Tom Ross/Steamboat Homefinder

03-07-2010

The Steamboat Springs real estate and development communities will be paying close attention Friday when 15 luxury condominiums at The Highmark go on the auction block.

By the end of the day, it could become clearer whether prices for high-end condominiums close to the base of Steamboat Ski Area will readjust to something closer to $450 a square foot, or whether the Steamboat market will work its way beyond a project that continues through years of struggles and possibly even foreclosure.

“It’s a bellwether of what’s going to happen in the condo market at the base of the ski area and will probably trickle to downtown,” said Jim Cook, of Colorado Group Realty.

Developer Steamboat Ventures Ltd. intends to offer one condo at absolute auction (with no minimum) when The National Auction Group puts the project under the gavel at 2 p.m. Friday, then auction off the remaining units with reserve prices that begin at $405 per square foot, or about $627,000, and go up to $914,000 depending on the size of the condo.

Throughout 2008, the condominiums sold at prices from about $980 to $1,500 per square foot with sales beginning at $1.83 million and reaching as high as $3.1 million, setting a new standard in the market.

Another entity likely to be watching the results of the auction is New York-based Rialto Capital, which acquired $10 million of original construction debt connected to The Highmark as part of a $500 million debt portfolio that was bundled by the FDIC after the failure of Integrity Bank of Alpharetta, Ga. The FDIC closed the bank in June 2008.

A bumpy past

Development of The Highmark, originally known as The Chadwick, was prolonged with a couple of significant bumps in the road.

Original developer Richard Friedman broke ground in August 2003. Work ceased in January 2004 after Friedman said increasing construction costs had exceeded what his business plan allowed.

After the foundation of the building stood through a winter of inactivity, Steamboat Ventures stepped in to resolve some outstanding construction liens.

Steamboat Ventures shares members with Los Angeles real estate development firm Concord Wilshire Partners. Steve Sirang is a principal in both entities. 

Steamboat Ventures also negotiated a $20 million promissory note secured by the assets in October 2005, which extended the original construction loan. Integrity Bank held the note.

Work on the building did not resume until September 2005 after the city of Steamboat Springs approved value-engineering efforts made to bring the project within financial constraints. The Highmark was finally completed in June 2008.

Cook, who was the original listing agent of the condos at pre-sale, then left the project. Despite the construction delays, he said last week that it’s a well-run project.

“It’s a great product. I had clients from Tallahassee stay this winter and they said the service was great,” Cook said. “I think it’s a good building. It was very expensive to build.”

On the other hand, Cook is representing Wells Fargo Bank in the sale of a foreclosed penthouse unit at The Highmark that is not in the auction. It originally sold on Jan. 25, 2008, for $3.172 million, with Wells Fargo financing 80 percent of the purchase price, Cook said. 

“It’s probably going to trade at $1.2 million,” Cook said. “That’s quite a discount.”

Condos sold furnished

Since 2008, nearby slopeside luxury projects at Edgemont and One Steamboat Place began late in December 2009 to close on condominiums at prices above $1,000 per square foot based on contracts written in the latter half of 2007.

Highmark is a different animal — although it’s not ski-in, ski-out, it’s still within steps of the Steamboat gondola at Village Drive and Après Ski Way.

The auction condominiums will be sold with the furniture package included.

A Steamboat interior designer who didn’t work on the project estimated the value of the furnishings for the four-bedroom units at more than $100,000. The Routt County Assessor’s web page values personal property in some of the units at $55,000 for tax purposes. 

The Highmark has been managed by Crescent Hotels and Resorts for about 21 months as a boutique hotel. A hotel management employee said this week that although the rental rates for the condominiums are steeply discounted in the slow seasons, the property was full during the December holidays each of the past two winters, with nightly rates for the penthouse units reaching $3,300.

The National Auction Group’s Shannon Lewis said about 100 prospective bidders had toured the property as of midday Thursday.

“We had hoped for more,” Lewis said. “It’s not as busy as we expected.”

Auction outcomes

The number of registered bidders won’t be known until the day of the auction, although a significant portion of them are expected to attend a catered cocktail party in the lounge Thursday night. In the meantime, anyone is welcome to tour the property daily between 10 a.m. and 6 p.m.

Lewis said registered bidders would be required to post refundable checks of $25,000, $50,000 or $75,000 depending upon the size of the unit they are focused on. Telephone bids will be accepted, Lewis said, but those prospective buyers will be required to take the extra step of actually depositing their checks into the escrow account of a local title company.

Purchasers will be charged a 10 percent premium over and above the successful bid amount.

The size of the registration checks aren’t likely to be a deterrent to serious buyers. One local Realtor who has a client registered for the auction said the buyers who bid on condos at The Highmark are apt to be cash buyers because the active nightly rental program at the Highmark makes it very difficult to borrow money to buy one of the units.

Cook said he was pleased recently to see that Bill and Kay Stuart, former owners of Market On the Mountain, have finally acquired the commercial condominium space on the ground floor of The Highmark. They sold the building site, which they had acquired from American Skiing Co., in a deal structured to give them a new location for the gourmet grocery, which they have since sold.

Cook said he is the leasing agent for the commercial condominium.