Tuesday, August 15, 2006

Great Wolf Resorts (WOLF) Holder Ader Urges Company to Explore Sale, Says Worth $16 or More

In a 13D filing on Great Wolf Resorts Inc. (Nasdaq: WOLF), Jason Ader discloses an 8.72% stake (2.7 million shares) in the company. The firm sent a letter to the company to encourage the Board to take immediate steps to unlock long-term shareholder value by retaining an investment banking firm to explore the sale of the Company.

The firm said they continues to be impressed by the current robust market for mergers and acquisitions and the appetite of private equity firms, noting just last week, Intrawest (NYSE: IDR) agreed to be acquired by a private equity firm for $35/share. The firm said based on an analysis of the IDR deal, Grey Wolf would be worth well in excess of $16 per share.

A Copy of the Letter:

August 14, 2006


The Board of Directors

Great Wolf Resorts, Inc.

122 West Washington Avenue

Madison, WI 53703

Lady and Gentlemen:

Hayground Cove Asset Management LLC, as the investment advisor to Hayground CoveInstitutional Partners LP, Hayground Cove Overseas Partners Ltd., Hayground CoveTurbo Fund LP, Hayground Cove Turbo Ltd., Hayground Cove Equity Market NeutralFund LP, Hayground Cove Equity Market Neutral Fund Ltd. and other accountsmanaged by the investment advisor, is, according to public filings, the secondlargest beneficial owner of the common stock of Great Wolf Resorts, Inc. ("GWR"or the "Company"). We have been a long-term investor, and believe that themarket price of GWR shares fails to reflect the value embedded in its currentresort portfolio, the Great Wolf brand, the hotel management contracts, theunused real estate surrounding your current hotel properties, the announcedproject pipeline and the opportunity for other new developments and jointventures. We are writing this letter to encourage the Board to take immediatesteps to unlock long-term shareholder value by retaining an investment bankingfirm to explore the sale of the Company.

The two significant earnings shortfalls in 2005 caused serious damage tomanagement's credibility and GWR's overall reputation with investors. As aresult of the lost investor confidence, the shares trade at a significantdiscount to the underlying asset value. When Bruce Neviaser, Chairman of theBoard, called me on August 9th I was relieved to hear that Mr. Neviaser believesGWR is worth at least $16 per share. I was also encouraged that he sought myadvice about which investment banking firm to contact and how best to go aboutan organized sale of the company as a way to maximize the value for his sharesand that of all your public shareholders. As I told him, there are severalinvestment major investment banks, including Bear, Stearns & Co. and DeutscheBank, among others, that have great experience in this area and that could addsubstantial value in conducting an organized sale process.

I am writing this letter so that the entire Board understands clearly the pointI made to Mr. Neviaser on our call. AT THIS TIME, WE BELIEVE SHAREHOLDER VALUEWILL BE MAXIMIZED BY A SALE OF THE COMPANY.

Hayground Cove's investment professionals have substantial experience inevaluating and investing in the hospitality industry. We continue to beimpressed by the current robust market for mergers and acquisitions and the appetite of private equity firms. Just lastweek, Intrawest agreed to be acquired by a private equity firm for $35/share.

In fact, in a report Deutsche Bank Securities put out last week reviewing theacquisition of Intrawest by Fortress Investment Group, Deutsche Bank expressedthe view that "THE INTRAWEST DEAL REPRESENTS A 9.1X MULTIPLE ON FISCAL (JUNE)2007 EV/EBITDA. IF WE ASSUME AN 8.0X MULTIPLE FOR IDRS RESORT & LEISURE TRAVELOPS, A 12.0X MULTIPLE OF ITS management FEE BUSINESS, AND A 7.0X MULTIPLE FORREAL ESTATE EBITDA, WE BELIEVE THE $35 OFFER ATTRIBUTES ROUGHLY $5-$6 IN VALUEFOR IDR'S DEVELOPABLE LAND." Applying a similar analysis to Great Wolf's assets,brand, real estate and management contracts would yield a WOLF stock price WELLIN EXCESS OF $16 PER SHARE.

We support Mr. Neviaser's interest in a sale, and encourage the Board to takeimmediate steps to engage an experienced investment banking firm for thatpurpose. We believe the best way to maximize shareholder value at this time isthrough the sale of the Company, and request a meeting with the Board to discussour views on valuation.



Jason N. Ader


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