Mountain Resort Market Outlook

MOUNTAIN RESORT MARKET OUTLOOK

U.S. Mountain Community Summit February 20, 2019 Adam Ducker and Dana Schoewe MOUNTAIN RESORT HOUSING SUPPLY & OWNERSHIP WHY ARE MOUNTAIN TOWN MARKETS UNIQUE? MOUNTAIN RESORT TOWNS ARE NATURALLY DISPOSED TOWARDS HIGH REAL ESTATE PRICES ► Ski towns provide immediate access to recreation and offer a high density of commercial services relative to population (given large seasonal tourist populations), resulting in real estate premiums driven by accessibility and convenience ► Mountain resort towns are geographically constrained, in part due to the conserved ski mountain/national forest land, meaning building areas are restricted and supply is naturally constrained, pushing prices up ► Ski resort towns are meccas for outdoor recreation. As the popularity of year-round outdoor recreation activities including mountain biking, hiking, snowshoeing, and skiing continues to rise, an increase in demand continues to drive prices up ► Existing high-quality developments in mountain villages give mountain resort areas a reputation for luxury product and desirable living ► Construction and operating costs are high given challenging construction logistics, labor contsraints and many other factors

Source: RCLCO U.S. Mountain Community Summit | 2/20/2019 | 3 MOUNTAINS DOMINATE SEASONAL MARKETS 25% OF COUNTIES WHERE OVER 90% OF HOUSING STOCK IS FOR SEASONAL USE ARE SKI-CENTRIC Estimated Percentage of Housing for Seasonal Use, U.S. Counties; 2017

MAP KEY 0-15% 15-32% 32-51% 51-71% 71-97%

Source: US Census; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 4 SEASONAL HOUSING TRENDS IN SELECT MARKETS INCREASE IN VACATION HOME HOUSING SHARE SINCE THE RECESSION

Housing Stock by Primary Use in Select Mountain Resort Markets; 2009-2017 70,000 88.0% 87.0% 60,000 86.0% 50,000 85.0% 40,000 84.0% 83.0% 30,000 82.0% 20,000 81.0% 80.0% 10,000 79.0% 0 78.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Seasonal Housing Units Non-Seasonal Housing Units Share of Housing Units for Seasonal, Recreational, or Occasional Use

Note: Select Markets include Teton County, WY; Summit County, UT; Eagle County, CO; Summit County, CO; Pitkin County, CO Source: US Census; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 5 HOUSING DIVERSITY DECLINING NEW PRODUCT DIVERSITY IN MOUNTAIN RESORT MARKETS

Historic Permitting Trends in Select Mountain Resort Markets; 2000-2017 3,000 80% 61% 70% 66% 70% 2,500 61% 60% 60% 2,000 46% 50% 29% 1,500 35% 40% 23% 25% 21% 17% 30% 1,000 20% 17% 14% 20% 500 10% 0 0%

Single-Family Permits Multifamily Permits Permits (New Sales) as a % of Total Sales

Note: Select Markets include Teton County, WY; Summit County, UT; Eagle County, CO; Summit County, CO; Pitkin County, CO Source: HUD; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 6 PRODUCT TRENDS IN SELECT MARKETS ATTACHED PRODUCT SHARE OF TRANSACTIONS TICKING DOWN

Residential Sales by Type; Eagle Residential Sales by Type; Teton County, CO, 2002-2018 County, WY, 2002-2018 1,600 70% 900 70% 1,400 60% 800 60% 700 1,200 50% 50% 600 1,000 40% 500 40% 800 30% 400 30% 600 300 20% 20% 400 200 200 10% 100 10% 0 0% 0 0%

SFD Condo/TH Share Condo/TH SFD Condo/TH Share Condo/TH

Source: David Viehman; RealQuest; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 7 PRICE POINTS BY PRODUCT TYPE IN HIGHLY DESIRABLE CENTRAL VILLAGE AREAS, ATTACHED PRODUCT AT A SIGNIFICANT DISCOUNT BUT PRICES CONTINUE TO CLIMB

Average Sales Price by Product Average Sales Price by Product Type; Vail Village and Lionshead, Type; Teton Village, 2010-2017 2010-2017 $8 $18 $7 $16 Millions $6

Millions $14 $5 $12 $10 $4 $8 $3 $6 $2 $4 $2 $1 $0 $0

SFD Condo/TH SFD Condo/TH

Source: Slifer, Smith and Frampton; David Viehman; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 8 AGGREGATE MOUNTAIN RESORT TRANSACTIONS EXCEED PREVIOUS CYCLE LEVELS Historic Sales Transactions by Year and Price in Select Mountain Resort Markets; 2003-2017 6,000 30%

5,000 25%

4,000 20%

3,000 15%

2,000 10%

1,000 5%

0 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 <$1M $1-$2M $2-$5M $5M+ Share of Sales over $1M (R)

Note: Select Markets include Teton County, WY; Summit County, UT; Eagle County, CO; Summit County, CO; Pitkin County, CO; Blaine County, ID Source: RealQuest; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 9 VARIABILITY IN TERMS OF MARKET ELITENESS ASPEN, JACKSON HOLE REPRESENT MORE ELITE MARKETS AS GLEANED FROM SALE PRICE DISTRIBUTION Distribution of Mountain Resort Sales by Price Range; 2013-2017 100.0% 50% to 90% of 90.0% residential sales 80.0% occur under $1M 70.0% 60.0% 50.0% 40.0% Less than 1% to 30.0% over 10% of sales 20.0% occur at over $5M 10.0% 0.0% <$1M $1-$2M $2-$5M $5M+ Jackson Hole, WY Summit County, UT Front Range, CO Vail, CO Aspen/Snowmass, CO Sun Valley, ID Telluride, CO

Source: RealQuest; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 10 MOUNTAIN RESORT MARKET COMPARISON ALTHOUGH MOUNTAIN RESORT MARKETS ARE SUBJECT TO SIMILAR TRENDS, PRICES CONTINUE TO RISE ACROSS THE BOARD Average Sales Price Per Square Foot; 2014-2017 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0

2014 2015 2016 2017

Note: Includes SFD and condo sales transactions Source: Sotheby’s; RCLCO. U.S. Mountain Community Summit | 2/20/2019 | 11 LIMITED POOL OF HOUSEHOLDS THAT CAN AFFORD TO BUY IN THESE MARKETS

United States Wealth Distribution; Number of United States 1M+ 2018 HNWIs; 2018

10M+, 5.6% 1M+, 18 Typical second 7.1% home price: $2M+

100% 100K to 16 5-10M, Millions 90% 1M, 14 10.7% 80% 33.8% 12 Typical 70% second 10 home price: 60% 10K to 8 $1M - $2M 50% 100K, 6 40% 30.8% 4 30% 1-5M, 83.7% 20% Under 2 Typical 10% 10K, 0 second 0% 28.4% home price: $250K - $1M

Source: Credit Suisse; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 12 GENERALLY, OWNERS ARE DOMESTIC FROM PRIMARY URBAN MARKETS Eagle County, CO Residential Teton County, WY Residential Ownership Origin; 2018 Ownership Origin; 2018 NY IL 2% 2% Other Other CA NY IL 14% 18% 3% 2% 2% TX FL 4% 2% TX FL 4% 5% CO WY CA 66% 70% 6%

TOP FIVE OUT-OF-STATE OWNER MARKETS TOP FIVE OUT-OF-STATE OWNER MARKETS 1 Orlando, FL 1 Napa, CA 2 Dallas, TX 2 Austin, TX 3 New York, NY 3 Houston, TX 4 Houston, TX 4 Los Angeles, CA 5 Chicago, IL 5 New York, NY

Source: Eagle County Assessor; Teton County Assessor; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 13 FOR HNWIS: LARGE INTEREST IN “SECOND HOME” ASSETS

100% Other, 1.5% North American HNWIs Asset Hotels, 5.6% Allocation; 2018 Farmland or 90% Indirect Agricultural Land, (listed 7.0% Alternative Investments 80% entities and 10% REITS), Land 7.3% (residential 70% or Commercial commercial), 60% (excluding 10.2% Real hotels), 16.1% Estate 50% Equities 12% 37% 40%

30% Residential Fixed Real Estate, Cash and Income 20% 52.3% Cash 18% Equivalents 10% 23% 0%

Note: high net worth individuals (HNWIs) are defined as individuals with over $1M in investable assets, excluding primary residence, collectibles, consumables, and consumer durables Source: CapGemini; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 14 SECOND HOME PRICE RECOVERY AT THE HIGHEST INCOME LEVEL UNMATCHED

Median Value of Other Residential Real Estate Holdings by Income Percentile (2016$); 1989-2016 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Less than 20 20–39.9 40–59.9 60–79.9 80–89.9 90–100 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Source: IRS Survey of Consumer Finances; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 15 BABY BOOMERS CONTINUE TO DOMINATE SECOND HOME MARKET; WILL YOUNGER BUYERS STEP UP?

Households with other Residential Real Estate Holdings, By Age Cohort; 1989-2016 25%

20%

15%

10%

5%

0% 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Less than 35 35–44 45–54 55–64 65–74 75 or more

Source: IRS Survey of Consumer Finances; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 16 PERCEPTION SHIFT IN THE PURPOSE OF A

“SECOND HOME” Second Home Financing; United Intended Use at Time of Second States, 2018 Home Purchase; 1971-2017 100% 90% 80% 70% 0% 20% 40% 60% 80% 100% 60% 50% Personally Financed Inherited or Gifted 40% Mortgaged Other 30% 20% Average Second Home Rental Yield; 10% United States, 2018 0%

10.0%

1987 1975 1979 1983 1991 1995 1999 2003 2007 2011 2015 1971 5.0% For own use only 0.0% For own use and renting out Gross Rental Yield Net Rental Yield For renting out/returns only (less upkeep)

Note: Annual yield expressed as a % of purchase price Source: Savills World Research; Homeaway; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 17 SHIFT TOWARD VACATION HOME RENTALS? INCREASING SUPPLY AND DEMAND

Cumulative Number of Airbnb Rentals by Market; 2010-2018 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Vail, CO Aspen, CO Jackson, WY Park City, UT Big Sky, MT

Source: Airdna; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 18 MEANWHILE, LACK OF FRACTIONAL THIS CYCLE

Annual Sales Volume ($M) of Fractional, Private Residence Club, and Destination Club Shares; United States, 2018 $2,500

$2,000

$1,500

$1,000

$500

$0

Fractional Private Residence Club Destination Club Total

Source: Ragatz; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 19 MOUNTAIN RESORT REAL ESTATE DEMAND DRIVERS THE DREARY SKIER PARTICIPATION STORY (GOOD NEWS IS ROCKY MOUNTAIN SHARE IS GROWING) Skier and Snowboarder Visits by Region; 2000-2018 30 45% 40%

Millions 25 35% 20 30% 25% 15 20% 10 15% 10% 5 5% 0 0%

NE/SE/MW Rocky Mountain Pacific RM Share

SOURCE: National Skier Association; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 21 WHO ARE THE SKIER PARTICIPANTS? ECONOMIC AND DEMOGRAPHIC FUNDAMENTALS OF SKIERS 1. Families: Over 65% of skiers first went skiing with their family 2. High-income households: 61% of Rocky mountain skier-visits in 2017/18 were generated by households with incomes over $100,000 3. Long-time ski aficionados: 82% of skiers first tried skiing at age 17 or younger 4. Millennials: This age group made up 32% of skier-visits in the 2017/18 ski season 5. Locals: Colorado residents make up about 44% of annual Colorado skier visits

Source: Curbed; NSAA; GlobalData; Skiessentials; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 22 SKIER-PARTICIPANT HOUSEHOLD AGE DISTRIBUTION GROWING DIVERSITY OF AGES, RACES, GENDERS Skier-Participant Distribution by Generation; 2007-2017 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Gen Z (19 and under) Millennial (20-36) Gen X (37-52) Baby Boomer (53-71) Silent Gen (72+)

Note: Survey represents over 14,000 respondents. Source: NSAA; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 23 SKIER-PARTICIPANT HOUSEHOLD INCOME DISTRIBUTION TREND TOWARDS MORE AFFLUENCE/LESS INCOME DIVERSITY Skier-Participant Household Income Distribution; 2007-2017 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 <$50,000 $50,000 - $99,999 $100,000 - $199,999 $200,000+

Note: Survey represents over 14,000 respondents. Source: NSAA; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 24 IN MOUNTAIN TOWNS, SKIER VISITS HIGHLY CORRELATED WITH SALES TRANSACTIONS Skier Visits and Real Estate Transactions, Select Resorts; 2016 2,000 R² = 0.9331 1,800 1,600 1,400 1,200 1,000 800

600 Sales Transactions Sales 400 200 0 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 Skier Visits Teton County, WY Summit County, UT Front Range, CO Vail/Beaver Creek, CO Aspen/Snowmass, CO Sun Valley, ID Lake Tahoe, CA/NV Big Sky, MT Year SV Number of Transactions Transactions Over Skiable SV SV per SV Per Reported Skier Visits (SV) Per Year $1M per Year Acres per Acre Chairlifts Chairlift HS Lifts HS Lift Teton County, WY 2013-2016 590,400 359 165 2,900 204 17 34,729 7 84,343 Summit County, UT 2016 2,000,000 773 132 9,326 214 65 30,769 32 62,500 Front Range, CO 2004-2016 3,911,909 1374 129 11,306 346 94 41,616 26 150,458 Vail/Beaver Creek, CO 2016 2,575,000 1119 264 7,104 362 55 46,818 27 95,370 Aspen/Snowmass, CO 2004-2016 1,291,854 405 201 5,480 236 42 30,758 19 67,992 Sun Valley, ID 2016 419,000 260 22 2,054 204 14 29,929 7 59,857 Lake Tahoe, CA/NV 2016 6,131,500 1674 182 17,264 355 111 55,239 28 218,982 Big Sky, MT1 2016 475,000 128 119 5,800 82 23 20,652 8 59,375 TOTAL 17,394,663 6,091 1,214 61,234 14,324 421 41,317 154 112,952

SOURCE: RealQuest; Denver Post; Resort Websites U.S. Mountain Community Summit | 2/20/2019 | 25 IMPACTS OF MAJOR, RECENT ACQUISITIONS DIRECT INVESTMENT FROM RESORT OWNERSHIP TENDS TO DRIVE REAL ESTATE SPECULATION AND ADDITIONAL PRIVATE INVESTMENT

2013 2015 2017 2018 Taos Ski Valley sold Park City/Canyons Steamboat/Winter Park Crested Butte sold to Louis Bacon sold to Vail Resorts sold to Aspen/KSL to Vail Resorts

Plans for 300 Planned $50 million in New $15 million New high speed quad residential units, investment to combine gondola, investment in lifts to increase uphill 70,000 square feet of Park City, Canyons new retail at base,

DIRECT capacity by 50%

retail at base resorts downtown INVESTMENT

Following Listings for high-end Across all product Likely to see bump in announcement, homes jumped 20-25% types, sharp decline in skier visits and transactions jump over immediately following DOM, continuous

property values IMPACTS INDIRECT INDIRECT 6x previous year announcement rising prices

Source: Ski CB; Vail Resorts; KSL; WSJ; Hollywood Reporter; Sotheby’s; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 26 HOWEVER, HIGH QUALITY OF LIFE, SCHOOLS, AND ECONOMIC OPPORTUNITY ALSO DRIVE DEMAND LIKE PRIMARY MARKETS, GOOD SCHOOLS AND JOBS IMPACT REAL ESTATE

Select Mountain Resort School Professional/Technical Services District Rating Percentile; 2010-2018 Employment; 2012 and 2018 100% Average annual 1,000 increase: 11.3% 80% 900 800 Average annual increase: 6.2% 60% 700 600 40% 500 400 20% 300 Average annual 200 increase: 3.6% 0% 100 0 Telluride Steamboat Aspen Springs Telluride Steamboat Springs Aspen Median Percentile 2012 2018

Source: ESRI; Colorado Department of Education; US Census; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 27 CHANGING RESIDENT DYNAMICS PERHAPS 1/3 OF AMERICANS NO LONGER LIVING HOME AND OFFICE DYNAMIC Sizing the “Gig Economy”

Note: Survey represents over 14,000 respondents. Source: NSAA; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 28 THE CHANGING FACE OF RETIREMENT MOUNTAIN TOWNS EMERGING MECCAS FOR NEW ACTIVE RETIREMENT

Source: U.S. Census; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 29 MOUNTAIN RESORT HOUSING: ALIGNING FUTURE SUPPLY WITH DEMAND CONCLUSION LUXURY MOUNTAIN RESORT MARKETS CONTINUE TO PERFORM WELL, WHICH IS GOOD NEWS FOR LOCAL TAX BASES BUT MARKET AUDIENCE REMAINS LIMITED

High construction costs and sustained demand

Prices continue to expand

Local owners and many skier-families priced out of market

Even more exclusive, investment-driven markets

Need for a greater diversity of housing product to cater to locals, workers, upper/middle income vacationers

U.S. Mountain Community Summit | 2/20/2019 | 31 CALDERA HOUSE, JACKSON HOLE, WY TWO LUXURY OVERSIZED CONDOS PAIRED WITH SIX HOTEL ROOMS OPENED SUMMER 2018

Source: Caldera House; Curbed; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 32 ONE SNOWMASS, SNOWMASS, CO COMING NOVEMBER 2019 PARTNERSHIP WITH INSPIRATO 41 LUXURY RESIDENCES AT NEW, REVITALIZED SNOWMASS BASE VILLAGE

Source: Aspen Times; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 33 TRANSFER TELLURIDE, TELLURIDE, CO DOWNTOWN, MIXED-USE PROJECT WITH AFFORDABLE HOUSING, LUXURY RESIDENCES, COMMERCIAL SPACE HISTORIC RENOVATION OF ICONIC SITE DOWNTOWN PHASE ONE BEGAN IN 2015

Source: Meriwether; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 34 VIRGINIA PLACER, TELLURIDE, CO MIXED-USE AFFORDABLE HOUSING PROJECT OPENED IN 2018 COMBINES COMMUNAL LIVING, BELOW-MARKET RATE APARTMENT UNITS, AND TINY HOMES

Source: CCA; Curbed; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 35 ACCESSORY DWELLING UNITS, DURANGO, CO OVERHAULED HOUSING CODE TO INCREASE HOUSING SUPPLY

Source: CityLab; Iriana Shiyan/Shutterstock.com; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 36 WASATCH SPRINGS, PARK CITY, UTAH THE UPPER END OF WORKFORCE ATTAINABLE? ($500,000-$700,000) SMALLER (STARTING AT 1,600 SQ. FT.) TOWNHOME PRODUCT

Source: Wasatch Springs; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 37 6 WEST, EDWARDS, CO 120 MARKET RATE APARTMENTS LUXURY BUT “UPPER END WORKFORCE ATTAINABLE” UNDER CONSTRUCTION

Source: Gore Creek Partners; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 38 BIG SKY TOWN CENTER PURPOSEFUL PRICE AND LIFESTYLE ALTERNATIVE TO CLASSIC RESORT REAL ESTATE MIX OF UNSUBSIDIZED RENTALS AND MEDIUM DENSITY FOR-SALE

Source: L&Kl; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 39 YOTEL PAD, PARK CITY, UT MICRO UNITS EMPHASIZING EFFICIENCY TO KEEP PRICES DOWN FULLY FURNISHED “TURNKEY” COMING IN 2020

Source: Yotel; RCLCO U.S. Mountain Community Summit | 2/20/2019 | 40 QUICK FIRE SESSION: DEVELOPERS DELIVERING TO LOWER PRICE POINTS WITHOUT SUBSIDY? BREAK OUT SESSIONS BREAK OUT SESSIONS

► What is the missing “workforce attainable” product – what could work on land with market prices

► Conventional rental apartments -- What can the land use community do to accelerate non-subsidized deliveries

► Positioning resort communities for impact investment in non-subsidized housing

► Encouraging/incenting reinvestment in aging/under-utilitized resort real estate

► Removing regulatory barriers to non-luxury/non-subsidized real estate -- what entitlement constraints inhibit development and could be removed

U.S. Mountain Community Summit | 2/20/2019 | 43 AUSTIN LA ORLANDO DC

221 W 6th St 11601 Wilshire Blvd 964 Lake Baldwin Ln 7200 Wisconsin Ave Suite 2030 Suite 1650 Suite 100 Suite 1110 Austin, TX 78701 Los Angeles, CA 90025 Orlando, FL 32814 Bethesda, MD 20814

Adam Ducker Senior Managing Director P: (240) 644-0980 E: [email protected] W: RCLCO.COM