Funding Vail’s renewal
Vail, CO, Colorado
VAIL ” Vail’s Solaris project has its financing wrapped up. Given the state of the credit market these days, that’s news.
Solaris developer Peter Knobel announced this week that the project, on the site of the old Crossroads building between the Frontage Road and Meadow Drive in Vail, had closed on a $325 million financing deal that will allow Knobel and team to finish the project.
That was good news for Bob McNichols, developer of the One Willow Bridge Road project across the street from Solaris.
“I’m actually happy for the whole town,” McNichols said.
Knobel’s deal is complicated, including a mortgage, public financing, and private equity in the deal.
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So, in a market where it can be tough for to get a mortgage for one home, how did Knobel do it?
“We had a strong project,” Knobel said.
Much of that strength came from pre-sales. Solaris claims that 70 percent of the luxury condominiums are under contract, and that those contracts include non-refundable deposits.
Knobel also put millions of dollars of his own money into the project so far, including buying the site, designing the new complex, and paying for teardown, excavation and concrete work.
The West End
Interest in a project is critical to finding loans in an environment described as “tough” by everyone interviewed for this story.
In Edwards, Brian Bair of Midtown Development says he’s close to wrapping up a financing package for the West End, a combination residential/commercial project just west of the Gas House restaurant.
Midtown had originally planned to have machines moving on the West End by now. But with tightening, and sometimes moving, lending standards, that start time has been moved to late summer.
“It’s an interesting time to be in the real estate development business,” Bair said.
While Midtown hasn’t yet closed on its financing, Bair said the company is close.
“But we had to get real creative,” Bair said.
That creativity includes flexibility in construction timing and loan terms, and, perhaps, building the project in phases to stretch out the need for cash at any one time.
“But we’ve had strong pre-sales and pre-leasing,” Bair said. “And the project has good fundamentals.”
And there are questions and more questions from lenders, Bair said, from the pent-up demand for workforce housing to the financial strength of West End buyers and tenants.
Even with the delay, Bair expects the first West End units to be in buyers’ hands by the end of 2009 or early 2010.
“But the lending environment couldn’t have changed any more than it has,” Bair said.
McNichols agreed. While he said he doesn’t have any projects in the pipeline now, what he’s hearing from others in the business is that times are tight.
“Whatever happens next in Vail, we’ll have a new environment to work in,” he said.
What’s changed, what hasn’t
Vince Riggio is one of the developers of the proposed Eagle River Station project at Eagle. Since the project was first proposed, he said lending standards have changed dramatically.
“Lenders want to see 35 percent equity in a project these days,” Riggio said. “It used to be 20 percent.”
That means if a project cost $150 million to build, a developer used to need $30 million in up-front money from investors. Today, that number is more than $52 million.
Getting that extra money often as not means having a reputation with both lenders and private investors.
“(Knobel) got financing with his resume,” Riggio said.
Experience and reputation are going to be big factors in lining up Eagle River Station financing, too.
“I’ve got 20 years of experience with the banks we’re using,” he said. “We’ve been around and we’ve got strong relationships. If you’re a valued customer, and if you’ve over-performed, you’re in good shape.”
And, in tight times, location matters again.
Bair, Riggio and Knobel all pointed to their Vail Valley locations as reasons for their optimism about financing.
Riggio said the retail part of Eagle River Station is something a lot of national retailers look for ” virgin territory that won’t cannibalize sales from other locations.
Knobel, who has the best location of any of the developers interviewed for this story, said getting financed is proof not only of the strength of his project, but of the enduring strength of Vail in a tough market for money.
“Lenders don’t even know how to close loans right now,” McNichols said. “The standards change all the time. It’s really hard to get approvals these days.”
But, Bair said, the right project, with the right people behind it, can succeed.
“If you can work your way through it, there are lenders that will lend,” he said.
Business Editor Scott N. Miller can be reached at 748-2930, or email@example.com.