The Game of “Financial Chicken”

“I wanted to stand here and look you straight in the eye and answer any questions you have,” stated CEO of Mammoth Mountain Ski Area Rusty Gregory, at a meeting held on July 1. The meeting was regarding MMSA’s decision to close the only parking area at the Village at Mammoth. The lot closure was effective immediately the same day as Gregory’s public appearance at the Grand Sierra Lodge.

Gregory explained that in tough economic times like these the powerful players try to force the pain onto the less powerful players. In this case, the powerful player is CNL, the property owner of the Village, and the less powerful players are the Village tenants. CNL has continued to raise rents, even as more and more tenants are unable to pay.

MMSA’s first strategic move to “get CNL to pay attention, and to spread the pain of these times around a bit,” according to Gregory, was first to refuse to pay their rent and then to refuse to renew their leases at the Village. The Mountain pulled out of their four commercial spaces. With their departure, CNL lost $700,000 in rent each month. When that didn’t seem to do the trick, MMSA decided to close off the parking lot that up until now has been used by CNL for free, based on a handshake agreement.

“Right now we are playing a game of financial chicken,” Gregory stated.

The closure was not, as some believed, put into effect to create a private parking lot for MMSA season pass holders.

Village tenants present at the meeting were concerned that the cards being played by MMSA wouldn’t make much of a difference to CNL, and in the meantime their small businesses wouldn’t be able to hang on. They asked what pain the Mountain would be feeling from all of this, if Gregory’s true intention was to spread it around?

“We are trying to sell ourselves as a world-class resort and that’s hard to do with a ghost town Village,” Gregory replied.

Gregory bluntly stated that he believed the Village would go dark for one or two years before things got better, but believed that doing more of the same and expecting different results didn’t make sense. His ultimate goal of closing the parking lot was not to hurt the tenants even more but to get CNL to pay MMSA to rent the parking lot. The Mountain would collect these rents and then turn around and give them back to the tenants of the Village, pro rata.

“It’s time for some benefits to flow to the tenants,” Gregory said.

Michael Vanderhurst, Intrawest’s Commercial Asset Manager for the Village was present at the meeting but stated he had not been given authorization to speak on CNL’s behalf. He did say that CNL had not authorized Intrawest one way or the other to pursue new tenants to replace those that were leaving.

CNL is the property owner of the Village and 80 percent stakeholder. Intrawest is the property manager and is a 20 percent stakeholder. The whole parking mess began when the Village was built in the 90s and the Town relinquished the obligation for Intrawest, who was then the sole owner, to build any parking, Instead, Intrawest was required to give the Town land on Canyon Boulevard that is one day expected to become a parking garage. CNL has stated that they do not think parking is important for the Village, so it is still unclear who will help the Town build that structure.

According to Gregory, the value that CNL has placed on the Village is $23.5 million, which is what they paid for the property. In today’s market, Gregory believed the property would only be worth between $12-15 million. These prices still do not warrant the $5.20 per square foot CNL is charging in rent. Gregory felt that the market value of rents would be somewhere around $2.25 per square foot.

Gregory said he was encouraged by talks about individual business owners being able to buy their own spaces, but was not encouraged by the prices that CNL was discussing.

“If we’re gonna fight, we gotta fight now,” Gregory said. “There’s nothing better to do in the summer anyway.”

At this time the parking lot will remain closed indefinitely, with the exception of opening for Jazz Jubilee, July 9-13.

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