Poster-sized aerial photographs plaster the walls, mapping hundreds of valuable but vacant acres. To those not intimately familiar with the Sun Valley-Ketchum area, the green grounds would be indistinguishable. But that's not the case for Wally Huffman, director of resorts and resort development for Sun Valley Co. The blown-up photos of company land surround Huffman's desk, constantly reminding him of the trying task that lies ahead: developing this land.
"We're an operations company, not a development company," said Huffman, who used to be Sun Valley Resort's general manager until he left his post of 32 years in mid-2009 to oversee planning and development of Sun Valley Resort and the company's other ski resort, Snowbasin, near Ogden, Utah.
Expanding Sun Valley Co.'s role from resort manager into developer is only part of the challenge. The other half—financing—is, to a great extent, out of Huffman's hands, and stands between not only Sun Valley and its plans. In the past couple of years, three other developers have received approval from the city of Ketchum to build their four-star hotel projects. Together, the four projects are valued at $2 billion, providing 350 hotel rooms and 1,000 residences.
Sun Valley Co., operator of Bald Mountain and the smaller Dollar Mountain, is planning the most colossal project of the four, a base village of 138 acres. It would turn open land—some of which is now skier parking—at Baldy's main skier entrance of River Run into a riverside plaza surrounded by a hotel, restaurant and shops. Most of the development would consist of single- and multi-family residences and three parking garages.
Another developer is planning a similar concept at the center of a residential project, including a nine-hole golf course, at Baldy's Warm Springs side. The remaining two projects are stand-alone hotels downtown—Bald Mountain Lodge and Hotel Ketchum.
Despite the fact that each of those developers has obtained the city's permission to start building anytime, not one has turned a spade of dirt or said when he'd pick up the shovel.
Waiting for the money
"That's the only thing holding it up," said Jack Bariteau, developer of the proposed four-story, 73-room Hotel Ketchum at the corner of Main and River Streets. "We spent all those years trying to get approved, and when we finally did, there was no market."
Bariteau, a developer in town since 1997, is looking for an investor to back his hotel, estimated to run $65 million in construction costs.
"Historically, banks were always there for these kinds of things," he said.
He said banks are no longer lending a hand since the recession began. Bariteau and the others have been forced to seek out private money and convince potential investors that their hotel projects are worth the risk. Bariteau said that's become more difficult due to a distressed forecast for the hospitality business.
The hotel sector is experiencing some difficult times. The Clarion Inn in Ketchum is in foreclosure and scheduled for auction on March 8, according to American Title Co., which is part of the proceedings. (Hotel owner Peter Lewis could not be reached for this story.)
Knob Hill Inn, a 29-room Ketchum hotel that has been on the market for two years, was nearly sold to nonprofit Sun Valley Adaptive Sports, which wanted to buy it for conversion to a rehabilitation center for wounded veterans. However, that deal fell through last fall when the organization couldn't raise the $10 million needed for buying the hotel and covering the costs of renovating it. Another deal to sell Knob Hill Inn—and keep it as a functioning hotel—was supposed to close Monday but also fell through, according to the hotel's real estate agent, Joshua Wells. Wells said the inn remains in operation as he talks to other prospective buyers.
"They don't have the will or capacity now," Bariteau said of cautious private investors. "We're still in the midst of a financial restructure. No one knows where it's going. The money simply isn't available."
Huffman said ski resort areas throughout the country are struggling to find money for new projects. He said that's the buzz leading into a quarterly resort owners meeting he'll soon be attending.
However, Bariteau claims, financing is "nascent," with investors slowly sprouting up.
"We'll get it built," he said. "The question is when."
According to Lisa Horowitz, Ketchum's director of community and economic development, the city is equally optimistic.
"I think we're going to see all these projects," she said.
Echoing Bariteau, she added, "It's just a question of when."
The clock is ticking
Developers don't have unlimited time to win the hearts of investors. City approvals have expiration dates. If the deadlines are not met, developers have to start over at square one, going through the whole process of city meetings and public hearings to get back to where they are now. The good news is the City Council can extend deadlines if it wishes.
"The city has been very cooperative," Bariteau said, "which is a good sign to investors."
Ketchum approved Bariteau's Hotel Ketchum in November 2008, giving him two years to apply for a building permit and to break ground. He was back before the City Council in February 2010 pleading for three more years. The city gave him two more years, with the option of a third if it deems Bariteau's problems worthy at that time. Bariteau said he hopes it won't come to that, but he said he might need it. At this point, he said, he doesn't want to presume anything.
Bariteau isn't alone. Helios Development, developer/owner of Warm Springs Ranch Resort, has become "less ambitious and more realistic," scaling back designs for its 77 acres, according to spokeswoman Joy Kasputys. She said that along those lines, Helios is no longer using Park City, Utah-based DDRM Greatplace to lead the project.
Like Bariteau, Helios has asked the city for an extension and is also in need of investors, Kasputys said. The City Council gave Warm Springs Ranch a one-year extension in January that requires acquisition of a building permit by January 2015 and completion of construction by January 2021.
Horowitz said the city is willing to be flexible because the recession has changed the situation and the city needs more hotel rooms, especially four-star rooms like these.
"Hotel recruitment and development is a high priority," the city states on its website.
For that reason, the city gave Bald Mountain Lodge developers $6.6 million in incentives to break ground by June 2012 and build the hotel by January 2015. After that, the incentives sharply drop off.
"I think it's very likely they could be in construction in summer 2012," Horowitz said of the proposed Main Street hotel, which would sit on the city block between First and River streets.
Of all the projects, Sun Valley Co.'s 138-acre base village was given the most flexibility. Huffman said he doesn't know when construction will begin.
"They haven't told us when they're going to pull the trigger," Horowitz said, "but it's not a dead project."
Huffman said he'd "like" to start putting in the infrastructure this spring, meaning the streets, water, sewer and utilities. But even that is no small task on a project this immense. He said the infrastructure would take a couple of years to construct. The cost would be shared with the Ketchum Urban Renewal Agency, since many utilities would be publicly owned.
"At least this would give us some breathing room to decide if we want to partner with somebody or go out on our own," Huffman said, adding that the project's 19-acre hotel core is "contingent" on financing from outside partners.
"This hasn't presented itself but it will," he said.
Huffman said the infrastructure must be fully in place before the hotel can even be considered. That's because its location—along the Big Wood River's east bank—is the farthest away from existing city infrastructure.
"It's at the end of the umbilical," he said.
And Sun Valley Co. has a lot more on its plate than just River Run. Its main hotel is a cement lodge built in 1936.
"We've done everything to make the rooms acceptable," he said, but the resort's core in Sun Valley is "in need" of four-star rooms. Plus, he said, Snowbasin needs rooms.
"Where do we start first?" he asked, knowing full well that when River Run construction does begin and takes full attention, building 180,000 square feet of real estate won't come quickly.
It will take 15 years to build out, he said.
"Sometimes, I wish I was 45 years old again so I could see this all come to fruition," he said, looking high on the wall but obviously not looking at anything at all, just imagining. "But I'm not."
Trevon Milliard: firstname.lastname@example.org