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From real estate company to ski lift company
Have you been eyeing a condo in the Sutton Place Hotel at Revelstoke Mountain Resort? Are you just waiting for Northland Properties to get tired of waiting and slash their prices?
Don't hold your breath. There's two approaches the resort can take, says Graham Rennie the president of Northland Asset Management, which operates the resort: either cut prices and give product away, or hang on and wait for things to improve.
"We tend to be favouring the latter where there is no fire sale. We are holding prices," said Rennie. "We see the value and we're basically in a holding pattern with not a lot of focus or expectation to be selling a lot of real estate. We certainly have it on the market but we understand the realities of the world out there. We hope to see it recover down the road."
As is widely known, RMR, like many other resorts, was hit hard by the global financial crisis in 2008. The easy money dried up and suddenly, people stopped buying recreational properties. People that put down deposits to buy condos in the Sutton Place Hotel were unable to close on the deals, leaving most of the units unsold.
That has forced many resorts – Revelstoke included – to re-think their financial model.
"It means they have to find a way to ensure that their business is viable based on other parts of the business," said David Lynn, the president of the Canada West Ski Areas Association. "In other words, selling lift tickets, food and beverage, on hill accommodations and so on, as opposed to the real estate side of the business."
He cited Whistler as an example. In Whistler, according to the Globe and Mail, condos are selling for nearly half what they used to and prices have fallen by nearly a quarter from their 2007 peak.
Whistler, under Intrawest, was often held up as the model resort when it comes to selling real estate. Over several decades Intrawest built up the largest ski resort in North America, with real estate prices to match. They took that model – of using a ski resort amenity to sell real estate – and applied it to several other ski areas.
In the end, the model collapsed with the markets and in 2010 Whistler-Blackcomb was turned into a publicly traded company, trading on the TSX.
"Whistler is primarily what we call a lift company," said David Lynn, the president of the Canada West Ski Areas Association "They have to make money from selling lift tickets, season passes, food and beverages, etcetera, as opposed to making money from selling real estate."
That's the position RMR finds itself in now. That is why improvements at the resort have been so incremental ever since the first burst of activity in its first two years.
"Any focus on development now is improving current infrastructure," said Rennie. "Future infrastructure improvements are going to come from a marketplace where homes are selling and real estate is developing, because that's how you fund the infrastructure."
The real estate model of development is comatose for the moment, though some people still believe in it.
Oberto Oberti, the developer behind Jumbo and a proposed resort near Valemount, is still gung ho behind his plans, despite the apparent lack of investors.
Whitewater, near Nelson, unveiled its latest master plan in 2010 and it calls for the development of condos and single family homes around the base of the resort. A few years ago it added a fixed-grip triple chair that was purchased used from Vail Resort to increase its vertical drop and open new terrain, but no real estate has been built yet.
Red Mountain, near Rossland, is also expanding with the addition of a slow quad chair that will access 1,000 acres of new terrain.
Jon Peterson, a resort development economist, said he expects the secondary home market to rebound, however prices have fallen by so much (especially in the United States), it will take a while before they return to a point that resorts can start new development. Much of the really cheap resort property has been snapped up, so prices should start rising soon, he said.
Still, he added, RMR’s decision to maintain the high prices on properties is a risky one. “It’s hard to be very optimistic that they can hold that price and see much chance of buyers flooding in to buy those units anywhere close to that.”
Rennie said he expects things to pick up in the future, but it is depending on a turnaround in the financial industry.
"I think the financial industry still walking in a no-man's land on real estate," he said. Is it headed for a soft landing, is it going to hold, is there growth on the horizon, where are interest rates headed? There's a lot of uncertainty around it.
"I think it's been progressive but recreational property is not a prime focus for lenders, especially when you look at offshore clientele, which is a big part of what Revelstoke's catering to."
In the meantime, the resort is focusing on filling existing capacity, and then it will look at growth. He said there are still potential improvements in the current ski terrain, and the resort is looking at expanding summer operations, including hiking and biking.
"We're in it certainly for the long haul but nothing will be short-term decisions that aren't sustainable on a longer-term basis," he said.