Fixing the Village

Q & A from the Labor Day issue of the Mammoth Real Estate Times. Happy Labor Day!! It feels a little like Fall here in Mammoth.

Q: The tone of your columns and writings are very critical of the Village, and we’ll admit that things aren’t perfect there, but how do you propose to make things better?

A: In a column I wrote a couple of years ago I questioned whether the Village was heading towards becoming a “dysfunctional mess”. I posed that question because I saw the warning signs––too little commercial occupancy to create the necessary “critical mass”, no solid effort to generate shoulder season rentals and traffic, the lack of efficient public parking, and from what I was personally experiencing at Eagle Base––condo hotel management and policies that were inadequate. The phrase we are hearing more and more around Mammoth is “good planning without execution is a hallucination.” Indeed, the LSD has taken hold. Blame Wall St. for bringing it to the party and our decision makers for letting us consume it.

So let’s go back to the planning of the Village to understand what went wrong. The North Village Specific Plan was formulated and approved in 1990-91. It brought over 30 separate property owners (and their egos) together into a new planning and zoning district. If the local economic pain of the 80’s and five years of drought and the looming economics of the early 90’s weren’t so profound, it is doubtful whether these property owners ever would have come to agreement. But they did.
A couple of years later some visionaries decided the Plan needed revising. They brought Eldon Beck to town. Mr. Beck was a professor of Urban Planning at UC Berkley and his planning firm had helped plan the alpine village concepts in Vail and Whistler. He is basically the father of contrived alpine villages in North America. Beck was about to retire, but agreed to come and give the Plan some refinement.

Beck spent time in Mammoth talking to local officials and business people and observing the site and town. His immediate priorities were to understand the site and its relation to the sun, both in summer and winter, and to attempt to protect the native trees on the site. But he also had a strong sense for the social engineering required to make a resort village work. His theory, based on his vast experience, was that the visitor will always seek out interaction with the local inhabitants. (Maybe that is why we need Don’t Feed Our Bears stickers.) Therefore, one of the keys for the village to be successful, the local people must be drawn to the village on a regular basis.

To solve this part of the equation, Beck planned an Events Arena in the Village. There it sits in the 1993-94 version of the North Village Specific Plan. Beck’s vision for this facility was a full sized indoor ice rink that could be easily converted to a small convention facility or an entertainment venue. Sort of like a mini Staples Center. Underneath it would be two or three levels of parking (and easily accessed from both Minaret or Forest Trail.) And there was a bridge spanning Minaret Road from the core of the commercial district (that is there today) to this Events Arena.

The Event Arena would be the draw for hockey and ice-skating, the convention facility could help book rooms in the shoulder seasons, and the entertainment facility could host all types of events. And all of it not weather dependent. And the local residents and visitors with vehicles could utilize the parking or public transportation. And there would be tons of bed base (“warm beds”) and shops and restaurants right there. Just like a real alpine village.

Beck also knew something else. Modern municipal planning was dependent upon deal making and other financial mechanisms that could make this all work. He knew that the volume of development that was proposed in the North Village could support both the development and maintenance of this facility. It had been done before. Public planners call them exactions, and developers call them extractions. California planning laws are fairly liberal in the use of development agreements that can (and should) create mutual benefit. It helps if everybody has a long-term perspective.

In fact, the Town of Mammoth Lakes became so concerned about what this economic monster could be like, that it started the process in the mid-90’s to “save” the Main Street and Old Mammoth corridors from becoming run down and being put out of business. Today, the lighting, sidewalks and other niceties on Main Street and Old Mammoth Road are a product of that concern. I certainly appreciate the upgrades, but it further displays the failure of the Village. It was suppose to be a significant, really BIG––in many ways. Instead, it really has come to resemble a dysfunctional mess.

So what happened? Obviously the plan didn’t get executed. It is now more of a nightmare than a hallucination. Shortly after the 1994 Plan was approved, Intrawest arrived in town. They began development at Eagle Base but eventually moved to the Village. (“The Village” is Intrawest’s portion of the North Village Plan.) Intrawest shrewdly negotiated a development agreement. Now I’m not here to lay blame (we’re trying to figure out the “fix”), but the Town and decision makers were clearly bullied in the negotiations. The really knowledgeable people around Mammoth in these sorts of things estimate the Town left $50-100 million on the table.

The Town did get a substandard lot for a minor parking lot––the lot has poor traffic access and will prove very expensive to build on––nothing like the location of the proposed Events Arena. (I’m sure the boys in Vancouver got a good laugh over that one.) The $50-100 million could have paid for the land and Events Arena and probably a bridge too. But all of that is water under the bridge (pun intended.)

Some people want to blame the lack of regular air service for the failure of the Village, and there’s no doubt it has made an impact. But if you believe that Eldon Beck knew what he was doing, then all those people flying in would have eventually ended up at Roberto’s, Shogun, etc., where the locals are.

The other failure is something I’ve harped upon repeatedly, and that is the poor performance of Mammoth Hospitality. See, after Intrawest built the condo hotels, they just dumped them on the flailing hotel arm of Mammoth Mountain. With little expertise at hospitality and hotel operation, and absolutely no experience at condominium and Homeowner’s Association management, muddling through this challenging task was almost a given. The original sales manual given to the local real estate community by Intrawest for selling the “Resort Condominium Concept” talks about the “win-win-win of the situation”. Excellent hospitality and hotel management and Association management creates the win for the owners and guests. Looking back, we all know who won. And those “winners” just got heavily cashed out–by a hedge fund.

One of the other failures has been the handling of the commercial space in the Village. Old shopping center lease strategies were thrown out the window. It is no secret the Village business owners have struggled. Expensive tenant improvements and lease rates (and common area charges) would make it hard for any business, even if the Village were bustling 365 days a year. And key, anchor tenant locations sitting empty for years doesn’t send a good message either.

So now the remaining parts of Intrawest (now owned by Fortress Investment Group), Starwood Capital, Goodman/Crossroads, Staubach/Cypress, and even the Clearwater (Old Mammoth Road) folks all have to figure out how to make this work. The Village has proven to be an exciting venue for special events. But the cost is large and the actual return is low. The traffic has to be more consistent. And if Beck was right, the local residents have to be drawn for regular visitation. There’s nothing drawing me except for an occasional good party, and only if parking is reasonable.

Compounding the Village’s problems is the growing public perception that condo hotel investment in low occupancy locations (like Mammoth) is not sound. Especially if expenses are high (again, like in Mammoth.) In some markets where condo hotels have proliferated, condo hotels are now being called the “the shortest living fad in real estate history.” And too, many of the (Village) developer’s pro formas were relying on very profitable fractional and “club” sales to boost their bottom lines. The consumer interest in this product is marginal at best.

So the “fix” is a huge challenge. Band-Aids and hype aren’t going to work in a higher interest rate environment. More (and fancier, or trendy or “branded”) rooms aren’t going to make things better. Many of the potential “move-up” buyers feel burned. Maybe it’s all a “Pebble Beach” scenario. Maybe subsequent owners/developers will come back at lower investment rates and see the wisdom of Beck’s plan, and implement more prudent commercial leasing strategies, and introduce progressive hospitality and property management and more. It’s a big we’ll see.

Meanwhile, my hunch is that the Village will stand as a living monument to the larger events played out on the international financial and power stages of the 2000’s. We will have a grim reminder of those profound activities right here in the microcosm of Mammoth. So I think I’ll head to Old New York Deli for a pastrami sandwich––to hell with my cholesterol numbers.