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Destination Resorts 2.0

As the recession recedes and tourism grows, Central Oregon resorts redefine themselves for a new generation.


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The Tetherow Golf Course (left) and the Tetherow Lodges hotel (right). The hotel was completed last year.

Chris van der Velde wants you to know: The Dutch do things differently. “In Europe, we don’t leverage that kind of stuff,” says van der Velde, the half-Dutch managing partner of Tetherow, a 700-acre golf resort located on the southwest edge of Bend. A former pro golfer on the European circuit, Van der Velde,was a minority partner in the original resort back in 2004, when developers across Central Oregon were, as van der Velde says, out of control.

“We overran the budget by almost 200%. My philosophy was: The project needs to be sustainable. The developer and I didn’t see eye to eye. That’s why I stepped out.”

Van der Velde stepped back in in 2009, when he partnered with longtime friend Willem Willemstein, another Netherlands native, flush from profits earned in the oil business, to purchase a majority stake in Tetherow, including the golf course, club house and 106 residential lots. (Two other developers also own lots on the property). Starting in 2012, the resort began to see an uptick in sales. In 2014, Tetherow sold 51 home sites, up from seven in 2011. Membership today clocks in at 318 families, up from 87 in 2010.

Despite the forward movement, van der Velde is careful not to oversell. “The destination resort model is challenging because it requires putting in costly amenities,” he says. And while the second home market is coming back, “it’s not quite there.”

Slow and steady

Cautious optimism is the mantra among resort developers in Central Oregon, where many properties are reporting record number of visitors. Construction, especially commercial construction — hotels, restaurants, new pools — appears to be on the upswing, if not exactly booming. In 2014, Deschutes County issued 54 permits for commercial construction for eight destination resorts, up from 28 in 2013. The county issued 130 permits last year for homes in resorts, 74 more than 2012. "We don't have to create amenities. We have Bend."

The slow turnaround in the resort sector, and some of the private, resort-like communities, suggests the specter of the recession is fading. It also suggests a new chapter is opening up in Central Oregon’s luxury resort story. During the market boom and bust of the past decade, the area was ground zero for new resort development, until many properties collapsed under the weight of bankruptcies, foreclosures and environmental battles restricting development. More than a half-dozen resorts were proposed between 2000 and 2008, yet only three opened. In some communities, a few homes were built but not much more.

Today, the outlook is improving, says Deb Tebbs, president of Cascade/Sotheby’s in Bend. Some locations are doing better than others. “Because of the failed projects of the 2008-2010 cycle, people are a bit leery,” Tebbs says. “The ones that are doing well are those that have produced a clear vision where they’re going.”


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Ready to build: A new hotel will break ground at the Pronghorn Resort this summer.

Spencer Schaub, general manager at Pronghorn, a 640-acre community northeast of Bend that opened in 2004, is working on that vision. “Our initial focus was on the development of real estate,” says Schaub. But over the past couple of years, the focus has shifted to amenities and overnight lodging for short term guests. “We will continue to add more amenities to the property, to become more a resort than just a private, residential golf community.”

State and Deschutes county laws require destination resorts to build one overnight lodging unit, a hotel room, for example, for every 2.5 individually owned home lots. But during the recession, many resorts put plans for new hotels and other public amenities on hold — after applying for and receiving extensions with the county.

The result is what Paul Dewey, executive director of Central Oregon LandWatch, a watchdog group, refers to as “zombie subdivisions.” Developers planned for and built resorts, he says. “But because it’s a high risk idea and doesn’t come to fruition, what you’re left with is a subdivision.”

Emboldened by record numbers of tourists, developers who struggled during the downturn now aim to activate resort properties by moving forward with public accommodations. According to the Central Oregon Visitors Association, tourism in the area is in its third straight year of consecutive growth and is setting new records for visitor volume and revenue. The region now welcomes 3.8 million overnight visitors annually.

The number of rental night stays at Pronghorn, which restructured several times during the economic downturn, increased by 80% this past year, says Meredith Strodel, a public relations representative. The resort will break ground on a long awaited $20 million hotel  and spa this summer, with completion slated for summer 2016.

A Pronghorn resident, Tebbs says that resort is still working through its relaunch. Pronghorn has built 60 homes since opening. Three new homes are under construction.

Tetherow has already built significant new rental accommodations — in the form of a new hotel that was completed last year. A second restaurant opened in 2013. In the past 12 months, Tetherow has sold 38 homes and townhouses, priced between $800,000 and $2 million. Home sites are selling for $200,000 to $400,00. That’s below the peak prices of the boom, Tebbs says, but up 35% from the bottom.

Located on the edge of Bend’s urban growth boundary, Tetherow’s development trajectory also hints at a new stage in the evolution of the destination resort. Unlike outlying resorts that attract second home owners, many Tetherow residents are executives living and working year round in Bend, says van der Velde: “business, tech guys, doctors, lawyers.” He says the location, the national forest on one side and the city on the other, is a draw for young professionals. “We don’t have to create amenities,” van der Velde jokes. “We have Bend.”

Destination resorts were conceived 40 years ago as a way to expose tourists and prospective business owners to the region, says Roger Lee, executive director of EDCO, Central Oregon’s economic development agency. The gamble paid off. “Resorts became a path to economic diversification, not only with the direct employment that they generated, but by expanding opportunities for development and growth in other industries.”

No longer a haven solely for retirees or ski buffs, Central Oregon has become a hub for aviation/aerospace, high technology, biosciences, outdoor recreation gear and apparel, brewing and distilling and advanced manufacturing businesses. What’s more: executives running those businesses now appear to be creating a resort model in their own image. Hence Tetherow, a destination van der Velde describes as an “urban resort,” a place where work and recreation intersect.


 

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Deanne Howe in front of her future home at Ranch at the Canyons. Howe explains the location’s appeal: “I can live on a farm but get to watch other people do all the work.”

As once languishing resorts rebound, projects that failed outright are reinventing themselves. Some, like the 2,030-acre Remington Ranch near Prineville, are still working through the detritus of the financial collapse. In February, a judge in Portland approved the sale of the resort to Columbia State Bank. The project folded before any homes were built.

Others properties are farther along. In 2012, Vancouver, Wash. developers Patrick Ginn and Jeff Creagan purchased a controlling interest in Ranch at the Canyons, a 1,700-acre gated community at the base of Smith Rock near Sisters. In the 1990s, the property was a poster child for the contentious land use battles fought over new resort and subdivision development. After trying unsuccessfully for eight years to gain approval for a traditional golf resort — former Gov. Kitzhaber vetoed the proposal twice — the original owners converted the property into a “private farming community,” a designation that requires a certain amount of active farming on site.

During the recession, the property was put on the auction block. Ginn and Creagan purchased their stake for $2.3 million, a fraction of its original $30 million value.

Instead of a golf course, the community features “Tuscan” style amenities: a working ranch, stables, a vineyard and a 600-acre conservation area. Sounding a familiar refrain, Ginn says he and Creagan have spent the past few years focusing on “understanding and appreciating the culture and the vision.” This year, “the goal is building and completing the community.”

The auction purchase included 60 home sites. The partners have since scaled the number down to 46. Nineteen are for sale; four sold in the past 18 months and two of those are under construction. Ginn says one of the new buyers is a  San Francisco couple who plan to stay at the ranch on weekends and during the summer. “They reviewed all the destination resorts and liked what we had to offer,” he says.

Ranch at the Canyon sites are going for $500,000; home prices run $1.5 million to $2.5 million. “The market isn’t like it was at the peak; that wasn’t sustainable,” says Ginn. “But it is coming back.”


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Sunriver is undergoing a $50 million expansion and remodel, including a revamp of the main lodge.

Unlike the newer resorts, Central Oregon’s historic tourism properties — Black Butte and Sunriver — didn’t take much of a hit from the economic downturn. “Where we saw the fall off was more to do with corporate America than leisure travel,”  says Sunriver managing director Tom O’Shea. Public sector projects, such as improved road access to Bend and the Redmond airport, also helped sustain the number of visitors, O’Shea says.

Not that Sunriver has been resting on its laurels. To lure a younger, more sophisticated generation of resort goers, the 45-year old resort has embarked on an ambitious, six-year $50 million remodeling and expansion effort. This spring, Sunriver completed an extravagant new outdoor aquatic facility, “The Cove,” featuring a 3,200 square-foot pool, fire pits, cabanas, a restaurant and bar, children’s play areas and pond habitat for the spotted frog, an endangered species.

The main lodge and restaurants have also undergone a significant remodel. “We needed to do this transformation to take Sunriver into the future,” O’Shea says. “We wanted to bring it to the level of what is consistent with 4-star resort.”

In response to growing demand, Sunriver has also announced plans to expand its Caldera Spring subdivision. Of Caldera’s existing 320 lots, only 20 remain. The proposal, in the master planning phase, features 490 residential lots on 614 acres known as Pine Forest.

As the housing market improves, will the land use controversies and financial challenges that dogged destination resorts return? Observers don’t expect that to happen, although it may be too soon to say. If there were an uptick in new rural subdivision development, “we’d be concerned,” Dewey says.

But demographic and development trends suggest the market, even if it returns in full swing, is moving in a different direction. Dewey, like Lee and Tebbs, points to the fact that most of the resort growth today is occurring around established communities, near Bend (at Tetherow) or Sunriver.

There is also a limit to the number of new resorts that can be built. Under state law, resorts aren’t allowed within 24 miles of cities over 100,000 people. With a population of 83,000, Bend is reaching the limit.

In the meantime, developers who survived the torpor of the recession are feeling flush. Van der Velde credits “clear vision and persistence” for keeping the dream of Tetherow alive during the downturn. As the economy continues its upward trajectory, he appears to be thinking the unthinkable. “We have a lot of cash. Maybe we will get a little leverage. But Europeans will leverage 50%, 60%, 70% — never 80% or 90% like Americans.”


The millennial golfer 

Resorts are stepping up efforts to lure young people onto the course. Pronghorn, for example, recently added a “foot golf course” that uses a soccer ball instead of a golf ball. The goal was to make golf “a bit less stuffy,” says general manager Spencer Schaub. For the same reason, Tetherow has started using GolfBoards, an electric skateboard that takes the place of a golf cart. Golf Boards are manufactured by a Bend company. On May 29, Tetherow will hold its inaugural Golfboard Open Tournament.

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