Resort properties on the rebound with sales and new construction

With multiple golf courses, recreational trails and access to the scenic mountains, rivers and forests on the “dry side” of the Cascades, Central Oregon has staked a position as the state’s, and the Northwest’s, premier tourism and vacation home destination.

It’s generally acknowledged that the region has seven of Oregon’s nine major destination resorts, with the other two--Salishan and Bandon Dunes--on the Pacific coast.

            And as the economy, including real estate, continues to climb out of a deep hole the region’s surviving new resorts are showing the potential that was in the dreams of their original founders-- albeit some are now under new or restructured ownership.

            Among the regional resorts, several new ones that emerged in the beginning decade of  2000 enjoyed a rapid rise, in sales and real estate prices, as new golf courses were designed by such notables as Nicklaus, Fazio, McClay-Kidd and Peterson-Hardy. But when the air started leaking out of the balloon, they sputtered back to reality.

            Brasada Ranch in the Powell Butte area of Crook County, Pronghorn along Powell Butte Highway between Bend and Redmond and Tetherow in Deschutes county, abutting Bend’s southwest city limits, have all ended up wholly or in part under new ownership forced by financial distress.

            On the other hand, Black Butte Ranch, Sunriver and Eagle Crest--the region’s three “original” destination resorts--weathered the downturn and are regaining traction, along with the new Caldera Springs, under ownership also affiliated with Sunriver.

Not included in the resort list are Crosswater, a private gated golf community adjacent to Sunriver, and the Running Y Ranch 140  miles south near Klamath Falls.  However both have present or past connections to ownership entities still active in Central Oregon.

Boom properties fell the hardest - (Refer to table below)

In Pronghorn and Brasada Ranch, the largest new resorts,  many building lots have been sold at half or less of their 2005-2008 prices when the projects caught an early, unsustainable wave of buying characteristic across the region and in large part driven by then skyrocketing real estate returns in neighborhing California.

For example, in Pronghorn individual lots sold from a low of $350,000 up to a premium lot on the Tom Fazio deisgned course for $1,100,000 in late 2008. In 2011 a lot on the 5^th Fairway of the Jack Nicklaus course sold for only $6,000, although a golf membership priced at $115,000 was required at closing.

At Brasada Ranch, developed by door and window manufacturer Jeld-Wen, the top lot sale was a 0.65 acre lot at $523,000 in April of 2008. In February of 2012 a bank owned 0.57 acre site sold for $12,500.

Pronghorn is now controlled by The Resort Group, an Hawaii based group, which reportedly acquired deeply-discounted existing debt from lenders to the previously troubled project, now  rebranded as an Auberge Resort. In its boom days Pronghorn developers boasted it was the first property to have golf courses designed by both Jack Nicklaus and Tom Fazio.

The permitting by Deschutes County for both Pronghorn and Tetherow required the developers to build a percentage of nightly lodging relative to home sites. Both received several extension reprieves by county officials who cited the continued adverse economy.

But in 2013, new ownership of both projects announced plans to move ahead with the lodging requirement.

Tetherow is well underway on construction of an initial 50 hotel suites adjacent to the original golf clubhouse and restaurant.

Pronghorn developers said  in November construction will get begin in 2014 on a 105-room hotel, to be branded and managed by Auberge, along with expansion of  an existing spa facility.

An architectural illustration of Pronghorn's planned 105 room hotel

Brasada Ranch experienced challenges from the flagging economy as well. Before starting Brasada, Jeld-Wen, a successful window and door manufacturer based in Klamath County, had entered the resort business in the 1980s with Eagle Crest near Redmond. Much of the original resort was marketed by Jeld-Wen affiliate Trendwest as time share interests.

The company extended its resort development into Washington state with the 6,000 plus acre Suncadia Resort, originally MountainStar, only 90 miles east on Interstate 90 from Seattle. And it also built the 3,600 acre Running Y Ranch golf resort near Klamath Falls.

Faced with unfavorable conditions in the building industry, Jeld-Wen in 2012 sold Eagle Crest, Brasasa Ranch and the Running Y to Northview Financial, headed by former hospitality executives and backed by Oaktree Capital. Jeld-Wen also relinquished ownership in Suncadia and was later acquired by a Canadian building products company.

Northview has since launched an aggressive marketing program for Brasada and announced plans to upgrade conference and other facilities at Eagle Crest. Several months ago Northview listed the Running Y for sale with a Seattle brokerage and cited the substantial investment it had made in the resort.Running Y Ranch resort on the market block

Sunriver-setting the early standard

Sunriver Resort, arguably the best known Oregon destination resort, continues to lead the region in lodging occupancy and other hospitality industry categories. The resort was conceived in the 1970s on the former WWII Camp Abbott site, 17 miles south of Bend, by former timber industry industrialist John Gray. 

In 1992 Lowe Enterprises acquired the resort from Connecticut Mutual Life Insurance, which had bought it from Gray in 1972. Lowe subsequently brought in investment capital through a limited partnership under PacTrust-- intially formed as a real estate investment trust of US Bank and now controlled by Kohlberg Kravis & Roberts.

Under this ownership, affiliated entities of PacTrust have developed the private Crosswater golf community, host to NCAA championships and other major tournaments, as well as Caldera Springs, immediately across from Crosswater. 
       There were 148 single family home sales for 2013  within Sunriver resort at a median price of $364,000 and a total sales volume $60,432,294, compared with 144 sales at $347,500 on volume of $54,901,335 in 2012.
       In the “boom” years from 2004 through 2009 Sunriver recordded 918 single family sales at a median price of $474,500 and volume of $491,604,176--easily surpassing any other Central Oregon resort and second home community. 

Tetherow - leading the new resorts

Although faced with a maze of different controlling interests, Tetherow’s clubhouse and golf course owners have joined a Portland investor to move ahead with new lodging. Elsewhere in the project, sales of townhomes and lots have been brisk, ramping up in 2012 and accelerating throughout 2013.

Construction underway on Tetherow lodging

In it’s startup phase Tetherow notched 51  lot sales from 2006-2009 at prices from $225,000 to $775,000, peaking with 35 sales on volume of $20,003,000 in 2008, then dropping to only two sales in 2009 and none in 2010.

Sales picked up in 2011, with seven sales at a median of $199,000 before rising to 20 on a median of $182,500 in 2012 and more than doubling that with 41 in 2013, and a median of $210,000. Another nine sales were pending in early February.

Unlike Tetherow and Pronghorn, Sunriver and Black Butte Ranch are  mature resorts, and much larger with fewer potential lot sales within the original master plans. However, with development of Caldera Springs, the Sunriver ownership has added to its buildable land inventory.

Black  Butte Ranch, developed in the 1970s by Brooks Resources, originally the real estate subsidiary of the former Brooks-Scanlon logging company, is constrained within its initial footprint, and limited by decisions of a board required to seek approval by a vote of homeowners to expand.

In recent years Black Butte expansion proposals have aroused opposition, although homeowners did in 2013 vote to  improve common facilities such as the main lodge amenities, athletic facilities, restaurants and the two golf courses.

Reflecting the scarcity of buildable home sites at Black Butte Ranch there were only two sales of $260,00  and $ 287,500 in  2012 and 2013. In early February there were three active lot listings priced from $199,000 to $549,000 and a pending sale at $259,000.

In early February Sunriver had 16 lot listings ranging from $143,00 to $460,000, and recorded  13 sales in 2012 -2013 from $124,500 to $275,000.

Experts are positive on 2^nd home-resort markets

The national trend is for continued expansion of the hospitality real estate sector, incuding resorts and second homes, according to a report by the CoStar Group, commercial real estate information company.

CoStar quotes Arthur Adler, managing director of Jones Lang LaSalle’s Hotel and Hospitality Group:

"This is a good time to be a hotel investor and owner as we expect several more years of strong and growing fundamentals," Adler said. "Hotel fundamentals will continue to be driven by growing business and leisure travel in major gateway markets, as well as in secondary markets and resort destinations throughout the Americas. We are optimistic about the near- and long-term prospects for the industry.” 

Another report by RCLCo, the respected national industry advisory service founded as Robert Charles Lesser Co. in 1967, is also positive on the second home market, often linked with resort properties.

In a headline “Most likely to Succeed (Eventually); Second Home/Resort,” the company’s new “sentiment report” notes:

“As with all land uses, second home/resort has seen steady growth through recovery, although current sentiment levels are somewhat below 1Q 2013 expectations.Consistent with the more cyclical nature of the 2nd home/resort industry compared with real estate overall, respondents’ high hopes for second home/resort in the coming year have not been dampened. In fact, respondents are expecting more forward motion from second/home resort in the next year than all other land uses, with the exception of for-sale residential.”

(Statistics in the table below are derived from the Multiple Listing Service of Central Oregon database and deemed reliable but not guaranteed. The information shows overall trends among regional resorts and may not reflect all activity, depending on whether some internal developer transfers or sales were not recorded with MLS, or other variables).