Light at the end of the tunnel
While several downtown building
projects are moving toward completion or to the drawing board, most
Whitefish subdivisions are at a standstill. The economic recession
has played havoc with residential construction, but one local
developer sees light at the end of the tunnel.
Back in early 2008, Bill Kahle had
three developments underway — a mixed-use project in the
gentrifying Railroad District, a large commercial site near The
Wave called Baker Commons, and a 12-acre residential project right
above The Wave called O’Brien Bluffs.
Then came the Wall Street crash and
credit crisis. While people watched their retirement portfolios
plummet, banks tightened up their lending policies, and new
residential construction screeched to a halt.
“Our plan was to develop and sell lots
at O’Brien Bluffs to spec-home builders and families, based on the
Creekwood subdivision model, where I once lived,” Kahle recalls.
“Nothing had sold yet. We had a few on contract. All the
subdivision work was done except for the street trees.”
Kahle and his backers decided to hold
off on filing for final plat with the city, which would have
changed the project’s tax structure.
“We weren’t sure how bad it would get,”
he said. “We decided to wait six months to the next buying
season.”
O’Brien Bluffs is located on a low hill
surrounded by trees. It has a rural feeling, but it’s a short
distance to downtown for walkers and bikers.
“I timed myself,” Kahle said. “I can
make it to Coffee Traders in under four minutes.”
The subdivision has 37 residential
lots, with sidewalks on both sides and a new city park. A
stormwater system with underground storage tanks is in place and
operational. Everything is in place except for buyers, something
Kahle thinks will change this year.
“Last year, we had at least seven
serious inquiries,” he said. “A mixture of in-city and out-of-city
people.”
The offers, however, didn’t match what
Kahle and his backers needed, and rather than apply for final plat
for just one buyer, they decided to hold off again. They went back
to the bank and came up with a “long-term workout” — not an easy
task considering all that had happened over the past two years.
“The rules of real estate development
have changed drastically — on the lending and the developing
sides,” Kahle said. “The recovery of the economy is contingent on
banks acting like banks again.”
Kahle said he heard of people with
adequate income and credit scores getting loans rejected “for a
little nuance.” On the other hand, a speculator approached Kahle
about buying 10 lots at once. Not only was the price off the mark,
but Kahle’s goal is to have homeowners or spec-home builders put up
the houses.
“We want end-users,” he said.
With a little help from his bank,
Kahle’s investors recently put some money in an escrow account so
two houses can be built on the north side of O’Brien Bluffs. Tom
Watson Construction, of Kalispell, will build the homes starting
this spring, with Kahle managing the work.
The homes will fit the neighborhood and
hopefully the market, Kahle said — 1,600 square feet, three
bedrooms and 2 1/2 baths, with an unfinished bonus space above the
garage. Prices will be in the $275,000 range, he said. Gone are the
days of buyers mortgaged to the hilt seeking a McMansion to
flip.
“There’s been a change in what buyers
want — it’s not so much what they can afford as what they need,”
Kahle said.
Kahle has confidence in the local real
estate market. Whitefish has a broader appeal than most towns in
Montana — and the rest of the Flathead, he said. And with lots
ranging from 7,500 to 30,000 square feet, O’Brien Bluffs should
appeal to families or retired couples who want an alternative to
condos.
“All the amenities of Whitefish are
still here — Glacier Park, Whitefish Lake, Big Mountain, the
O’Shaughnessy and Alpine Theatre Project, The Wave,” Kahle said.
“There’s also the community spirit. These are great, great people.
I learned that from the outpouring of support after my accident
last year.”
Developers need to dig in and find a
way to buy themselves some time, Kahle said. In some cases, that
will mean throwing developing costs out the window and just trying
to cover the debt.
“There are psychological reasons for
why we got into this mess,” he said. “We need more jobs, obviously,
and the market fundamentals need to change. But people are scared
of real estate, and that needs to change.”