Photos by Anne Medley
While high-end developments around the West collapse under the weight of huge debt loads the slumping housing market can’t support, the planned Bitterroot Resort south of Missoula, having yet to tap investors and with little built infrastructure, appears to be in position to ride out the slow down.
As rancher-turned-resort CEO Tom Maclay said Tuesday, “It’s very good to be standing outside of that.”
Money spent so far on planning, public relations, carving runs on private land, retaining top-flight resort manager Jim Gill has all been “internal,” Maclay says, made possible by “a few land sales” and “good bankers.”
Of course, the resort is still mired in a three-year back-and-forth permitting process with the Forest Service. Maclay hopes to gain access to public lands beneath Lolo Peak. But even if the Forest Service rejects the latest proposal, tweaked to account for lynx and elk, the resort will almost certainly be built, Maclay said.
The proposal seeks 3,000 acres of Forest Service land (down from the 12,000 originally requested in 2005 — see map at right) for gladed skiing, Nordic skiing, guided touring and mountain biking, none of which would require ski lifts to access. The ski lifts, reaching about 6,000 feet, are planned to be only on Maclay’s land.
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A Bitterroot Resort without public lands would have about 300 acres of trails and 1,000 acres of skiable terrain. It would still be viable, Maclay asserted, because “It’s a great place to live.” By which he means the roughly 2,700 chunks of his 3,000-acre ranch he plans to sell as real estate. Those lots are extremely valuable, even with a scaled-down ski resort above.
But will real estate generate enough money to cover, using Gill’s estimates, more than $100 million in skiing infrastructure and a resort village that could cost just as much? Maclay and Gill are convinced it will. Maclay cites the “embedded demand” in the resort market and said, “We’re surrounded by 150,000 people who want to live here.”
Using real estate to finance ski and golf resorts is a common model, but it doesn’t always work, according to William Marks, an analyst covering real estate and leisure services with JMP Securities. “If a ski resort is financed from the sale of lots, the developer better look into how profitable the ski area can be with people not using their homes all the time.” It can lead “to a ski resort that could consistently disappoint down the road.”
Of the 12 lots already sold, six of which have been built upon, about half of the buyers are Montanans and half from out of state, some of whom are real estate investors, Maclay said. He expects that trend to continue. If it does, the problem of absentee homeowners may apply.
Despite the credit crunch and the struggles among projects of similar scale in the West, Maclay is in talks with potential investors. He said one effect of the downturn is that it “brings only quality institutions forward.”
“We’re on many people’s radar,” he said.
But, incidentally, not Credit Suisse’s — that’s the international investment bank that loaned $250 million-plus to Tamarack Resort in Idaho and Promontory Club in Utah, both of which defaulted and filed for bankruptcy protection. “I’m sure they’d return my call if I called,” Maclay said.
Last fall, Arkansas-based ANB Financial’s new branch in Jackson, Wyoming, courted Maclay, but he didn’t bite. Regarding the negotiations he would only say, “It was not the right fit at the right time.” (In May, the U.S. Comptroller of the Currency shut down ANB Financial, calling it undercapitalized and saying it used unsafe and unsound practices.)
“(Maclay’s) being very cautious, going slow, trying to make good decisions,” Gill said. Asked if financing will be sought upon approval of a Forest Service special-use permit, Maclay said, “It’s too early to say, but everthing’s on the table.”
At this point, the pace of the project, especially the construction of the village and golf courses, is “simply market driven,” Maclay said.
With the permitting process still in flux and the market floundering, Maclay appears content to — and thankful that he can — wait it out. “It can’t not work out,” he said.
As Gill said, “You try to set yourself up for when things start picking back up again.”