Weathering the Downhill Slope of Recreational Real Estate

Published: December 10, 2009,
The International Herald Tribune, The Global Edition of The New York Times

At any ski resort, a fast downhill ride is a good thing — unless that describes its sales.

Recreational real estate has been on a downward trajectory in most parts of the world since the economic downturn last year. For many developers, sales have dried up and financing problems have forced them to delay or to abandon residential projects.

Few ski resort operators have escaped, said Paul Mathews, president of Ecosign Mountain Resort Planners in Whistler, a community that is a co-host of the 2010 Winter Olympics. He has been involved in the planning and design of about 30 international ski resort projects in the past year, from North America to Europe and Asia.

“Everywhere I’ve been working, real estate sales just dropped dead 15 to as long as 20 months ago,” Mr. Mathews said. Some developers have responded by delaying construction, he said, while others with finished properties are finding buyers only by offering steep discounts.

But some resorts have weathered the downturn better than others. Mr. Mathews believes those with strong fundamentals — good locations, great skiing, unusual amenities and solid financing — are the ones that will continue to thrive.

Revelstoke Mountain Resort, British Columbia

It’s a long way from Whistler, site of most of the Olympic outdoor events, but Revelstoke Mountain Resort is basking in the international spotlight on the Games.

“Without a doubt, we’re benefiting,” said Rod Kessler, chief operating officer of the resort, about 685 kilometers, or 425 miles, northeast of Whistler, in British Columbia’s interior region.

It’s also cashing in on the buzz that the resort has generated for the scope and quality of its skiing, from challenging back-country runs to helicopter and cat skiing. The resort, which opened in December 2007 and covers 200,000 hectares, or about 500,000 acres, was in the early stages of a 15-year, $1 billion development plan when the downturn hit. The first two of three planned condominium buildings were being built and in pre-sales, and two neighborhoods of single-family building lots were on the market.

But Northlands Properties, a Vancouver company that assumed a majority interest in the resort in January, decided to tough it out, said Mike Vopni, head of residential sales for the resort through Sotheby’s International Realty Canada.

The strategy has paid off, Mr. Vopni said — 100 of the 115 condos in the first two buildings have sold, as have 32 of the 49 single-family lots. Prices for condos range from 339,000 to 2 million Canadian dollars, or $321,150 to $1.89 million, and lots are priced from about 700,000 to 2.9 million Canadian dollars. About half of the buyers are from Canada and the rest are from the United States and abroad.

Mr. Kessler said several buyers told Revelstoke’s agents that they missed out on buying into the early stages of other top resorts and now regret it.

That’s just what was running through the minds of Bruce and Kathleen Benson of Prescott, Arizona, when they discovered Revelstoke while trolling the Internet this spring.

“We ski all over the world, and we had been looking for a long time for somewhere to invest,” Mrs. Benson said. They had considered Whistler and a few Colorado resorts, but they found that prices had risen sharply in both places.

“Revelstoke is still in its natural state — it hasn’t been found yet,” she said. “So it was something that really enticed us.”

They bought a two-bedroom, two-bath condo for 574,000 Canadian dollars after they hiked the mountain in the summer, but before they had a chance to take a single snow-covered run down it. They are looking forward to doing that this month.

“We missed out on the Whistler experience because we hemmed and hawed about it, and by the time we thought maybe we should do that, prices had gone through the roof,” said Mrs. Benson. “So we decided, let’s just do it.”

Sun Mountain Yabuli, China

Graham Kwan doesn’t mince words when asked about the effect the worldwide economic downturn has had on China and Sun Mountain Yabuli, one of two ski resorts owned by his company, Melco China Resorts.

“The impact has been significant,” he said of the resort, which covers 220 hectares near Harbin in northeast China and in which his company already has invested $140 million. “We put everything on hold and waited for the right timing to move forward again.”

That came this summer, when he convinced the builder of the initial group of 55 private townhouses — which Mr. Kwan describes as the first ski-in, ski-out homes in China — to finance the rest of the construction phase.

The effort probably would not have been successful without Sun Mountain’s critical strengths. It is one of only a handful of ski resorts in China, where skiing has taken off in popularity in recent years.

Two high-end hotels opened last ski season at the base of the mountain, and a boutique hotel, which belongs to the Small Luxury Hotels of the World group, is about 1,000 meters above them at the top; all three hotels are owned and operated by the resort. A condo hotel is still on the drawing board.

Once the show homes are complete later this season, sales will start on the three-story townhouses, which are about 235 square meters, or 3,000 square feet, and will be sold completely furnished, “down to the knives and forks and chopsticks and glassware.” Prices haven’t been finalized, Mr. Kwan said, but will be around 5 million renminbi, or $730,000.

Although he said expats who are residents of China or Hong Kong are eligible to buy property at the resort, Chinese buyers with disposable income are the central focus of Sun Mountain’s marketing efforts. “They are buying more and more lifestyle and recreational property,” he said. “We say over here that it’s like a big piece of bamboo — they have been held back for such a long period of time, and now the wealth and the buying in this country is just springing forward.”

Rocksresort, Switzerland

For Reto Gurtner, the slump in the real estate market was something that happened far away from the crisp, clean air of Rocksresort, his year-old ski resort in Laax, Switzerland.

Construction on the first phase of seven residential buildings continued because all the financing already was in place. So in March, Rocksresort started selling apartments to private owners; just one or two in the initial block of 30 units is still available. After a bit of a slow start, Mr. Gurtner said, “we passed our expectations in terms of sales” at prices ranging from 550,000 Swiss francs, or $545,000, for a two-bedroom unit to 1.3 million francs for a four-bedroom furnished apartment.

So how is this 20-hectare resort, about 150 kilometers southeast of Zurich, bucking the worldwide trend? Aside from the quality of its slopes, amenities and ultra-modern suites, it helps that it is in Switzerland, where tight lending controls and low interest rates kept the real-estate market stable over the past few years. “We didn’t have the real-estate bubble that affected the U.K. or Spain or France,” Mr. Gurtner said.

Another boost was Rockresort’s exemption from Switzerland’s tough rules on foreign real-estate ownership, which it secured by mandating that all apartments be part of a rental pool. (Owners are guaranteed three weeks of private use during the high season and unlimited use in the off-season). As a result, the government could consider the units to be hotel rooms rather than private-use apartments, qualifying them for the exemption.

The ruling has opened up the market to foreign buyers, Mr. Gurtner said, with the added benefit of making the apartments more attractive to investors and solving the problem of “cold beds” — privately owned units that are often left vacant, creating a shortage of rental accommodation and depriving resorts of revenue to support the ski operation, restaurants and shops in the village.

Over the next few years, Rocksresort plans to build 11 residential blocks, releasing apartments for sale to private owners a single building at a time. The rest will continue to operate as rental-only units under the Design Hotels banner until Rocksresort puts them on the market.

Mr. Gurtner is confident he won’t have to employ the tactics some other resort operators have had to use to sell real estate, such as slashing prices. “We even increased the prices because of the sales of the first ones,” he said.