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.