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Mountain Life

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One evening last March at Colorado’s Copper Mountain, Michael Coyle did something he never expected. Coyle, a vice president at the Vancouver, B.C.-based Intrawest ski resort and real estate development company, told his sales staff to call 75 people who were planning to visit Copper the next day, and ask them to stay home.

The visitors had given Intrawest $2,000 deposit checks, which the company subsequently refunded. Coyle turned away $150,000 because he already had $33 million in hand. The unlucky 75 had put deposits on the chance to buy condominiums at Intrawest’s planned Copper Springs Lodge, but they were too far down the list. Intrawest had 108 units to sell-and 370 people willing to buy, at an average price of $369 per square foot. Every unit of the proposed development sold in six hours-before a spade of earth was turned.

“We never expected to sell out,” Coyle says. “We would have been really happy if we had pre-sold 60 percent of the units.”Not only did the project sell out, it drew top dollar from the buyers, half of whom came from out of state. Resort real estate is rising so fast some observers are wondering if prices are too high. Adjacent properties at Copper had been selling for 45 percent less, in the $200- per-square-foot range.

“A lot of it is betting on the come,” says Chris Eby, owner-broker at Buyer’s Resource Real Estate in Summit County, Colo., who represented three Copper Springs buyers. “You reach a comfort level on that wager by virtue of who’s doing the development.”

Copper Springs is no anomaly. At mountain resorts from Mammoth, Calif., to Winter Park, Colo., to Snowshoe, W. Va., such feeding frenzies are becoming the norm. On April 9, the American Skiing Company took reservations for 85 units at its planned Sundial Lodge at The Canyons, Utah, a few miles from Park City. People were lined up 16 hours in advance; one early arrival was offered $1,000 for his spot (he turned it down). Those who scored will pay $450 to $480 a square foot for condos that don’t yet exist in a resort that’s essentially unknown-but which, by 2005, will have seen $500 million in investment from ASC and will cover 7,200 acres.

“This price is what they get in Deer Valley,” says Melissa Roberts, an incredulous ASC spokeswoman.

Driven by a hot stock market, Baby Boomer demand and low interest rates, resort real estate is seeing a boom unlike anything since-well, since the last boom in the Seventies. That rush ended with a spectacular flop in the recession of the early Eighties. Just as stock investors puzzle over whether the Nineties bull market on Wall Street is about to end, would-be buyers of resort property ask themselves if sky-high prices represent the top of a market that’s about to sink, or the beginning of a long, pleasant run.

“How high is too high? In the Eighties, these markets died,” says Ilyce Glink, host of the national radio show Real Estate USA. “They will probably die again after the year 2000.” But, she adds, “we are in a unique economic situation that we have never before been in. It is changing what happens in real estate.”

High interest rates and a sluggish economy hammered many mountain property owners in the early Eighties, while revised tax laws in 1986 closed vacation property tax loopholes and led to further depreciation. Some regions, particularly California and the Northeast, slumped in the late Eighties and early Nineties, and have only come back recently.

“We were glutted with properties coming onto the market in 1986,” recalls Sharon Kellermann, principal broker at Graves Realty near Vermont’s Sugarbush. “Plus, because of the tax change we lost a chunk of people who were buying.”

A cautionary tale for current buyers may be found at Sugarbush-as it can be at many resorts. In South Village, four-bedroom units sold for up to $200,000 in 1984. In the early Nineties, those same units cost about $105,000. Today, the price is up to about $170,000. But remember, inflation has whacd out about 40 percent of a dollar since 1980.

On Wall Street, some pundits argue that the rules of the market have changed: The advent of a globally linked economy has opened an era of low unemployment, low inflation, good earnings and endless prosperity. Conventional wisdom makes a similar argument about mountain real estate, citing these factors:

Baby Boomers are coming into their peak earning, inheritance and buying years. “We’re entering prime recreational purchase years,” says Scott Oldakowski, vice president for real estate sales and marketing at the American Skiing Company in Bethel, Maine. “Some of the projections I’ve seen expect a 10- to 12-year real estate boom, and we’re in the second or third year.” One huge reason: The average Baby Boomer will receive a $90,167 bequest from his or her parents, according to a Cornell University study, adding up to a $10 trillion windfall.

Demand is going up and should continue to grow. According to a 1995 survey by The International Timeshare Foundation in Washington, D.C., 60 percent of Americans believe they will buy vacation property within the coming decade, up from 25.5 percent in 1990.

The best resorts will retain their cachet. “Blue chip destinations such as Aspen, Hilton Head, Palm Beach and the Hamptons will always have interest in them, and they’ve got limited land availability,” says Glink. “I think all of these places can go out of favor, but I don’t think it can be that way for long.”No place has had higher appreciation than Aspen, a town that last winter saw a $24.8 million spec home hit the market. Nearby Winter Park, long the sleeping giant of Colorado resorts, has boomed, too. Hines Resort Development sold $46.5 million worth of new base-area condos there in one weekend last March. Local builder Bob Wolf couldn’t sell a spec home for $200,000 in 1990; last year he got $480,000 for one.Those at the forefront of mountain real estate development justify ever-higher prices by citing the quality of their product, the integrated vision of their resort development plans and-most of all-the scarcity of prime land. “The Canyons in Utah is unique because it’s a clean slate,” says ASC’s Oldakowski. “It’s one of the last opportunities in North America to create a world-class resort from scratch.”While that may be true, buyers should remember that even an island resort as rarefied as Nantucket-possessing the three key attributes of cachet, location and limited land-took it on the chin from 1989-91, when homes in the $350,000 to $850,000 range lost 40 percent of their value. Nantucket has since bounced back. But does pride goeth before the fall at the base of your favorite ski area? No one knows for sure, but the Three Horsemen of the Collapse are generally agreed to be an environmental disaster (such as a Superfund site listing); war; and economic downturn.So how do you know if you’re going to catch the wave or get smacked onto the beach? Bottom line: You don’t. “There’s no way to know,” says Richard J. Roll, president of the American Homeowners’ Association in Stamford, Conn. “I think it’s difficult to calibrate. What we advise is prudence, and prudence is somewhat based on each family’s means and priorities. If you’re buying for your own use, and it’s within your own means, by all means, buy. If you’re buying for speculation, beware.”What occurs in resort real estate is a cyclical phenomenon that ends in a speculative bubble,” Roll warns. “The speculative bubble is the result of demand that’s fueled by the greater fool theory.”In other words, don’t buy because you think some other fool will pay more than you did.SKI Mountain Property editor Hal Clifford can be reached at The Numbers*
The rising price per square foot of a new Intrawest condo at Keystone’s River Run:
1995: $307
1997: $390
+ 27 percent
Tracking the sale price of a South Village condo at the base of Sugarbush, Vt.
1984: $200,000
1991: $105,000
1998: $170,000
– 15 percent
*not including inflation984: $200,000
1991: $105,000
1998: $170,000
– 15 percent
*not including inflation