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Friday, June 8, 2012

Echo Mountain- Investment Opportunity of the Year

I just received the following email from my friend, MG. In it, he highlighted a very attractive real estate opportunity (far superior to the Nigerian Banking opportunities he normally sends me). After conducting an extremely rigorous and thorough analysis, I have come to the conclusion that we should be buying for roughly $1.3mm. Once MG deposits the $$$ into my bank account via wepay, we will be a go! Free hot sauce will be served at the base lodge every Fri-Sun, so I trust this will drive droves of skier traffic (and lead to major upside to our investment!)

---------- Forwarded message ----------
From: MG
Date: Fri, Jun 8, 2012 at 1:00 PM
Subject: Colorado's Echo Mtn Ski Area for Sale
To: Todd Wood

Here's your big chance! Bids due Aug. 2.
Sent from my iPhone


From: Todd Wood
Sent: Friday, June 08, 2012 1:49 PM
To: MG
Subject: RE: Colorado's Echo Mtn Ski Area for Sale


I estimate roughly $1.5mm in annual revenues. Conservatively assuming a 15% EBITDA margin (as non-premium destination, ECHO will not be able to command as high prices as Vail, and hence deserves a discount to the low 20% EBITDA margins that Vail has historically achieved in its mountain segment), I see $225k in EBITDA. At an 8x EV/EBITDA multiple (Vail/Whistler trade historically in the 8-10x range), the company is worth $1.8mm. This would be a 1.2x EV/S multiple, compared to 1.65x for MTN’s mountain (ex-real estate) biz, which seems like a reasonable discount due to ECHO mountain being miniature, completely unknown outside of Denver, and in the boonies.

To get the 40+% returns we’d want, we should be bidding $1.3mm.

As 50/50 partners, I’m just going to need you to contribute $650,000. Please send to me using the wonderful payment service, WEPAY. Thanks, I’ll take care of the rest once I see it hit my account.

Highly Accurate and In-depth Financial Analysis supporting this bid:

Historical Revs per skier visit (by segment) for the past 4 years at VAIL:

Total Rev $109.4

Lift ticket $49.3
Ski School $12.0
Food $9.5
Retail/Rental $26.0
Other $12.5

Echo Visits 32,000

 Blue-Sky Scenario- Echo receives the same $109/visit as Vail. Base case is somewhere in between a 50% discount, and a 50% discount plus ascribing no value to their ski-school business/other....

@Vail Profitability @50%  Discount @50% discount w/out ski-school/other
Implied Revs $3,499,676 $1,749,838 $1,358,908
Lift ticket $1,579,140 $789,570 $789,570
Ski School $383,199 $191,600
Food $305,418 $152,709 $152,709
Retail/Rental $833,258 $416,629 $416,629
Other $398,662 $199,331

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