Mammoth Real Estate Sales Report – July 17, 2022

 

This year’s 4th of July parade was one of the best ever and was very well attended. Mammoth’s modernized Chamber of Commerce is proving its value in events like this. The CoC has come along way since the red caboose in the Safeway parking lot. The volume of visitors cleared out following the 4th weekend and Mammoth has experienced beautiful weather and light crowds ever since. Almost perfect. One national tourism expert recently commented that “People are taking the summer off.” It certainly appears this way now.

 

High fuel prices and high inflation are no doubt impacting travel to the region. But after the last two summers of mayhem it is welcome. They’ll be back. Local visitor-related businesses who are seriously short employees may find the reduced traffic to their liking. The national news about the problems with air travel and air service should have Mammoth positioned for quality drive-to tourism. It also furthers the debate about the massive local tax dollars allocated to subsidize air service. Maybe the Town should have their own airline?

 

The Town Council rejected the Limelight Hotel appeals in a recent meeting. The geothermal uses appeal has been tabled for now subject to future proposals. One of the interesting comments from the public was the unexciting design of the whole project — that it looks like a building that could be in any major city. It is similar to the YotelPad design. It sure seems that construction costs are so high that the architects and developers are looking for the cheapest way out. Compare the elevations above; the top was the proposed Ritz-Carlton on the same site/location from 2007 with “mountain” architecture and retail and pedestrian access on the ground level (the design is “evocative of the Ahwahnee Hotel”). It is an expensive, timeless look. Below it is the Limelight elevation. It looks like boxes stacked on top of a massive concrete garage. But the Ritz never got built. We’ll see about the Limelight.

 

Condo hotel development is an interesting game. The Intrawest playbook that developed Juniper Springs and the Village including the Westin Monache was founded on the basis of not only developing and selling all of the units but maintaining a “long term cash flow position” in the project. The “front desk” and back offices are separate ownerships in the building and ensure control over the bulk of the rental units. When Alterra purchased the public company Intrawest a few years back, the SEC filing placed a value of approx. $35M on the front desk at the Westin Monache. It is a cash flow machine. 

 

The Limelight structure is a bit different. They are proposing to develop the property and only sell 23 of the upper floor luxury units; 2 and 3 bedroom suites including special penthouses. The balance is 151 smaller units that they would retain ownership of. As we have learned from the Westin, the smaller units have better occupancy rates than the larger units. Pre-Covid, the Studio units at the Westin were hitting 80% occupancy, which is almost unheard of in a mountain resort community.

 

​​​​​​​Here’s some back-of-the envelope math; the current rumored construction estimate for the Limelight is $350 million (which is roughly the entire enterprise value of Mammoth Mountain Ski Area). The sale of the luxury condos could bring a return of $50-75M in revenue. If the Westin Studios gross about $70,000 per year in rental, the 151 hotel rooms could generate $10-12M per year in room rates. If all of the 23 luxury suites were on nightly rental there could be another $2-3M in management fees generated annually. High construction costs make the numbers tight. But the Crown family may be intrigued with the opportunity that is Mammoth and certainly have the capacity to make things happen. Mammoth has never had a bigger hitter in the batter’s box.  

 

Meanwhile the earth movers continue to excavate a giant hole at the Limelight site. If nothing else it will make for great in-town snow storage.

 

Phase 2 of The Parcel has been approved. This phase will include 148 units of deed restricted affordable housing, aka workforce housing. The location of this phase is right behind the Main St. businesses of Wave Rave, old Slocums building, Mammoth Liquor, etc.. Can’t happen soon enough.

 

Mono County, with an average of four new Covid cases per week has now entered the CDC’s “High” level for community transmission. With this comes the return of Covid public health protocols. Maybe slack tourism will curb it. Or maybe new restrictions will curb tourism. Time will tell.

A reader asked about the comment in my last Q&A about “we are back to ‘blocking and tackling’ in the real estate business”. This was a popular saying from one of my former associates who was classically trained in sales at IBM and Xerox and started selling real estate in Mammoth in 1972. What does this really mean the reader asked? It doesn’t mean we are about to start blocking and tackling buyers and sellers (although I’ve actually seen it happen a few times). But it does mean the market is normalizing. The past 24 months, and especially the past 18 months have not been normal. One prominent supervising broker said to me last week “my newer agents know nothing but order taking.” It is so true. It is no way to “learn” the business. It is great way to become spoiled.

The football analogy of blocking and tackling refers to the real work that is takes to be successful in the real estate business. It is about product knowledge, marketing, negotiating, selling, etc., and outright paying attention. The past two years have distorted many things, including agent’s perspective on what it takes to be successful (this is one of the reasons managing sales agents can be lobotomizing).

What has made matters worse this time around is the role that tech has played in the business and the market. This includes not only social media but companies like Zillow and Homelight. Premier agents at Zillow and Homelight pay mightily for the exposure and leads these companies provide. It can cost $10s of thousands per month or up to 35% of the gross commission on each and every transaction.

As the current transaction flow slows down this is going to effect the agent’s bottom line in a profound way. Many of these premier agents are going to question their continued participation. Most are going to have to get back to blocking and tackling to survive. And savvy buyers and sellers are catching on to the “value proposition” of this tech strategy.

With the market change these tech unicorn companies are now going to be scrambling for new revenue sources and structures. And maybe some profitability to justify their existence. Layoffs are already coming fast and furious. Their stock charts look like good ski runs.

In an Inman article this last week, real estate tech guru Mike DelPrete (scholar-in-residence at University of Colorado Boulder) said agents are going to be in a “dogfight” for business with the market cooling. Not only with themselves but also against tech. Of course he is “selling his book”, but how long can these companies keep losing money? It is like the year 2000 for real estate tech companies. They clearly don’t know anything about blocking and tackling.

DePrete states that agents are in a dogfight with tech because “There’s billions and billions of dollars from these real estate tech companies that have been invested into new models, new services, new ways to help these buyers and sellers, and new advertising—hundreds of millions of dollars on TV ads, radio ads, all of that trying to attract a dwindling number of potential customers first and be able to build the best relationship with them.”

He goes on that some of these tech companies will become more efficient and it will “enable them to do less with more and continue to expand their product or service in a new markets in a faster way.” He goes on, “For other companies, it’s going to limit their ability to grow…If you have less resources, less people, less ability to grow your business, it’s going to slow you down, which can come and get you into this dangerous zone where the market is slowing, you need to cut expenses, but by doing so, you’re slowing your ability to grow and compete in the market. It’s a bit of a catch-22. That could be really dangerous for companies, especially in an environment like this.”

After reading this lengthy interview I can see why he has taken a university position. I can say he talks out of both sides of his mouth better than any real estate agent I have ever met, and I’ve known plenty. I doubt he ever played football or any other team sports.

Meanwhile, those of us who have survived the past decades of the real estate business in Mammoth are already back to basics (and enjoying a little free time). Reality is we never really changed. We’ve been blocking and tackling all along. And this is a good thing for future buyers and sellers of Mammoth real estate.

And, where did all those out-of-town Compass agents go??