Some of the folks who regularly quiz me about Mammoth real estate think I have lost my mind. When prodding me for ideas about “opportunities” I have recently suggested watching the Westin Monache condo hotel project. What? (Paul HAS lost his mind!) But I didn’t say start buying––I said start watching. Here’s what I see and potentially foresee.
First, from what I can see, feel and hear, the Monache units and project are superior to anything built in the Village or at Eagle base. Some of the units, especially on the upper floors, have incredible views and settings and the larger (especially end) units have a wonderful feel inside. As I have pointed out in the past this is the first true hotel-like structure in Mammoth. And I underline structure. I didn’t say hotel-appearing. Sorry to JSL, SS, LH, WML and Grand Sierra. (Oh, and special condolences to the Mammoth Mountain Inn.) The structure–––the building––has real soundproofing, real hotel-like ventilation and real hotel-like amenities including a restaurant and bar under roof. Brands and licenses (like Westin) can come and go but the foundation (I like intending puns) of the project is the structure––the most impressive in all of Mammoth––and the amenities and mechanical systems. The building was built to “Westin standards” and that is a better start than all the rest. And the location to the Village Gondola is important, but expect a special assessment for an escalator in the future.
With all that said, let’s look at the impacts of the current financial environment. Financing for the buyers of these condo hotel properties has tightened substantially––meaning larger down payments, higher interest rates and stricter requirements (including cash in the bank) on the borrower. Simply, many potential buyers can’t, or won’t, make the cut. With more and more foreclosures hitting the Village condo hotel units, I wouldn’t expect this lending criteria to change anytime soon. The whole condo hotel industry has internationally come under far greater scrutiny. Projects with top brands in fabulous locations in places like Poipu, Playa del Whatever, Napa, The Strip, etc. that were originally a “slam dunk” are languishing on the market. (Maybe Barack has a plan for all this pain but don’t count on it.) Furthermore, most buyers were counting on all the rental revenue that was promised to help pay the mortgage. Inevitably, this whole market will soften including units at the Westin Monache. Already we have resale units listed for sale at the Monache at prices less than what the owners paid less than a year ago.
Now comes the other, and maybe more important, market condition founded in the current financial environment–––the diminished availability of construction financing, especially for condo hotel projects that are now becoming just short of the plague. (And forget financing for a true hotel in Mammoth––zip, zilch, nada, never going to happen in my lifetime.) Therefore a project similar to the Westin’s quality just isn’t going to happen for many years. (Okay, time out. I’m fully aware of the proposed Ritz-Carlton Residences in Mammoth. I really hope the guys from Texas get this built. I’m pulling for them because if they do, and it’s a hit, I’ll be retiring to my panga in Zihuatanejo right about the time my AARP membership starts. But I know too many old, tired and retired real estate brokers from Mammoth who are wore-out from the decades of development delusions. Ten years ago the lodge at Chair 15 was “ready to go” and I’m still waiting for the train around Lodestar and I keep the map of the Sherwin Bowl Ski Area on the wall just for humility’s sake. I’m still astonished the Village Gondola got built, but then again it might have been the key chess piece in a big con game.)
So here we are. Even if the Ritz started tomorrow (and they’re not) these projects are 3 years in the construction. And I won’t (shouldn’t) belabor the environment of frustration that the Town government has created for development. Forget the fees (trying to play catch-up for letting Intrawest skate), the ambiguous planning bureaucracy is frustrating even the most seasoned players. Few are in the mood to dance with this partner, and those that do are desperately hoping to get entitlements so THEY can find a buyer when the economy turns.
I’m plotting the future graphs––prices come down, rental revenue comes up, real competition is far off on the horizon, but how far off?, what are the re-sales doing?, do we still have commercial air service and if so is it growing? And along the way I really want to see how the Monache Homeowners Association is doing. Is it functioning (financially) as projected? (Anybody want to place bets? It’s all a matter of degrees.) Are propane costs killing it? Are labor costs killing it? Does Westin want to stick around? Are the restaurant and bar viable? Are there any construction defects? Lawsuits? This project is all new territory in the Mammoth condo world. It takes a little time to sort this stuff out. These are all factors that will play into “buy” signal or not––and the opportunity timing.
And what about all the unsold units (60+/-)? Rumor has it that some entity bought all the remaining unsold units in a bulk discount purchase. Sounds par for the course for Intrawest (cut and run?). These would make prime units for packaging with air service and lift tickets (especially since the individual owners find it unsavory to take a financial beating while their units take the physical beating). But that is all conjecture on my part. Or maybe there is going to be a new miracle marketing machine to sell this leftover inventory. The quandary are the 40 +/- resale units already in the MammothMLS(.com) that were just purchased in the last year. Or maybe there some hedge fund that is going to offer some trick financing on these units. Stay tuned.
But regardless, the Monache will be one to watch in the future for opportunities. Cherry picking one of the sweet suites at the opportune time may be a solid investment as well as a very nice lifestyle play. Meanwhile, it has been a simply wonderful summer here in Mammoth with great weather, no crushing crowds and adequate time to play.