At the clip developer Mark Hunt is buying up commercial property in downtown Aspen, it is nearly inevitable that a 2016 city ordinance aimed at slowing down the influx of chain retailers will be tested.
That’s what a veteran property appraiser told a crowd of roughly 400 people gathered last week at the Aspen Board of Realtors annual market update luncheon at The St. Regis Aspen Resort.
“Don’t be surprised if there is litigation coming down the pike in the next couple of years, as that conditional use process gets tested”, said Randy Gold of Aspen Appraisal Group.
Gold’s company’s background includes 24,000 appraisals in the upper Roaring Fork Valley for 42 years, he said.
During the past decade, Hunt has acquired approximately $160 million in commercial property in downtown Aspen and capped off the 2010’s with the October purchase of two retail spaces and two deed restricted housing units, all located in the Isis Theatre building at 406 E. Hopkins Ave., for $13.05 million. The building’s four movie theaters were not part of the deal.
“One of the craziest sales (in 2019), in my mind, was the sale of the Isis Theatre space at $3,400 a square foot”, Gold said.
Also in October 2019, another limited liability company under Hunt’s control bought a 6,150-square-foot building at 516 E. Hyman Ave. for $8 million.
“The numbers that he’s paid for these properties is going to force him to charge very, very high rents, so who can pay that stuff?” Gold said. “Well, it’s going to be mostly, not totally, but mostly international and national retailers that are going to be able to afford $175 or $200 a square foot in rent.”
Enter Ordinance 106, adopted by Aspen City Council 2016 in response to community sentiment that ultra-luxury retailers were overrunning downtown’s commercial landscape.
While lacking the teeth council originally envisioned, the ordinance applies to future development downtown.
Under the ordinance, future stores in downtown Aspen meeting the chain criteria – 11 or more locations that share standardized merchandise, services, signs, facades and other elements would undergo a conditional land-use review by the Planning and Zoning Commission in the event of a redevelopment.
The ordinance does not apply to existing buildings. Any downtown Aspen building, however, that is torn down and replaced would be subject to the ordinance, as well as any structure that expands its net leasable space by 500 square feet or its floor area by 250 square feet.
“Now, when you tear down a building and build a new one, it’s still allowed but it’s a conditional use”, Gold said. “So, I can totally see a conflict as Mark is forced to find tenants that can pay big rents since he’s paid big prices for the property and there’s going to be a conflict in getting approval for these national formula or international chains to come in here and get approval from City Council.”
Hunt did not respond Monday to questions regarding Gold’s statement, but in an email Friday he said Gold was off base about his remarks that he reportedly has two billionaire angels who are silent investors behind his purchases.
“It is not accurate”,he said. “I wish it were true.”
Hunt started off the new decade this year by buying a majority of the condominiumized Wheeler Square building on East Hyman Avenue for $10.6 million. He confirmed that he expects to close on the purchase of the rest of the building in March.
Commercial property values have been skewed, according to Gold, because of the some purchases are out of line with the market.
“The high prices paid by these guys are driving values for a lot of downtown commercial property,” he said. “Not only is it emboldening sellers, capitalization rates are really irrelevant in most cases, and it’s making it very hard for appraisers, particularly this appraiser, to really understand what commercial properties are worth.”
While Hunt was the face behind more than $160 million in commercial property acquisitions in Aspen’s past decade, when it comes to total square footage, his downtown real estate portfolio ranks second to a couple of landlords who have been doing business here since the 1970s, Gold said.
Tony Mazza and Frank Woods own 11 properties downtown that encompass 160,000 square feet; Hunt is next with 17 properties amassing 140,000 square feet.
Six groups of investors which include Hunt, Mazza and Woods – control about 30% to 40% of downtown Aspen commercial real estate, Gold said.