Broker’s Report July 24, 2016 — Silicon Mountain??

There was plenty of invigorating and enlightening information at last week’s Town Council workshop here in Mammoth Lakes. The local press covered the event but glossed over and missed the really profound points. The main body of the presentation to the Council was presented by international planning consortium Hart Howerton (HH) who was recently hired by the Ski Area to revisit the strategic planning of the Resort and Town. And help guide the community leaders to an expanding future and opportunities.

The essential take-aways;

1.) Mammoth Resorts (MR) CEO Rusty Gregory spoke and said he is now “more optimistic than ever” and has a “commitment to action” and wants to “move forward together” with the town. Recent financial restructuring will now allow him to proceed with $100 million of “on-Mountain improvements” including the Eagle Lodge base and new beginner ski slopes on the Camp High Sierra property. This will include the Eagle Gondola. The land trade for the Main Lodge property is still some 18-24 months out but they are in the planning process for that too.

2.) Gregory also reported that MR is re-purchasing the hotel site property within the Sierra Star golf course with financing from Credit Suisse. HH told him that closing Sierra Star golf course “is a really bad idea” and a hotel in the Sierra Star community is vital for the overall resort and that this type of community (golf, lakes, condo, homes, etc.) is critical in today’s mountain resort mix. And it creates the critical link between the Village and Eagle (this was the original planning concept from decades ago but somewhere it all became distorted).

3.) To jumpstart the Village it needs a significant parking structure and a convention facility. HH recommends that Canyon Lodge be “re-purposed” to a convention facility because it is only a 4 minute gondola ride from the Village. HH also recommends that the Town owned property at the north end of the Village where the old community center and tennis courts are should become a 2-level parking structure and wide sidewalks and sitting areas and pedestrian bridges should be developed on the east side of Minaret to facilitate the flow of people from the parking structure to the core of the Village.

4.) HH recommends that the Town ice rink/multi purpose facility should be placed on the “Shady Rest parcel” (the large undeveloped parcel behind Schat’s Bakery). This would kick-start a Main St. redevelopment that would basically encompass the Shady Rest Parcel and east to the Mammoth Mountain RV Park (at the entry to town) and would include the Sierra Nevada Resort property that has new development densities under the name Clearwater.

The HH vision within this zone includes a mix of public facilities including the ice rink facility, the courthouse/police station complex, the hospital, etc. and private enterprises including existing and new restaurants, coffee houses, retail and a variety of existing and new housing. Negotiations with the owner of the Shady Rest parcel have already occurred and he is willing to sell (and finance) the land for the ice rink. The balance of the property would be zoned for open market and deed-restricted housing. This Main St. revitalization is being driven by…

5.) Multiple drivers are accelerating the Mammoth Tech Community Initiative. The Digital 395 project that laid fiber optic lines up and down Hwy. 395 and the multi-million dollar investment last summer by Suddenlink is now providing Mammoth Lakes with the best Internet bandwidth possible. It has made Mammoth Lakes “uniquely situated” for the tech industry. It is being described as “a gift that hasn’t been opened yet” and the community is now considered “asset rich in the tech economy.”   And Mammoth’s location is centered between three thriving tech areas; the Bay Area, west Los Angeles and Reno.

The Mammoth Tech Community Initiative is being spearheaded by Rudy DeFelice who is running the New Market Opportunities division at Mammoth Mountain and Jim Demetriades the owner of the Sierra Nevada Resort who made his wealth in tech and has strong connections to the tech industry and venture capitalists. Demetriades stated he is involved with 20 tech start-ups just this year.

DeFelice explained that the conditions are in motion to create what the tech industry calls “the loyalty ladder” here in Mammoth. The participants begin as visitors to the resort and then evolve to extended stays. They experience the exceptional broadband connectivity that Mammoth now has and the mountain lifestyle. This will increasingly lead to off-site offices and campuses where companies and individuals can come and work and interact with other tech workers (this interactive work scenario is critical). This is already happening in Mammoth. The ladder evolves to “hoteling” where product teams come for more permanent relocation and eventually this all leads to actual relocation of individuals and families. He himself is experiencing the “cachet” of living in a mountain town.

DeFelice (who, according to his LinkedIn profile is a former attorney and CEO/founder of several Internet start-ups) refers to this as the 7-12 economy. These workers work 7 days a week and 12 months a year (sounds like real estate). He points to the immediate interest from companies in the tech fitness arena like FitBit and recreation video like GoPro but he believes the level of interest can come from all aspects of the tech industry. The ultra high-speed Internet service is the catalyst that will bring capital and ideas together.

He referred to a quote from the tech industry that explains why demand in Mammoth and a Main Street revitalization could happen and happen quickly. “The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley. And both groups are highly mobile. They’ll go where life is good.”

These workers are referred to “transportables’” because their jobs already exist and they have the freedom to move. He estimates there will be 1,000 new tech workers in Mammoth within five years.

DeFelice stated that this will create “massive economic stimulus” for this food-coffee-events culture, that there will be demand for not only housing but restaurants, coffee houses, retail and all sorts of additional services. And HH believes the Downtown area can be redeveloped and evolve into a concentrated area that can serve all of these needs. Much of it already exist. But the ice rink facility placement is critical. HH also believes that densities can be significantly increased for any new development. This is a walking and biking environment. And all of this has a strong “Millennial strategy.” That makes the future of all of this even brighter.

Obviously Demetriades sees the opportunity. He has the land, existing facilities for the short run, the capital and access to capital and is a tech industry insider. And I’m guessing he would like to recoup some of the money he plunked down for the Sierra Nevada Inn at the peak of the 2000s real estate market.

Meanwhile the Town Council has to start wrapping their heads around all of this. There will be a huge flow of information and ideas over the coming months. The Council may (will) be asked to make some ballsy decisions about Shady Rest and the ice rink and a parking garage for the Village (those Mammoth Knolls neighbors will be the next group of NIMBYs). And don’t forget there is a few million dollars needed for the new Airport terminal. And maybe the ice rink/multi purpose facility needs to be the new events venue all rolled into one (that was the 1994 North Village plan). Decisions, decisions.

The Mammoth Tech Community Initiative apparently has a very detailed and in-depth study and implementation plan. I’m sure not everybody in Mammoth will be excited about it. There may be no stopping it. It has the potential to make profound changes here in Mammoth and the entire eastern Sierra. We should be seeing that soon.

What is interesting are the similarities to the early 1990’s. The pain of a slower economy and drought winters brought the community together back then to take bold steps and act in a spirit of cooperation. It led to extensive planning and eventual development and change. I had a front row seat back then. I remember hearing that the 38 property owners in the North Village couldn’t come together to agree on the Specific Plan. But they did. They were motivated. The same level of motivation exists today.

Rusty Gregory even admitted at the workshop that the “obstacle has been the Mountain.” They have been servicing tons of debt and muddling along. He likely hasn’t been able to sell the enterprise for his “dream price” so now he has to do something. He said the acquisition of the Big Bear resorts has been “very positive.” The HH studies show Mammoth has immediate demand for an additional 900 hotel rooms. But the values (selling prices) of the condo hotel units has to rise to make it all viable. And Gregory also sees a new future for Mammoth that wasn’t in the cards just a few years ago; a local tech boom.

Gregory also stated that they are planning for $750 million in new real estate investment. But everyone knows that is contingent on them selling ~$1B worth of properties. The development projections will need to show those types of profit margins. But that type of demand isn’t likely to happen based on tourism alone. But if an organic housing demand is created by a growing tech industry, many current second-home and transient rental condos could become permanent homes. That displacement could create significant demand for new tourist oriented housing. If the studies and projection are all correct the demand could be for a couple thousand units.

So this will become the discussion for many months to come. Some plans will be tossed out the window. The Main St. neighborhood plan for the Town’s General Plan is in place. Much of the “hard work” is completed. Now the discussion turns to implementation.

And many will start asking; What and where will be the best investment in the community if all of this is likely to happen? Stay tuned.