Springtime in the mountains is a time for celebration. We have endured the long winter and can look forward to a beautiful dry and warm mountain summer. As the saying goes, “People come for the winters, but stay for the summers.”
However, commercial real estate is still in a deep freeze which proves to be a very opportunistic time. There is a tremendous amount of wealth passing from one generation to the next as the opportunities to purchase property for less than what is owed to the banks are becoming more and more prevalent. Here are three reasons why this is happening in the resort markets of Colorado:
1) Typically, we are seeing commercial real estate lag the Denver market by approximately 12-18 months. We are now in the heart of the storm. Banks are no longer delaying and praying, and owners are running out of cash to meet their obligations. Case in point, the beautiful Bachelor Gulch, Beaver Creek Ritz Carlton has fallen into foreclosure:
VAIL DAILY – One of Beaver Creek’s highest-end hotels has gone into foreclosure. Miami-based Gencom, owner of the Ritz-Carlton Bachelor Gulch, owes $61 million, reports the Vail Daily, citing records in the Eagle County Treasurer’s Office. The building and land itself are worth $24.2 million, according to the county assessor. But a more comparable indicator of the value is that of another hotel at Beaver Creek, the Park Hyatt, which in 2007 sold for $69 million.
2) Property tax assessments have dropped by as much as 30%. State law requires that counties value property in even-numbered years. Those values are a snapshot of the local market as of June 30 in even-numbered years. While this will make it harder for sellers to justify a higher price, it will also help buyers negotiate short sales with the banks. While every property will require an independent appraisal, these lower county tax records could provide a bit more evidence to the banks to complete a short sale.
3) Vacation home markets remain the hardest hit sector in the U.S. real estate market. “Mortgage lending in the past three years has been pretty rough, with much higher underwriting standards,” says Paul Bishop, NAR’s vice president for research. “People drawn into the market at this point are buyers with substantial cash, or people not dealing with a mortgage. If your credit is strong and you put down a sizable down payment, lenders are more interested.” Lower residential real estate values typically translate into lower discretionary spending, and a sluggish commercial real estate counterpart.
Resort Realty Capital employs a unique strategy to source commercial real estate opportunities in resort markets. Monitoring foreclosures, public policy and the residential markets are just a few of them. Next month, we will be announcing a partnership with commercial real estate brokers in more than 8 different markets across the Rocky Mountain region which will provide us with access to opportunities before they hit the market.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
THIS IS NOT A SOLICITATION FOR INVESTMENT – THIS INQUIRY IS TO FIND OUT IF YOU ARE INTERESTED IN RECEIVING ADDITIONAL INFORMATION. NEITHER RESORT REALTY CAPITAL, LLC, IT’S AFFILIATES AND REPRESENTATIVES MAKE ANY REPRESENTATION REGARDING THE RISKS OF INVESTING IN COMMERCIAL REAL ESTATE. YOU SHOULD CONTACT YOUR OWN PROFESSIONALS TO MAKE THE DETERMINATION AND ASSESS THE RISK OF INVESTING. AS WITH ANY INVESTMENTS, THERE ARE INHERENT RISKS AND NO GUARANTIES OF RETURNS. PLEASE CONSULT WITH YOUR OWN PROFESSIONALS IN DETERMINING THE RISKS ASSOCIATED WITH INVESTING IN COMMERCIAL REAL ESTATE.