No residents yet at Little Nell project in Aspen
December 16, 2008
ASPEN ” Everything looked golden for the Residences at the Little Nell when the fractional ownership project started coming together at the base of Aspen Mountain earlier this decade.
If real estate boils down to location, location, location, then RLN, as the project is known, has Aspen’s most commanding address.
The luxury condominiums are located next to the Silver Queen Gondola at the base of Aspen Mountain.
The management arrangement for the condominium-hotel was the icing on the cake. The 26 condos and eight hotel suites will be managed by the Aspen Skiing Co.’s Little Nell Hotel, Aspen’s only Mobil five star and AAA five diamond property.
So RLN’s well-heeled buyers could rest assured they would be pampered in their luxury digs.
CWA Development LLC earned approval relatively easily in Aspen’s usually contentious land use review process. After an initial proposal was rejected, the current plan was approved by the Aspen City Council 4-1 in October 2004.
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Timing of the sales of the six-week ownership interests in the three- and four-bedroom units couldn’t have been better than when they started in July 2005. Aspen’s real estate prices were surging and RLN had little competition in the ski-in, ski-out niche.
Sales went so well, in fact, that RLN’s marketing firm referred to the prevailing market conditions as “a perfect storm.” And sales prices reflected that. The prices for shares in 19 three-bedroom units started at $1 million and reached $1.9 million. Of the 152 interests available in those condos, only eight were unsold as of November.
The seven four-bedroom units sold out. Prices started at $1.25 million and soared to $3 million.
But the golden project has been somewhat tarnished between the approval and now. As it nears completion, there are construction delays, litigation with neighbors and objections from a handful of angry buyers.
Problems arose with unstable soils right after ground breaking. The owners of three large homes adjacent to the project on the lower slopes of Aspen Mountain claim work on the condominium-hotel’s foundation shifted soils around their houses, making two of them uninhabitable. The developers are facing three lawsuits over that issue.
The soil instability also threw the construction schedule out of whack. The project was initially going to be completed in summer 2008. Swinerton, the general contractor on the job, scrambled to accelerate work this fall and make up lost time.
A handful of buyers filed a lawsuit last month to try to get out of their contracts for reasons related to the construction delay. Initially, four buyers claimed RLN defaulted on a key provision of the contract because the developers declared a “casualty” which could affect the closing of contracts and opening of the project. That casualty was the unstable slope and the retaining walls required to allow work to progress on the foundation.
The four buyers want their earnest money refunded and their purchase agreements nullified. Two more buyers joined that lawsuit this month. Those six buyers have contracts on eight interests in the project.
The developers contend they didn’t default on the contracts, said Brooke Peterson, a representative of the ownership group. R.J. Gallagher, whose firm is the managing director of marketing and sales for RLN, said it is important to keep the lawsuit in perspective. There are 166 buyers of 200 fractional interests in the project, he noted. So the parties in the lawsuit represent only a small portion of the buyers.
The latest lawsuit by disgruntled buyers also raises questions about the project’s recent ability to obtain a conditional certificate of occupancy (CO) from the city of Aspen.
The building department granted that conditional CO after a series of inspections over the long Thanksgiving weekend. The CO was issued on Sunday, Nov. 30 ” right at a critical deadline for RLN’s developer.
RLN’s contract with the buyers said the sales would be closed by Dec. 31, 2008. The closings cannot occur until 30 days after RLN received its CO from the city. If the CO was delayed further into December, the developer couldn’t close on the sales by the end of the year and buyers could have exercised their right to terminate the deals.
The lawsuit by the six buyers who want out of their deals claims that the CO was granted even though there is substantial work still underway on the building. Building department officials specifically said that all areas of egress and ingress should be usable and free of construction debris.
“On December 1, 2008, all of such areas were littered with construction materials, scaffolding, plastic sheeting, ladders, cement mixers, wheel barrows, tool sheds, half-built walls, piles of cut and uncut stone, piles of lumber, masonry saws, wet concrete, debris, pallets of mortar, overflowing dumpsters, portable restrooms for construction workers, plastic lean-to work stations, loose wiring, electrical supplies …,” said a lawsuit filed by the prospective buyers’ attorney, Neil Karbank. He included pictures of the work site as exhibits to document what he described.
The lawsuit claims that the developer “hurried dangerously” and with questionable workmanship so that it could obtain the temporary CO and prevent buyers from exercising their right to terminate the contracts.
The developer “exerted enormous and undue pressure on the city of Aspen building department over a period of weeks to issue a certificate of occupancy,” the lawsuit said.
Peterson credited the city building department for working with the contractor and developer on the inspections but he denied there was any favoritism.
Stephen Kanipe, the city’s chief building official, said inspectors follow “an established process” for issuing COs and conditional ones as well. He said he’s been honing that process for the nearly 20 years he has been with the department.
It isn’t unusual for building inspectors to work on weekends or during holidays at the start of ski season to help businesses open, Kanipe said. He listed the Little Nell Hotel, Grand Hyatt Hotel, Ritz-Carlton (now the St. Regis) and Highlands development as examples. That same process was applied to the RLN project, he said.
“Our track record over the last two decades shows we take a posture of cooperation and a posture of public service,” Kanipe said.
He said the city’s inspectors made a “litany of inspections,” and the contractor had to correct some shortcomings before passing some of the tests. Kanipe added that the scrutiny would show no slack was given to the project.
Kanipe explained that COs were issued for the individual residential units at RLN. That signifies that, in the building department’s judgment, they can be occupied and accessed safely. The building was given a conditional CO. Among the many conditions is a requirement for safe entry and exit.
No CO of any type has been issued yet for the eight hotel units, eight employee housing units, or the restaurant and retail space that will be part of the Residences at the Little Nell.
The lawsuit filed by Karbank argues that since the project as a whole didn’t receive the CO by Nov. 30, the developers didn’t live up to their contractual obligations.
Millions of dollars are at stake in the litigation with the six buyers. In theory, the outcome of the lawsuit could affect the contracts of other buyers who don’t proceed to closing on their fractional interests.
The total sales exceed $200 million. If some buyers are allowed out of their contracts, it’s uncertain if the developer could get as much for those fractional ownership interests in today’s market.
However, satisfied buyers are preparing to close.
“We have presently scheduled to close in excess of 70 percent of our contracts before the end of January,” Gallagher said. “The vast majority of are owners are excited about closing and have already reserved their vacation weeks beginning in February of 2009.”
The remaining work on the building won’t interfere with the owners’ experiences, Peterson said. The restaurant is scheduled to open later this ski season. When the retail spaces will open is unknown.
Meanwhile, the Little Nell staff is undertaking “sleep tests” to make sure the units are ready for owners, Peterson said. Most of the management of RLN is transferring from the Little Nell Hotel, including general manager Barbara Piper, who is an 18-year veteran at the hotel, according to Jeff Hanle, Aspen Skiing Co. director of public relations.
The 19 three-bedroom units range in size from 2,500 to 3,100 square feet. The seven four-bedroom units go from 3,600 to about 4,000 square feet. Owners’ privileges include 24 hour in-residence dining and room service; 24-hour maid service, on-demand transportation to the airport; private, underground, heated parking when occupying; and furnished units with gourmet kitchens and grand fireplaces.