As Fortress Investment Group LLC struggled to keep control of its Whistler Blackcomb Ski Resort during the Winter Olympics, Rick Jensen managed to steal a small jewel from the resort operator’s crown.
The former three-term mayor of Cranbrook, B.C., gathered a group of friends and persuaded them to bid for Panorama Mountain Village, a fully developed ski hill with underdeveloped real estate potential just outside Invermere, B.C., a 3 and 1/2-hour drive from Calgary. Late last winter, Mr. Jensen’s group took ownership of the resort for a reported $27-million.
Their bold gamble will provide one of the first tests of whether a recovering economy will restore consumer demand for Canadian resort property, a market that was hammered by the recession.
The financial crisis saw many cash-strapped resort owners lose their properties to creditors or sell low to cut their losses. New owners are racing to figure out how to turn their bucolic retreats into profitable paradises.
But the appetite for pricey vacation properties hours away from urban centres is suffering as potential buyers ponder the effect that recent interest rate increases by the Bank of Canada will have on their family finances, especially as the national housing market shows signs of cooling.
After six months of sharp increases, the average residential resale price in Canada slipped to $342,662 in June, a fall of 1.2 per cent from a month earlier, the Canadian Real Estate Association said. The dip marked the first month-over-month decline this year.
That hasn’t stopped Mr. Jensen from proceeding with his plan to turn the resort – which the group bought with cash, but plans to mortgage to finance development – into one of the only ski-in, ski-out residential neighbourhoods in the region.
“We’ve made some changes that have been meant to elevate the guest experience, but what we need to focus on is development,” Mr. Jensen said. “We have a 30-lot subdivision that is in the process of being approved. We have a lot of raw land and a lot of pent-up demand.”
He hopes to offer lots for sale at around $150,000 each, with construction beginning next summer.
Like Mr. Jensen, other new resort owners are also counting on making money from real estate – the very thing that got the original owners into trouble in the first place. Most resorts were never designed to pay the bills with revenue earned from tourists. The real money – in theory, anyway – is in condo development.
Money from each condo sale can be used to finance more development, so building and selling a steady stream of new units is key to success. If people stop buying, owners often find themselves unable to service their debts.
The main reason Mr. Jensen and his group were able to buy Panorama is because a troubled U.S. real estate market devastated the balance sheet of Fortress, the parent company of Intrawest ULC , which operated the resort. Unable to make payments on $1.4-billion in debt (U.S.), Fortress had to unload assets in Canada and the U.S., but was able to refinance its debt and hold on to its prized Whistler Blackcomb resort.
