(Bloomberg) — A 140-foot crane swings over the bare plywood roof of a private clubhouse under construction at the foot of Mt. Mansfield, Vermont’s highest peak. In another building, crews install electrical wiring on a tight deadline: Stowe Mountain Resort opens its public ski lodge in December.
The most expensive ski facility in the Eastern U.S., owned by American International Group Inc., is halfway through a $400 million renovation that began a decade ago when Maurice “Hank” Greenberg was running the insurance company. AIG’s founder, avid skier Cornelius Vander Starr, began developing the resort more than 60 years ago after the Civilian Conservation Corps cut the mountain’s first trails during the Great Depression.
AIG is selling assets to repay the $122.8 billion Federal Reserve credit line it was given to avoid collapse. That has Stowe residents such as Paul Archdeacon concerned that questions about the resort’s future, coupled with a weak economy, may crimp ski traffic in a town where most of the 4,400 residents make their living from tourism.
“The resort is the main driver of our economy and the largest employer in the area,” said Archdeacon, owner of Gracie’s Restaurant, named after his Airedale dog. “If you live here, you either work on the mountain or your friends do.”
Stowe has no traffic lights and no Starbucks Corp. coffee shop, yet it now has a luxury inn pricier than most hotels in New York, where rooms average $325 a night. Stowe Mountain Lodge, opened in June as part of the expansion, charges $750 to $3,552 a night during the peak mid-January ski season.
A season’s ski pass at Stowe costs $1,766, the highest in the eastern U.S. and not far from the $1,970 charged at Jackson Hole Mountain Resort in Teton Village, Wyoming.
AIG Chairman and Chief Executive Officer Edward Liddy promised on an Oct. 3 conference call to sell “as many assets as needed to repay our obligations.” Transactions will occur “as quickly as possible,” he said.
Peter Tulupman, a spokesman at New York-based AIG, wouldn’t say whether the ski area is for sale.
New York-based AIG loses whether it sells the resort or keeps it, said Gregory Kolb, an analyst who follows the ski industry for Janco Partners in Greenwood Village, Colorado. If the insurer peddles the property in the midst of an economic decline, “it will take a haircut,” said Kolb. If the resort doesn’t sell, AIG faces declining revenue as people shun expensive vacations and banks make it tougher to qualify for a vacation-home mortgage.
“Stowe is a desirable asset with a great reputation among skiers, but it’s an industry that is economically sensitive so you’re not going to get top dollar right now,” Kolb said.
In a normal market, Stowe would fetch at least as much as Killington Resort, sold by American Ski Co. last year for $83.5 million, Kolb said. Killington, 75 miles south of Stowe, was bought by SP Land Co., a Vermont real estate firm.
The credit crunch and the ensuing stock market crash are making it difficult for potential buyers to secure commercial funding, Kolb said. They’ve also reduced pre-season purchase of lift tickets at U.S. ski resorts by 15 to 20 percent, compared with last year’s record demand, he said.
“It’s not cheap to ski,” said Kolb. “If you’re worried about losing your job, you probably aren’t going to be taking a big-ticket vacation.”
One possible buyer is Intrawest, a Canadian resort company that owns almost a dozen ski resorts in North America, including Vermont’s Stratton Mountain and Colorado’s Steamboat Ski Resort, said Kolb, the ski industry analyst.
“There aren’t many players big enough to make a move on Stowe,” said Kolb. Officials at Intrawest declined to comment.
Greenberg, 83, who controlled the largest stake of AIG before the government bailout and who has a home in Stowe, has said he may buy assets from the insurer, without citing specifics. He didn’t return messages asking if he might buy the resort.
The hotel, the ski lodge, a new performing arts center and retail shops being built at the resort are only part of AIG’s expansion, named Spruce Peak at Stowe.
Record Condo Sales
The insurer sold more than $38 million of condominiums in the resort between May and July as buyers closed on contracts they negotiated in 2005 at the height of the U.S. real estate boom. That’s double the value of all the condominiums sold in the town during 2007, according to real estate records.
Property sales did little to offset the $18 billion AIG lost over three quarters in the collapse of the subprime mortgage market. In addition to providing life and property insurance, AIG is the largest seller of trip protection plans and liability policies for ski areas. The Stowe property is the company’s only ski resort.
“Most people have no idea that AIG owns Stowe, so I’m not sure at this point there would be a lot of pressure on them to sell it,” said Kolb. “It’s a well-kept secret.”
Archdeacon, the restaurant owner, said locals are hoping that if the resort is for sale it will be bought by Greenberg, who regularly eats at Gracie’s and other town restaurants.
Jann Perkins, owner of 10 commercial buildings she rents to Stowe businesses that cater to tourism, is rooting for Greenberg as well.
“Everyone is nervous because most of us make our living off the mountain in one way or another,” Perkins said. “We’re hoping Hank buys it because he loves Stowe enough to keep it going.”