Boyne Goes Big: Revised debt structure enables reacquisitions, upgrades

Big Sky Resort, Big Sky, Montana

It started with a one dollar bill and a young man’s dream to own a ski hill.

Boyne Resorts, North America’s third-largest mountain resort company, was founded when 30-year-old Everett Kircher bought 40 acres of barren property near Boyne Falls for darn near nothing.

The Detroit native opened Boyne Mountain for business in 1947 … but lean winters kept him from expanding.

Kircher’s father advised him to build a chairlift in snow-deficient, but scenic Tennessee in the early 1950s. It was a “fortuitous” move that generated revenue for expansion, said Boyne Resorts President and CEO Stephen Kircher, the late Everett Kircher’s son.

“Gatlinburg was fortuitous for us. Our success was generated from that,” he said about the Gatlinburg Sky Lift, an 1,800-foot-long chairlift ride that gives passengers panoramic views of the Great Smoky Mountains and downtown Gatlinburg. More than 300,000 people a year ride the attraction.

“My dad didn’t want to do it, but my grandfather forced him,” he said. “My grandfather wasn’t involved in the business, but he was a mentor to my dad and my dad listened to him.”

Boyne Resorts has since grown to 10 resorts with the reacquisition in May of six resorts and the Gatlinburg Sky Lift from Oz Management, a New York-based real estate investment firm. Boyne had once owned the resorts and the Gatlinburg attraction, but later sold them and had been operating the properties under lease agreements for about the past 10 years.

Boyne Resorts generated annual revenue of about $355 million last year, including the newly acquired properties. It employs 9,000 workers, of which about 1,500 are full time.

Its three Michigan properties — Boyne Mountain, Boyne Highlands and the Inn at Bay Harbor — employ 1,600 full- and part-time employees. They also comprise less than 25 percent of the company’s revenues, Kircher said.

More than three million ski visitors ski at Boyne-owned properties, the newest of which include Brighton Resort in Big Cottonwood Canyon near Salt Lake City, Utah; Cypress Mountain in Vancouver, B.C.; Loon Mountain in New Hampshire; Sugarloaf and Sunday River resorts in Maine; and The Summit at Snoqualmie near Seattle, Washington.

In addition to these and its Michigan properties, Boyne also owns Big Sky Resort in Montana.
Terms of the deal to acquire the resorts from Oz were not disclosed, but Boyne Resorts issued $400 million in private bonds to pay for the acquisitions, refinance debt and use for other corporate purposes. It was the first time the company had used such financing in its 71-year history.

Kircher said he views the acquisition of the seven properties more as a refinancing because the company already controlled their operations under lease arrangements.

“It doesn’t change my life; it just gives us a better capital structure to invest from,” he said. “The acquisition took out the leases and put us under one cohesive structure. It’s the best capital structure we’ve had in 70 years.”

Moody’s Investors Service, which reviewed the bonds, said the company benefits from “a well-diversified geographic footprint” and “relatively stable long-term fundamentals for the North American ski industry.”

While noting that Boyne Resorts is highly leveraged, Moody’s said it expects the company will grow revenue and become more profitable, allowing it to reduce debt over the next few years.

About 25 percent of the company’s revenues come from golf and other non-snow related activities at its resorts. Moody’s said Boyne Resort’s diversified revenue base is “viewed favorably” in its ability to repay the bonds, due in 2025.

“We’re pretty happy with the response to the bond issue,” Kircher said. “Some of the most reputable investors in the world have invested with us. It’s a great validation of the ski industry and our role in it.”

Being a larger ski resort company helps hedge against fickle winter weather and gives Boyne Resorts the ability to invest in the latest chairlift and snowmaking technology.

“In the 1960s and 1970s, hundreds of resorts went bust because they couldn’t afford to invest in snowmaking machines and chairlifts,” Kircher said.

Everett Kircher was a pioneer in the development of advanced chairlifts and snowmaking machines, a hallmark that the company has continued.

For example, Boyne Resorts is installing the first eight-seat, high-speed chairlift in North America at its Big Sky Resort. Boyne Resorts purchased Big Sky from the late NBC News presenter Chet Huntley in 1976.

“We try to be cutting edge,” Kircher said.

Owning resorts that stretch from the East Coast to the Pacific Northwest reduces weather-related risks in the ski business.

“The Pacific Northwest is volatile,” Kircher said. “Their bad years are when we have good years in the Midwest.”

And while the earth may be warming overall, Kircher said he’s not seeing the effects yet in his operations.

“We just came off our longest season ever at Boyne Mountain,” he said. “I can’t say definitively that the amount of snowfall now is different than it was in the 1940s and 1950s.”

Nevertheless, Kircher said there has been some impact on the ski industry from a slight increase in average temperatures. Boyne Resorts is responding to that, in part, by reducing energy consumption in snowmaking and other operations.

Since the 1970s, the company has reduced the electric power needed to make snow by 96 percent.

“It’s something we need to focus on,” he said. “We need to mitigate our impact on the environment.”

Kircher said he has no plans to acquire additional resorts in the next three to five years. Instead, the company will focus on upgrading facilities and diversifying recreation options. He said a number of new projects are under discussion but aren’t ready to be announced.

“Our goal is to add more diverse resort activities where it makes sense,” he said.

Those activities include water parks, zip lines, horseback riding, Segway tours and lacrosse. Boyne Mountain recently opened eight lacrosse fields for play on 200 acres of farm property it purchased in 2012.

“We’re the first resort in America to have lacrosse,” Kircher said.

Lacrosse is one of the fastest growing sports in the United States, according to a recent Sport & Fitness Industry report.

Boyne plans to host lacrosse camps and tournaments featuring teams from throughout the Midwest. The resort also is planning to eventually add soccer and other field sports events.

In addition to its $400 million bond financing, savings from the new federal tax law will help Boyne Resorts upgrade facilities and add amenities, Kircher said. Recently slashed corporate tax rates will allow companies to more quickly write off capital expenditures.

“It provides a real incentive to reinvest in equipment,” Kircher said. “That’s certainly one of our focuses in the next five years.

“What we’re doing [through the new financing] is reinforcing our ability to invest at a higher level than our competitors,” he said. “We want to provide a better experience for our guests and a bigger benefit for our communities.”

Boyne Properties:

Boyne Resorts consists of 10 ski resorts, some with golf, and a scenic chairlift. The company employs 9,000 full- and part-time workers and generated revenues last year of $355 million.

Boyne Mountain, Boyne Falls. Ski, golf and waterpark resort. Opened in 1947.

Boyne Highlands, Harbor Springs. Ski and golf resort. Acquired in 1964.

The Inn at Bay Harbor, Petoskey. Hotel and golf resort. Opened in 1998.

Big Sky Resort, Big Sky, Montana. Ski and golf resort. Purchased from late NBC News anchor Chet Huntley in 1976.

Former leased properties acquired by Boyne Resorts this year:

Gatlinburg Sky Lift, Gatlinburg, Tennessee. Scenic chairlift. Built by Everett Kircher; opened in 1954.

Sugarloaf, Carrabassett Valley, Maine. Ski and golf resort.

Sunday River Resort, Newry, Maine. Ski and golf resort.

Loon Mountain, Lincoln, New Hamphire. Ski resort.

Brighton, Brighton, Utah. Ski resort.

The Summit at Snoqualmie, Snoqualmie Pass, Washington. Ski resort.

Cypress Mountain, West Vancouver, British Columbia. Ski resort.