El Jebel project’s new owner capitalizes on lower costs
July 22, 2010
EL JEBEL – While the recession has sapped the financing and frayed the nerves of developers throughout the Roaring Fork Valley, the owner of one midvalley project said Wednesday he is capitalizing on low construction costs.
Dave Forenza broke ground this summer on the second phase of the Shadowrock townhouse project in El Jebel after acquiring the troubled development on March 31. His team is working on a building with five new townhouses. It’s one of the few major projects that started this year in the valley.
Forenza, a contractor and developer from Avon, said the recession is allowing him to build the townhouses at such a low price that he will list the units for less than he initially figured. The new prices are in the low- to mid-$500,000 range for both new units and a handful of existing units in the initial phase of Shadowrock, he said. The largest units will sell in the high $500,000s to low $600,000s.
“The feeling is really positive around here, especially after we dropped the price,” Forenza said.
Some observers in the real estate development industry privately questioned Forenza’s wisdom when he acquired the project. Shadowrock was approved for 100 units by Eagle County. The site is across Highway 82 from City Market. Blue Ridge Investments Inc. constructed 30 luxury townhouses before running out of financing in fall 2008. When the going was good, Shadowrock was a poster project for runaway appreciation. Sales prices topped out at $1.1 million.
Construction stalled when the recession hit. Blue Ridge wasn’t able to sell seven of the 30 units it developed.
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Forenza learned of the availability of Shadowrock from Colorado Capital Bank in Eagle, which he works with. He acquired the property and approvals for the 70 undeveloped units for $16.5 million, according to a deed filed with the Eagle County Clerk’s Office. Acquisition of the seven existing but unsold units plus his construction loans boosted his total indebtedness to about $22 million, he said.
Forenza can recoup a portion of his investment in infrastructure if a neighboring development gets approval and moves forward. Ace Lane is seeking approval for the adjacent Tree Farm project and would share some road improvements. Forenza declined to disclose the amount he can recover if Lane’s project progresses.
Forenza is confident he made a wise investment simply because construction costs are so “phenomenal.” He was approached directly by manufacturers of appliances, windows and cabinets, and by suppliers of everything from tile to lumber, and offered prices that are significantly lower than three years ago. The bids have also been low from subcontractors fighting to stay afloat.
He estimated that his construction trailer receives inquiries from up to six subcontractors per day, including some from out of state. The bulk of the work was awarded to firms in the Roaring Fork and Eagle valleys.
“I would say about 80 percent of the project is local,” Forenza said.
The concrete, insulator and lumber companies are from the Eagle Valley; the drywaller and plumber are from the Roaring Fork Valley. The framer is from Grand Junction, but it is a firm that works extensively in the Aspen area.
He said he isn’t exploiting the subcontractors in tough economic times. The recession has hit the “reset” button for the construction industry. The lower building costs are necessary for real estate to sell right now.
“The consumer’s going to benefit from the lower construction costs,” Forenza said.
He said he believes the construction industry must adjust to the post-recession reality. Contractors won’t reap the profits they once did, for the foreseeable future.
“You’re not going to walk away from a project with a retirement check anymore,” he said. He’s prepared to make a more modest living.
The roofing will be added next week to the five townhouses under construction. Windows and siding will start the following week. Work could be completed as early as September.
“Subs are readily available. Everybody’s ready to go,” he said, noting another change in circumstances produced by the recession.
The pace of sales of the five new townhouses will dictate when ground is broken on other buildings. Forenza is more bullish on the economy, and the housing market specifically, than many observers. As the economy continues to recover, he said there will be a shortage of new product. Shadowrock will be positioned to meet demand, and priced appropriately for the market.
“I definitely know there are very frugal buyers out there,” he said.
One of the seven existing townhouses developed by the previous owner has been placed under contract. He pointed to that as proof prices have been dropped low enough to spur sales.
The first 30 Shadowrock townhouses were designed in a rustic style. Forenza’s team redesigned the next phase as contemporary and added 300 to 400 square feet by moving a stairway to a central location. They also lightened up the units.
The largest townhouses are 2,696 square feet. Another model is about 500 square feet smaller.
Chaffin Light Real Estate was selected as the listing firm for the new units. A new website, http://www.shadowrockhomes.com, will be launched this month as part of the new marketing effort.