This Q&A appears in this week’s The Sheet. This is the unedited version.
Q: You haven’t written anything “spicy” lately and most of those columns have to do with development, so what do you see on the development horizon in Mammoth?
A: Well, “spicy” isn’t the goal, just the byproduct. Over the years I’ve had the pleasure to work with many of Mammoth’s older and more experienced brokers (many of them actually worked in MY company before they retired). As a consequence of the experience, it reaffirmed that I never wanted to work directly (as a listing broker) for a developer. Part of it is a defect in my personality, but for the most part I’ve never wanted to be “owned” or beholding to one entity, especially not a real estate developer. Now don’t get me wrong, I’ve worked for them, with them, and listened to them ad nauseam (mostly in public meetings). I just don’t want them to be able to tell me how to run my business or put undo pressure on me to sell their product. And I certainly wouldn’t want them telling me when I can and can’t go skiing or fishing (or what to write in my blog). Life is too short.
Recently, after discussing some of the unfortunate ramifications of certain real estate developments, I was asked by one of my younger associates, “If you had to do this all over again, what resort would you pick to be in real estate?” Well, he advertises that he loves Mammoth, but just the fact he asked the question of me tells me he’s asking the question of himself. I personally can’t imagine myself anywhere else. Kissing ass in Aspen? Freezing my ass in Jackson? Growing moldy in Whistler? Not me. And anyway, for better or for worse, I’m a California boy. And I often remind myself of the quote from Emerson, and I’m paraphrasing from his Old English, “Though we travel the world over seeking the beautiful, we shall not find it unless we carry it with us.”
Mammoth remains a quirky and fickle place for many reasons, and nowhere does it become so apparent than in the planning and development. Developers have come and gone and left plenty of scars. Leadership, thought, and execution has lacked continuity (and perhaps credibility). The economic realities of a resort town are a harsh teacher for many dreamers. There have booms and busts. But the sun does shine more often than not and even in “bad” snow years the conditions can be great. Sometimes I think the visual and recreational distractions that surround us make us more complacent about the finer points of the human made environment. And that is true for many of our visitors and second homeowners––there’s plenty of shopping and restaurants where they came from. If that is their priority maybe they should just stay at home.
But the longer and deeper I look at all of this the more I think we need to recognize the influence of the Sierra Club. And rightfully so when you consider we are nestled between the two Wilderness Areas named for the founder and most famous members of the Club. This 100-plus year old institution has grown large in membership and powerful in their influence (and they have the attorneys to back it). They are like the invisible 800 pound gorilla in the room here in Mammoth, and they’re here to stay and will outlive us all. We can only be reminded as we watch expanded air service work its way into Mammoth this winter. The Sierra Club basically delayed the program 10 years and downscaled plenty of ambitious plans. (Just think of all the empty and really devalued condo hotel units there might be.)
And as the Sierra Club taketh away, they also giveth. Pristine mountain areas are coming under greater and greater attack by developers, utility companies, miners and disrupters of all sorts. (Don’t be surprised if the Club becomes proactive in the legalization of marijuana just to get the growers out of the forests.) Government ownership of land is about 95 percent in our county and more is reverting to government ownership than to private ownership. The land around us is becoming more protected all of the time. So maybe they are saving us from ourselves. The lack of (real) overdevelopment and free access to publicly owned open space is becoming our greatest asset.
Meanwhile most Mammoth real estate is priced below replacement cost. That doesn’t make an attractive development environment. Commercial and development lending will be compromised for years to come, and double that for resort areas. All of this is good for most segments of the resale real estate market. Demand is beginning to exceed supply in some segments of the market (it’s a start). But don’t forget demand is elastic. One of those segments is the condo hotel market. (Readers wonder why I dwell on the condo hotel market: it represents the bulk of the remaining vacant land (and density) slated for development AND this product is a critical bed tax generator for the Town.) As buyers/users/investors move back into the market at prices 50% or less of peak, some interesting challenges are exposed for future condo hotel developers. We are seeing some fundamental demand for condo hotel properties. So what added value (worth) is a developer going bring to a new property to make it profitable to build? (It’s about “adding value” from now on––not just building more.)
The Westin presence, and its better quality construction, is not making a substantive difference at this time. The lack of financing, the upcoming stream of foreclosures, and a healthy supply of both developer and privately owned inventory should keep the values suppressed for some time. So what will add value? Is it the added air service? The ski-back trail? Not likely. This is their challenge. Even worse, more and more owners of condo hotel units are turning to self-renting: using online resources to advertise and self-manage rentals. It is possible the underground garages of these properties will become a stream of third-party maid vehicles. The owners who have the time, or really need the income, are getting creative and competitive. And cutting out the 50% management fee is a big first step. All of this may be adding some value to individual units but not to the bigger picture and the marketability of future units and their front desk operations.
One of the reasons buyers are finding the condo hotel properties attractive is their matured functioning. The early condo hotel properties floundered. This was a big development mistake (but they don’t care, they already split). The buyers were pitched and sold a quality product on all levels and received far less. The Westin was the only property that had the operations remotely figured out from the beginning. The next round of buyers for new properties may be smarter too. The other quandary is the pre-selling process. Too many people have been burned: from missing deposits, to deposits walked away from, to the unfavorable fine print in the contracts. And the collective consciousness may very well want to touch and feel the finished product before buying this time around. And that will create further difficulties for the construction financing.
Other segments have challenges too. There is demand for nice townhomes (condos), but at prices that aren’t going to excite developers. It’s a good time to get entitlements and fine tune their floorplans, and pray. And high-end home developers are now the latest part of the foreclosure cycle.
My take-away is we can plan to our hearts content but some future Planning Commissioners or Town Councilers (who probably don’t even live in town yet) will cave-in under the developer’s persuasion at the podium. That’s not my cynicism, just my experience. I remember in the early 90’s Rusty Gregory describing the future Village Gondola building as “the Eiffel Tower of Mammoth” and how there was no need for restaurant loading docks in the Village because the lease space would be “so valuable” that the food preparation would be done at offsite commissaries and shuttled up to the Village. The Gondola building couldn’t be more non-descript and the SYSCO trucks always seem languishing in the Minaret meridian blocking the crosswalk that was suppose to be a pedestrian bridge. And why are the dumpsters right next to the entry at the Westin? And the noise is horrendous up against the seven-story concrete structure while they’re being emptied. Nice first impression. Ah yes, we shall forget.
6 thoughts on “We Shall Always Forget?”
"Meanwhile most Mammoth real estate is priced below replacement cost."
what is the "replacement cost" for Sherwin anyway ?
thx 4 the report mr. p
Informative post but I must say it is more interesting and I am looking forward to some more facts from you on real estate in the future as well.
Priced below replacement my ass. Below "inflated replacement" if that is what you mean.
We'll find out about real replacement costs when we see how quickly the developers get back to building. Like I've said many times in columns, most people don't realize the added expense of building in Mammoth. If you can tell me how to reduce my current "inflated" construction costs I'd like to hear them because I'm looking to build another house. The price of oil doesn't help.
construction costs are not inflated in mammoth lakes.
permits and fee's are inflated
cost of land is the big inflated component.
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