Residences at Little Nell at critical point in dispute
ASPEN, Colorado – One of the few bright spots in the Aspen real estate market – the Residences at The Little Nell (RLN) – is seeing its sales activity slow and its prices drop as it deals with the recession and a legal fight with some disgruntled buyers.
After starting the year with the sale of about 70 fractional ownership interests, seven have sold since May 1, according to deeds filed with the Pitkin County Clerk and Recorder’s Office.
In addition, sales prices at the Residences, as in a lot of neighborhoods, are falling.
The project’s developer remains upbeat about sales prospects this summer and said “numerous” closings are scheduled during the next 45 days.
The three-bedroom luxury units initially were placed under contract for $1 million when reservations were first accepted in 2005, and they peaked at $1.9 million.
One of the latest sales of an ownership interest in a three-bedroom unit was for $900,000, according to the clerk’s office. The most recent sale of an interest in a three-bedroom unit was $1.2 million.
R.J. Gallagher, managing director of marketing and sales at RLN, said the $900,000 sale was an anomaly. The buyer had previously purchased two three-bedroom units at $1.9 million each. He was offered the $900,000 interest from a defaulted contract. “So sales have not dipped to the $900,000 price point,” Gallagher said.
In a different transaction this spring, the first resale of a RLN unit turned sour for the seller. Records show that Andrew Harris bought a one-eighth interest in a three-bedroom unit for $1,575,000 on Dec. 30. He sold that interest to Brian Sharples for $1 million on June 1.
Harris apparently didn’t shed the unit in a distress sale. Records show he liked the project well enough to spend $1.75 million for an ownership interest in a four-bedroom unit at RLN on May 11.
Gallagher downplayed the significance of Harris selling his three-bedroom interest for $1 million. The lowest-priced three-bedroom unit listed at $1.45 million in the Multiple Listing Service used by members of the Aspen Board of Realtors, he said.
RLN was the latest and greatest project in a flurry of fractional development in Aspen and Snowmass Village. The luxury condominium project has a prime location at the base of Aspen Mountain. It is managed by the Aspen Skiing Co.’s highly acclaimed Little Nell Hotel. The project has 26 slope-side condos; 19 of them have three bedrooms, and seven have four bedrooms. There were 208 ownership interests available, and the development firm said it had contracts for about 200 of them.
However, legal disputes cloud the fate of scores of contracts. Several lawsuits were filed by parties who didn’t want to close on their contracts. Lawsuits involving contracts on roughly 55 interests have been filed in Pitkin County District Court. Those cases are headed to arbitration, as is spelled out in the contracts. Other parties with contracts decided not to close on their deals and instead asked for arbitration hearings. No arbitration hearings have been held yet.
Since 80 ownership interests have closed, that indicates the fate of 120 contracts are yet to be settled. Sources familiar with the disputes said the RLN developer offered to settle the disputes in May by selling the three-bedroom ownership interests for $1.2 million and the four-bedroom units for $1.75 million, or at the original contract price, whichever was less. Disgruntled buyers also had the option of walking away from contracts with a refund of 35 percent of the earnest money.
Gallagher declined to discuss the “settlement conversations.” Other sources said the parties with contracts had until May 29 to accept the offers.
While Gallagher said RLN has “numerous closings scheduled over the next 45 days,” the other sources said they are aware of only a few parties that accepted the deals.
If some people accept the 35 percent of their earnest money and walk away from the units, RLN faces a challenge attracting new buyers in this market. Veteran real estate agents in Aspen said the fractional market has been hit particularly hard by the credit crunch.
Gallagher was confident that RLN is poised for a strong summer. About 70 closings during the first four months of this year buoyed sales in the slow Aspen market.
“All in all, we feel fortunate, based on what is taking place in the economy both locally and nationally, to be in the sales position we are in, and we look forward to a strong summer sales period,” he said.
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