Alterra Mountain Company has announced that it has entered into an agreement to purchase Arapahoe…
2021 is shaping up to continue being a challenging year in the ski industry. The ski industry like other industries is going through huge transformations due to the virus. This has caused all the major resorts to limit capacity either through reservations, pricing, or limiting sales. What does this mean for ski real estate? Where should you invest now based on the recent pandemic? Long term what does this mean for the ski industry? How did I do with my 2020 predictions
Before getting into the top 2 Colorado ski towns it is important to refresh a little on what is happening in the industry. The consolidation in the industry will drive real estate into the future.
Major Ski Industry Consolidation
To refresh on what is happening in the industry. If you missed the news, there have been several purchases/mergers involving many Colorado ski resorts. Below, I’ve highlighted the big four in Colorado. Each of these will have a substantial impact on real estate in their respective markets. If the purchase of Eldora by Powdr corporation is indicative of the future, look for KSI (Aspen group, Alterra) to continue to put substantial money into Winterpark and Steamboat over the next several years.
- Vail Resorts buys Crested Butte, this purchase closed late 2018
- Aspen buys WinterPark and Steamboat (and some other resorts like Mammoth)
- Copper (Powdr corp) buys Eldora
- Purgatory is sold to James Coleman (local Durango resident)
- Telluride joins Epic Pass
- Arapaho basin dumps vail for a date with Alterra (7 days)
The risk from Coronavirus to the ski model.
As you can see above, the ski model is that the two top players, Vail and Alterra are getting bigger bringing in more resorts not just in Colorado, but throughout the country and world. For example, Vail owns resorts in Australia and Canada that are on the Epic Pass and the Ikon pass is valid in Japan, Australia, Chile, etc… The ski model today is predicated on one pass for access to all the various locations. Someone in Australia would buy a pass for their home mountain and then take a trip to Aspen or Steamboat. Ironically some of the first cases of Coronavirus in Aspen and Steamboat came from Australians.
The virus changes the viability of the ski model in the short term. For example, Australia and New Zealand have closed their borders to non-residents. How would one use the Epic or Ikon Pass? More importantly the mountain communities both companies operate in do not have nearly the infrastructure to deal with a pandemic. For example, there are fifty intensive care beds in Vail. What happens when the town swells from 6k full time residents to 60k during the holidays with travelers from all over the United States and various international destinations?
The million-dollar question is what happens in the long term. Eventually there will be a vaccine for the Coronavirus that is widely distributed, but unfortunately this will not solve all the issues. Many questions remain including will this new virus change similar to the flu every year? Have we entered a new era of pandemics that will cycle ever year? Every 10 years? The answers to these questions will determine the fate of the “bigger is better” ski industry.
How did I do with my 2020 predictions?
“Although I am focusing on the top two resorts, pretty much all ski real estate near a major resort is going to be a good long-term investment as inventory is severely constrained and the areas will remain desirable for their recreational amenities.
One of the primary reasons I chose the top two markets is because of the trends I see unfolding with the Coronavirus. Both Aspen and Steamboat have become highly desired locations to ride out the pandemic attracting homeowners from all over the country to their second homes. I’ve heard from hundreds of homeowners how “thankful” or “lucky” they are to have a place in Aspen or Steamboat as opposed to NY, Miami, LA, etc… This desirability in the pandemic will translate into healthy long-term real estate markets”
What are the top 2 Colorado ski town investments for 2021?
Although I am focusing on the top two resorts, pretty much all ski real estate near a major resort is going to be a good long-term investment as inventory is severely constrained and the areas will remain desirable for their recreational amenities.
One of the primary reasons I chose the top two markets is because of the trends I see unfolding with the Coronavirus. The Coronavirus has caused a substantial reduction in inventory throughout the Colorado resort communities. The demand has been “Epic” (no pun intended) for basically anything in the resort communities. In many markets the absorption of real estate including lots has been historic, blowing away any prior records. Even though all Colorado ski resort real estate should perform well in 2021, two resorts should outperform
- Steamboat Springs: Steamboat was on my list last year and will continue into 2021, but for a different reason. Steamboat is still substantially undervalued compared to places like Vail and therefore much more attractive to many buyers. 2020 demand gobbled up basically any remaining building lots in town or close to the market. This lack of available land to build will propel prices higher as the building costs are north of $500/ft which means a 3k foot home will cost 1.5m to build plus the land costs. This will put a floor under the market and propel existing properties higher. Furthermore, Steamboat has a thriving full-time population with great schools and all the amenities of much larger markets at a lower price point
- Winter Park: Winter Park is a unique market and a much lower price point than any of the other major resort markets in Colorado with easy access to Denver without going through the tunnel and subsequent traffic jams. Winter Park will do well as buyers are priced out of basically every other resort. Since Winter Park is starting at a considerably lower price point than many of the other resorts, there is also more upside on a percentage basis.
The coronavirus pandemic has caused a seismic shift in ski real estate. Second homes in resort markets have gone from a nice to have to a requirement for many high net worth individuals to a must have for the safety and security of their families. Property owners throughout the country have flocked to their second homes throughout the Colorado resort communities to ride out the pandemic in comfort with open space, world class medical, and considerably less risk as opposed to a large city. Although the pandemic will wane the second half of 2021 as the vaccine is rolled out, there will still be a desire to have a property in places like Steamboat and Winter Park to get away from the city and enjoy the ski town amenities in both the summer and the Winter.
How can a Colorado hard money loan help with your Colorado ski town investment?
Every year I write the list of best ski town investments from personal experience. I spend considerable “windshield” time looking at transactions in both the front range and various ski towns throughout the state of Colorado. Each mountain town is unique with its own unique submarkets. Understanding these submarkets is the key to real estate success.
This intimate knowledge of the various ski towns in Colorado allows us to understand the uniqueness of each submarket to structure a transaction that fits your needs. Furthermore, both of the markets above are “hot” markets with limited inventory.
With limited inventory only the best contracts are accepted. Time is one of the most important factors in getting a transaction closed. We can close transactions in 5-10 days. We can also lend on properties that don’t qualify for traditional financing like nightly rentals/ condos that can’t qualify for government loans and have made loans on many commercial properties that don’t fit bank guidelines. For example, we loaned on a partially occupied commercial property in Telluride that had an outstanding location but couldn’t cash flow for traditional bank financing. As you are looking at the mountain communities and have questions feel free to contact me.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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