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Newsletters
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Title: |
Hotel Developments |
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Author: |
Rick Fusting |
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Date: |
06/06/2008 |
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Hotel Developments
There is a major reshuffling taking place in the hotel and development projects in the Mountain Village Core.
The Peaks The hotel is under contract with $3M of firm earnest money. It is set to close within the next 10 days. What many do not know is that the new owner has about 10 hotels across the country, and all are either a Ritz or St. Regis. It has not yet been declared who will manage the property, but it would make sense to assume that they are in talks with at least one of these name brands. The hotel will close in May 2009 to start the full remodel.
Silverline The Silverline is under contract, and the buyer is the Hunt Family. The Hunt family from Texas is one of the wealthiest families in the country. Reliable sources place the purchase price over $30M for the land and entitlements, though I have no firm confirmation of that information. Also unconfirmed is that the Ritz is close to inking a deal with them. It is obvious that the Ritz wants to get into the Telluride market. Again it is under contract and not sold. I was surprised at the rumored contract price, as it was much higher than I anticipated. If it closes, the price of condominiums in the Village Core should certainly rise as the land will sell for a much higher amount than what the sellers paid for it.
Cortina Cortina is a condominium project located on San Joaquin Road in Mountain Village. It is rumored that the seller has cancelled the individually contracted units and has the whole complex under contract with a small boutique hotel. The project is just in its framing stage.
The above three transaction will total over $100 million in sales. These buyers and projects show faith in the Telluride market.
Mondrain This project is currently going through Design and Review Board.
Telluride Market Update
The winter selling season of January thru April was one of the worst periods in terms of transactions since the months after the September 11th attacks. The Total Sales Dollar Volume from January to May is 39% below last year’s figures. Typically, our market is a seller’s market; however, the year to date weakness is making it more of a buyer’s market. For most, this is negative news unless one plans on buying.
The positive aspects of our market are that prices are not falling and inventories are not increasing rapidly. Depending on what segment of the market one is looking at, some segments have fewer inventories than last fall. Prices are coming down on anything that was overpriced, and that too is healthy for a real estate market. There are some properties where sellers need to sell, and they are dropping their prices below the market to get a deal done. More often than not, these sellers are getting hurt in real estate markets elsewhere in the country.
There are buyers that wait for a chance to get into our market on their terms and at lower prices. Unfortunately, it takes troubling economic times or major world events for these buying opportunities to arise in Telluride. These opportunities are here, but there are only a handful of these overly motivated sellers. These deals will be the investments that outperform the typical appreciation rate in the years to come.
It is not as if our overall market prices are or will be a certain percentage less than they were a year ago. There are just too few transactions and too many owners with above average wealth for sellers to start slashing their prices because of this pause in the market. These factors limit the number of distress sale opportunities for buyers. What happens in situations like this is a lack of buying, and that is indeed what is happening.
Healthy real estate markets will turn around first. Real estate markets with larger inventories will take time to work through those inventories and get back to positive price appreciation. Because of our limited supply, our market will pick up before the rest of the nation’s real estate problems start to heal. By the time the general real estate market begins to turn around, a lot of the opportunistic deals in Telluride will be gone.
Over the last few months, I have been very hesitant to promote possible deals or urgency, as I felt the weakness would continue. Now with the July Fourth weekend here, I am actually quite surprised by the amount of showings on properties and new clients with interest. Properties will still sell in a slow market and most likely the properties that will later prove to be the best financial buys will be the ones bought in the near future. Even if you feel that it is still too early to buy and that this pause will continue, I would recommend preparing a shopping list of preferred properties. When the market starts turning, you want to be prepared and able to act.
Have a great summer. I look forward to seeing you in Telluride.
Rick Fusting |
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