Broker’s Report, April 15 2006

Broker’s Report, April 15, 20006–First, a few comments on the ski patrol tragedy on Mammoth Mountain. In my 25 years of living here I don’t think I have ever witnessed one event create such a quiet undercurrent of unease quite like this one. The ski patrol members are the ushers and guardian angels at the church many of us prefer to attend. It has created an odd aura in town–you want to go skiing because you know it is so great, but there is something wrong. Like the simultaneous feeling of wanting to hesitate on a turn, but no, what the hell, open it up. Maybe we can all gain a little more respect. God bless those men.

Mammoth’s real estate market is in a similar state. Besides the overall sale of the Ski Area and periphery assets to Starwood Capital Group, the level of commercial, development, and apartment investment in Mammoth and the surrounding areas is at an unreal level. It is like a bunch of hedge fund guys have all put Mammoth on the top of their lists. Old-time owners and the more recent property assemblers are taking MAJOR gains. Indicators are that new offers persist on a variety of properties. Other properties are being listed for really high prices, waiting for delicious offers.

In the more common-man end of the market, we are seeing a spring sales pop but nothing compared to last fall. Condo inventory has been sitting in the 85 to 90 units range with 53 units in escrow at this writing. The absorption of new listings has been equal to sales since about December. Around 22 to 23% of the overall condo inventory has been Intrawest Village units–that’s where the greatest amount of speculation has been in the last few years so that is not surprising. Some of the new condo listings are coming on at very high prices, we’ll see if they sell. According to local appraisers in just the last week, there appears to be strong demand in the higher-end condos, especially larger units. Another interesting point as of late, cash buyers are paying for appraisals, just so they know where they stand between what they are paying and what the appraised value is.

In the home market there has been very little activity in the high-end of the market. Most of the homes listed under $1M are really compromised, but many of them are selling. Quality homes in the mid price range ($1M to $2.5M) that are competitively priced are likely to sell. There have been a number of high-end lots sell in the past few months with benchmark prices. The high-end residential clientele appear to like building their own homes. Some of the lower end lots have sold to contractors for potential spec building. Vacant residential lots will remain scarce and pricey. It might be a slow spring for lot sales with all of the snow pack.

It is really hard to say what is going on with the new fractional projects. The sales staffs say sales are great but they seem to be hounding the local brokers for prospects. The 80/50 project is on their third sales team. Intrawest is pumping their Altis project, which will be located on the ski run off of Eagle Express. Altis will be part of the “Storied Places” residence club with world-wide locations–they don’t sell fractions or shares, they sell “chapters”. Many people have asked me to do a Q & A column on fractional and club ownership. I have been assessing what is going on here as well as other resort areas. That column will come in the future.

Many of the major future development projects are taking a step back backwards. MMSA’s new owner Starwood Capital has criticized the quality (or lack thereof) of the development that has occurred in the past few years. They are expressing that they want to raise the bar. With all of the new acquisitions within the North Village Plan area, and most with some Starwood affiliation, new rounds of public forums and planning are beginning to occur. The three corners at Main and Minaret (Whiskey Creek) are now called “Crossroads”. The Hillside/Ritz property/development (next to the Westin) is on hold–it appears new ownership is taking over. There is so much BIG money flowing into development property in the North Village area it is almost insane.

The Chadmar Group, the new owners of the Snowcreek development, have hit home runs with Snowcreek Phase 6, known as The Lodges. The Town wants (and needs) them to bring superior planning to the balance of their development–the back ten of the golf course, the fabulous knoll adjacent to the creek drainage, and the flat, old meadow area that will be surrounded by the golf course.
Another new impressive project moving forward is now named “Clearwater”. Located on Old Mammoth Road, the existing Sierra Nevada Inn, Ocean Harvest Restaurant and the old Rafters building get scrapped and 400 units of residential combined with retail get built with nearly 700 spaces of underground parking.

Mammoth’s June 6 election will get real interesting with 3 Town Council spots open and two incumbents running. The majority of candidates are essentially “slow or intelligent growth” candidates. Transportation, water, the airport, PAOT (Persons At One Time–build out), how are we going to pay for much needed parking in the Village, potential building moratorium (could that drive prices of existing properties even higher?) are all issues. As MMSA CEO Rusty Gregory suggested last year, “Mammoth is addicted to the heroin of development.” Many in the town are now asserting that Mammoth needs to be addicted to providing a quality tourism experience–that this will be the solid foundation for the community.

So what is the reality for the real estate market? Rising interest rates are going to affect all markets. Mammoth’s market has experienced sales surges in the past few years. Those surges have resulted from announcements/news releases and major sales pushes. The spectacular wave driven by very low interest rates is over. But interest rates are still relatively low. It is clear that the new interests in town are driving to make Mammoth a more service oriented and high-end resort. And they have a track record of making that happen. All real estate markets are cyclical, Mammoth had a long down cycle, and many think Mammoth is in the midst of a long up cycle. I ask observers of Mammoth real estate all of the time what they think. They vary from 1 to 10 years of increasing values. They all mention that prices here are still at a fraction of Aspen and Vail.

In the meantime we have had a record snow year and back-to-back 600+ inch winters. Can we three-peat? Maybe global warming will keep it up. Many locals are moving down hill. Some way down hill. Times only get more interesting here in Mammoth.

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