assets of ailing Silver Mountain Ski and Summer Resort from Swiss lift manufacturer Von Roll Tramways.

With Eagle Crest staying silent while lawyers tinker with the agreement, rumors have swelled through the Silver Valley.

Will the new owners buy the resort and promptly strip out key assets, like the mountain’s signature gondola, to other properties?

Can Eagle Crest, with no ski-industry experience, make Silver Mountain a success?

Can anyone operate a successful ski resort in Kellogg?

Answers could start coming Friday, when Eagle Crest head Jerry Andres will sign a 20-year lease to run the six-year-old resort.

The terms of the deal:

Eagle Crest Partners pays $2.95 million up front and a dollar a year to continue the lease. The money goes directly to Von Roll, which will apply the cash to help retire the $16.8 million in tax-free bonds which built the resort.

Von Roll will swallow the remaining $13.8 million of its investment. The company could have opted to liquidate the resort’s holdings - valued by one potential buyer’s appraisal at about $7 million - but instead chose to sell the resort.

“I think they wanted to leave Kellogg on good terms,” said Charlie Cox, city attorney. “I think they didn’t look forward to the negative publicity they’d get if they let the resort go bankrupt, and took out the gondola.”

After three years, Eagle Crest Partners can remove equipment like the gondola and other ski lifts from the mountain. Cox said he negotiated the clause to protect the city’s interests, but it hasn’t stopped rumors that the new owners eventually will transfer the equipment to another property.

Cox lobbied for a five-year moratorium on removing assets from Silver Mountain. Eagle Crest settled on three.

“We know what they’re going to be doing,” Cox said. “The questions have been asked and we believe they’ve made a commitment to be here a long time. The city feels comfortable.”

Throughout the year that Silver Mountain stood for sale, rumors swirled that ski hills from Jackson Hole and elsewhere scouted Silver Mountain to remove the gondola.

Cox said the city was concerned too. On the surface, they have reason.

Eagle Crest’s other ski venture, called Pelican Butte, will be developed at the company’s Running Y Ranch four-season resort near Klamath Falls in southern Oregon.

The ski area’s master plan calls for a 14,000-foot gondola to lift skiers up the mountain, according to Rob Shull, district ranger for the federal forest land on which Pelican Butte will sit.

Silver Mountain’s gondola, at 16,000 feet long, could serve that purpose. But sources close to the negotiations said that two factors will likely keep the blue stanchions and gliding cabins in Kellogg.

First, Pelican Butte is but an artists’s rendering at this point, and could take up to seven years to permit and build. Second, while moving the gondola today might make financial sense, the wear and tear of three more years and the extensive maintenance required to keep it running could make yanking it out uneconomical in three years.

Cox points out that while Andres’ intentions appear to be to help Silver Mountain make it, “we know that companies can change.”

Ski competitors believe Andres has a substantial challenge in making the ski hill work.

Potential buyers such as Kalispell’s Winter Sports Inc. - parent of snow fortress Big Mountain - liked the relatively new equipment and potential for improvement on Kellogg Peak. But suitors blanched at the lackluster profit numbers the venture has posted.

In its six years, Silver Mountain netted only a few hundred thousand dollars, not even enough money to pay the interest on Von Roll’s bonds. With depreciation and debt included, Silver Mountain has been a money loser.

But Eagle Crest Partners appears to like a challenge. Owned by building materials giant Jeld-Wen Inc., one of Oregon’s largest private companies, Eagle Crest has taken risky ventures before and succeeded.

Its namesake resort that sprang from the sagebrush outside Redmond - hardly a tourism mecca - teams championship golf with time-share condominiums. By most accounts, Eagle Crest created a winner.

But the deeper questions in the Silver Valley still rest with the ski resort, not its new buyers.

Towering with promise yet saddled with high operating costs, Silver Mountain provides an investor’s paradox. What makes the deal work for Andres is that there’s more than $25 million worth of equipment and improvements on the hillside that he’ll be operating for barely $3 million over the next two decades.

Silver Mountain also has the advantage of nearly 710,000 people within 210 miles.

But there are reasons that profits have been elusive:

High overhead costs, mostly from upkeep on its long gondola.

Marginal snow conditions and high winds at times.

A minor identity crisis and inconsistent marketing message. Is it a destination ski resort or a regional ski hill?

There are clear steps that Andres can take to improve Silver Mountain. Some of the suggestions were put forth by Alliance Financial Group of Spokane, when it bid for Silver Mountain early this year.

Reopen the Tamarack Lodge for about $150,000. The lodge needs a new water purification system and minor repair. Once opened, it would complement the Mountain Haus Lodge and spread skiers more evenly around the mountain.

Lengthen Silver Mountain’s shorter ski runs. By removing access roadways, Eagle Crest can create the longer runs that high level skiers crave.

Develop the East Ridge Development property, about 180 acres of fairly level land that lies east of the Mountain Haus Lodge. While ownership of the parcel remains somewhat entangled, it could represent an area for condominiums that Eagle Crest seems to have excelled at. Getting good roads there would be the first challenge.

Most observers think Eagle Crest will have to add condominiums to be successful.

Silver Mountain’s lack of high-end lodging at its base or near its slopes - the kind currently popping up around competitor Schweitzer Mountain Resort in Sandpoint - limits its destination appeal.

Ski consultant Ted Beeler of sno.engineering in Bellevue, Wash., emphasizes that high-quality slope-side lodging is the key lure for destination skiers who like to stay on the mountain for days at a time. Those skiers usually spend more than their day-trip counterparts.

Tom Sainsbury Sr. and his son Tom Jr. are working to fill the lodging need. They’ve recently completed eight new rental units in their Silver Ridge Mountain Lodge development across Interstate 90 and just a half mile from the gondola base.

“Everything we do here is based on what happens at the ski resort,” Tom Sr. said while showing the new units at an open house this week.

“I think they’ve got the right people in there now. I think they’re going to do the right thing.”

Some things at Silver already have solidified under Eagle Crest’s leadership. Terry Turnbow will remain general manager, and many of his permanent staff laid off at the end of the last ski season have returned.

Turnbow and his staff met with Eagle Crest at their Redmond headquarters a few weeks ago, he said. Eagle Crest went through a re-hiring process and brought most of the familiar faces back to the base lodge.

“We’ve been focusing on getting our summer season up and running,” Turnbow said.

“We haven’t had much time to do strategic planning, but we will be doing improvements on the mountain this summer.”

If Andres has plans for any of those improvements, he’s not saying. But after the keys are handed over to him and Eagle Crest this week, Kellogg may soon find out how the new marriage will impact their city and its future.

, DataTimes ILLUSTRATION: Color photo

MEMO: This sidebar appeared with the story: EAGLE CREST’S REPUTATION Owned by building materials giant Jeld-Wen Inc., one of Oregon’s largest private companies, Eagle Crest is known for making risky ventures succeed. Its namesake resort sprang from the sagebrush outside Redmond - hardly a tourism mecca.