Ski Resorts and Real Estate

Bitterroot Resort Faces Long, Steep Climb

By Jonathan Weber , 4-13-09

	Tom Maclay on his ranch. Photo by Anne Medley. For more Bitterroot Resort photos click here.

For years now, ranching heir Tom Maclay has been busy planning, designing and trying to gain the land-use permits and public support he needs to build a new destination ski resort on his 3,000-acre property—and adjacent public lands—just south of Missoula. But now he’s facing an even bigger test: a tectonic shift in the real estate market that calls into question the once-fashionable concept of resort recreation financed by the sale of vacation homes and condominiums.

The global economic crisis has already led to the shutdown of Tamarack Resort in Idaho, touted just a few years ago as the first of a new generation of four-season recreation hot-spots built around high-end second homes. In Big Sky, the Yellowstone Club is in bankruptcy, neighboring Spanish Peaks has suspended construction, and Moonlight Basin—another ambitious new ski resort—is scrambling for new funding. Promontory Club, outside Park City, will be sold at auction in a few days, probably for a dime or two on the dollar.

For Maclay, the good news is that he didn’t get further along then he did, and thus doesn’t have to figure out how to finish a half-built project at a time when financing for such endeavors is all but non-existent. And because he bought the land from his parents at a steep discount, he doesn’t have to shoulder the carrying costs that drive many developers under when markets go south.

The bad news is, as Matt Frank reported in the Missoula Independent last week, Maclay does have more than $18 million in debt on the property, several local contractors haven’t gotten paid, and he now faces the prospect of selling off property in a weak market to keep the project afloat.

Maclay said in an interview with NewWest.Net that he’s looking to sell about 400 acres of the 3,000-acre ranch, and currently has about $7 million worth of land on the market.

Maclay denies any serious financial problems, and remains optimistic about a long-term plan that now calls for a gradual build-out of the various amenities. “The model we have - with Cat skiing, nordic skiing, mountain biking - will work well on any level,” he says. “We have one of the best sites in the world. It may take time - 20 years or 40 years or whatever - but we have done the homework and the due-diligence for it to work on any level. Everything we’ve done allows for phasing.”

Indeed, Bitterroot Resort has already scaled back dramatically its request for use of Forest Service lands, and is no longer seeking permission to build ski lifts on Lolo Peak. And whether or not the land sales that are now underway mean the ranch will eventually become another suburban sprawl - Maclay adamantly denies that, and says all land sales are consistent with the overall masterplan - the economic logic of selling lots to nurse things along is clear enough.

Yet even the go-slow approach has its challenges. Although Maclay said he had negotiated a reduced interest rate with his lender—the insurance company Metlife—the payments on $18 million in debt aren’t trivial. Further, it’s not clear if he’ll be able to sell much property in the current real estate climate. Maclay says he’s sold “20-odd” lots over the past few years, and property records show a few sales in just the last few months, but demand for expensive multi-acre tracts in the Bitterroot is not exactly booming.

James Tuer, the Vancouver, B.C.-based architect who has done much of the design work on the Bitterroot Resort, says the very paradigm of the real estate-driven ski resort is now in question.  “We’re going back to first principles in the ski industry,” says Tuer. “If the bottom line from the skiing operations doesn’t make sense, you’re in the wrong business.”

Ski resort developers, says Tuer, are now moving back to a focus on skier-days and lift ticket prices rather than real estate operations.

The Bitterroot Resort has already gone through several iterations, and several people familiar with the plans suggest Maclay should have pursued development of a residential village on the old Carlton town site near Highway 93 earlier, and independent of the ski resort. But Maclay remains very proud of the overall land-use plan for the family ranch, which he calls “an exemplary model of clustered community growth.” He stresses the economic benefits that the resort would have for the community, and says the project’s proximity to Missoula puts it in a different category from, say, the very remote Tamarack Resort.

But cash-flow appears to be an issue at the moment.  Maclay has been sued by one local company, Maverick Group, for non-payment of bills, and has had liens placed on his property by several other contractors, including WGM Group, the prominent Missoula-based planning and engineering firm that’s been working with Maclay for years. Jim Gill, Maclay’s right-hand man on the project, is no longer receiving his $11,000 a month salary, the Independent reported, and the Cat skiing operations have ceased.

Several project contractors told NewWest.Net that Maclay had a history of being slow to pay his bills, and expressed some frustration about the situation. But they were confident they would get their money eventually. Maclay acknowledged that the financial meltdown had created some issues but added: “I’m confident we’ll be able to work through this just fine.” He said he “regretted” paying anyone late, but said lots of contractors had been paid large sums already and that he always paid his bills in full.

There are still a lot of mixed feelings in greater Missoula about the environmental and social impacts of Bitterroot Resort, which is supposed to include a golf course (or maybe two), more than 2,000 housing units, and extensive skiing that could ultimately extend from the Bitterroot Valley floor to Lolo Peak. If climate change continues at the current pace, the site’s one big drawback—relatively low altitude—could become an even larger issue. Even in the best of circumstances, moreover, a project like Bitterroot Report requires relentless charismatic leadership over a long period of time to round up the talent, the money, the public support and the customers. Whether Maclay has the ingredients to make it all happen—and whether and when the economy will cooperate—very much remain to be seen

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