Business: RH Filings Offer Glimpse Into Company’s Aspen Vision

Recent regulatory filings by home furnishings company RH offer a glimpse into its vision for Aspen but no timeline for the completion of what it calls an “ecosytem” comprising a hotel, gallery and retail, in addition to residential real estate.

RH is partnering with developer Mark Hunt on multiple residential and commercial real estate projects in Aspen, and in January 2021 announced it was injecting, through what’s called an initial equity investment, approximately $105 million into the development.

“The investments include properties that will be developed into retail locations, hospitality concepts, residential developments and workforce housing projects,” the company said in its 10-K annual report issued March 29. “We have also selected Aspen as the location to develop the first RH Ecosystem inclusive of an RH Bespoke Gallery, RH Guesthouse, RH Bath House & Spa, RH Restaurants and our first RH Residences. We plan to operate the RH branded businesses and be a real estate investor and partner for the remaining properties.”

Formerly known as Restoration Hardware, the Corte Madera, California-based RH, along with Hunt are redeveloping the following properties:

• 314 E. Hyman Ave., from where the Crystal Palace used to operate, is planned for a RH Guesthouse hotel with nine bedrooms and luxury offerings.

In a March 29 earnings conference call, RH CEO Gary Friedman said, “You’re going to see the first RH bathhouse and spa in Aspen. And you’ll see other things. So I think this is — this brand is going to evolve and become something that the world has never seen.”

• 434 E. Cooper Ave. is slated for a two-story building that would include a RH Bespoke Gallery and other retail spaces.

• 500 W. Hopkins Ave., site of the former Boomerang lodge, is planned for a residential development.

• 1235 East Cooper Ave. is a residential project.

• RH and Hunt also will be marketing a Red Mountain home.

Construction recently resumed on the RH Guesthouse, a project that has been delayed by change orders and other setbacks. A news announcement made last year from RH said the lodge is eyed for a 2022 opening, but it is unclear whether it remains on schedule. RH is a financial partner but is not directly involved in construction management.

“We have not historically operated directly in all phases of real estate development including managing all aspects of construction of large scale real estate projects,” the company said in its 10-K filing. “With respect to projects such as the future Gallery and Guesthouse in Aspen, we are broadly undertaking increased development risk with respect to our real estate investments and these risks could increase our financial exposure to development cost overruns or other negative factors stemming from these real estate development efforts.

“Although our strategy in assuming greater risk and responsibility for real estate development in certain projects such as the Aspen project is designed to achieve greater financial returns and a higher overall return on investment, we could face increased downside risks if we encounter difficulties in implementing these strategies such as cost overruns or delays in construction.”

Hunt has previously said the projects, though some have been delayed, will get completed.

The structure between RH and Hunt involves three privately held, limited liability companies controlled by Hunt. RH is a nonmanaging member of the LLCs.

“We account for our investments in the Aspen LLCs using the equity method of accounting because we do not have a controlling financial interest but have the ability to exercise significant influence over the Aspen LLCs,” the report said.

The LLCs, the report said, “have the purpose of acquiring, developing, operating and selling certain real estate projects in Aspen, Colorado. We hold 50 percent of the membership interests in each Aspen LLC.”

According to its press release issued in January 2021 touting the Aspen ecosystem, RH said: “The RH Guesthouse at the Historic Crystal Palace … will feature guest suites with fireplaces, a live fire restaurant, wine vault, private rooftop pool and dining terrace with views of Aspen Mountain, and the brand’s first RH Bath House & Spa. The RH Residences at the Historic Boomerang Lodge will include up to five fully furnished four bedroom custom homes, and The RH Residence on Red Mountain will be a fully furnished six bedroom home with multiple terraces and an infinity pool with views of downtown, Aspen Mountain and Independence Pass. All of the RH Residences will include membership to the RH Bath House & Spa, plus priority reservations at the brand’s restaurants and private dining venues.”

In its annual report, the company reported that its revenue increased 32% in 2021 to $3.8 billion versus $2.4 billion in 2020 and was 42% over 2019.

By: Rick Carroll I  The Aspen Times I April 2022