Risks to Recreational Real Estate Purchases

The market for recreational real estate in Canada is at its slowest in a generation.

The four key markets for recreational real estate in Canada are the Laurentiens in Quebec, the Muskoka and Haliburton regions in Ontario, and the interior of British Columbia (including Whistler).

Two of those markets were impacted by very negative news this week.

The anchor of the Laurentians is arguable the resort of Mt. Tremblant which includes the towns of Mt. Tremblant and St. Jovite. The massive billion dollar Versant Soliel project at the Tremblant resort has a ground to a halt and is now several years behind schedule. It was to be followed by a north side project which is no longer on the drawing board. A slowdown at Mt. Tremblant would have devastating effects on the local economy and on real estate investments. Already there are literally thousands of recreational units available, several years of supply and prices are down 25-35% since peaking between 2003-2005.

In British Columbia, the crown jewels of Whistler, Blackcomb and Panarama were already having to contend with parent organization Intrawest being required to suspend investments in the resorts in order to pay higher interest charges on bank debt. Now comes news that Intrawest's parent Fortress Investment Group being close to bankruptcy, and this week suspended redemptions in its largest hedge fund. Fortress has seen its share price drop from about $20 to $1.76. We believe that Whistler, Blackcomb and Panarama are all excellent, stand alone operations, unfortunately they may to liquidate their real estate assets at fire sale prices in order to keep their parent companies afloat.