CEO: Aspen Properties Multiply In Value For RH

The top executive of RH, the home furnishings company partnering with developer Mark Hunt on several Aspen projects, cited the COVID-19 pandemic, challenging city building regulations and changing interest rates as reasons for falling behind on construction activity. 

“It's going slower than we anticipated,” RH Chairman and CEO Gary Friedman told investors and analysts Thursday during the company’s first quarter report. “Our development partner likes to say, ‘probably easier to develop on the moon than it is in Aspen,’ and things are taking more time. Aspen, it's a small town.”

In January 2021, developer Mark Hunt and RH, the rebranded name of Corte Madera, California-based Restoration Hardware, announced they had joined forces to build a luxury boutique hotel, show gallery, along with retail, dining and residential properties creating what they called an “Aspen Ecosystem.” The hotel, RH Guesthouse at the Historic Crystal Palace, would open sometime in 2022, the announcement said. 

Then the global pandemic struck that March, initially resulting in a slowdown in construction activity and housing sales due to economic uncertainties. The pandemic also resulted in a surge in housing prices, however, when people left urban centers for suburban and rural areas. 

Despite the challenges in Aspen, Friedman suggested the company does not feel an urgency to finish the projects because its Aspen real estate assets are holding more than their own in value. The publicly held company has made $140 million in capital contributions to the Aspen Ecosystem's real estate and development, according to filings with the Securities and Exchange Commission. RH’s initial contribution was $105 million. 

“We're taking our time a little bit,” Friedman said. “We don't think that there's a long-term value issue with anything in Aspen. If anything, we've had great timing. We invested before the COVID boom. I mean … before anybody had clarity on that. So we believe in our portfolio and investment. 

“We've made probably two or three times our money already. So if we wanted to liquidate our portfolio today, everything we have is worth a heck of a lot more. But we didn't just do it for that. I mean, we did see what we can learn about the idea to face in some places and so on and so forth, but we're excited about it. We'd like to go a little faster.”

RH’s investments into Hunt properties include the corner block of East Hyman Avenue that intersects with Monarch Street. That’s the site of the 130-year-old Crystal Palace building where an RH Guesthouse boutique hotel is to be built. The partial tear-down of the Crystal Palace and its new construction began at 300-312 E. Hyman Ave. in 2019, predating Hunt’s alliance with RH. The Owl Cigar mural on the wall remains in place, facing Monarch Street, and has been a point of contention with the city. 

“We're at a standoff with the city on the Guest House and some arguments on if the wall that they want us to keep as historic, is historic,” Friedman said. “And we believe it's not historic and (have) proof of that.”

Ben Anderson, the city’s director of community development, was out of the office but said in a written message, “We are putting a PreApp (pre-application) together for a review of their plans for the wall and other possible exterior changes.”

According to the project’s website, the mural dates back to the building’s original tenant, the Clark Commission Co. The historic mural was repainted in 1977 and its height might have changed over the years.

“The building has been heavily altered over time which has affected the second story, brick detail, cornice, storefront, upper windows, door openings and the Owl Cigar mural,” says the website. “The limited original materials that remain will be preserved and the remainder of the corner will be accurately reconstructed. A new addition will occupy the rest of the property.”

Plans for the RH Guesthouse call for 20 guestrooms, an RH Bath House & Spa and a restaurant, cafe and rooftop terrace. The building permit remains active, said Bonnie Muhigirwa, the city’s chief building official. 

“They have continued to make minimal progress to keep it from expiring while they figure out the final tenant improvement plan,” she said Friday in written correspondence. 

​​The most progress made in the Aspen Ecosystem so far is at 434 E. Cooper Ave. Shell and core work on the corner spot where the Bidwell building once stood is near completion for the future home of an RH gallery, restaurant and retail space. The building is called the Mountain House. 

“Our Mountain House is kind of on track. Our Mountain House is the name for the big gallery we're building there,” Friedman told investors. “It’s on the best corner in Aspen. It will be a three-level experience and two levels of retail. And we're going to, I think, get a whole world of RH kind of concept there because you get such a global customer coming into Aspen, a wealthy and affluent global customer. And we’ve got a great restaurant and hospitality experience. So that’s on track for next year, right?”

RH also is working with Hunt on a residential project at the site of the old Boomerang Lodge property on the 500 block of West Hopkins Avenue and a home on Red Mountain.

 “And then we are getting into the process of the plans on the homes and things like that,” Friedman said. “We slowed some of it down just because of the uncertainty in the market right now; like do you want to build homes and put them in the market when the interest rates should decide? But it will be progressing. So it's time, usually, on some of the homes and things like that. We're taking our time a little bit.”

RH’s January 2021 announcement about the Aspen Ecosystem said, “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.”

By: Rick Carroll I Aspen Daily News I June 18, 2024