Light at the end of the tunnel

While several downtown building

projects are moving toward completion or to the drawing board, most

Whitefish subdivisions are at a standstill. The economic recession

has played havoc with residential construction, but one local

developer sees light at the end of the tunnel.

Back in early 2008, Bill Kahle had

three developments underway — a mixed-use project in the

gentrifying Railroad District, a large commercial site near The

Wave called Baker Commons, and a 12-acre residential project right

above The Wave called O’Brien Bluffs.

Then came the Wall Street crash and

credit crisis. While people watched their retirement portfolios

plummet, banks tightened up their lending policies, and new

residential construction screeched to a halt.

“Our plan was to develop and sell lots

at O’Brien Bluffs to spec-home builders and families, based on the

Creekwood subdivision model, where I once lived,” Kahle recalls.

“Nothing had sold yet. We had a few on contract. All the

subdivision work was done except for the street trees.”

Kahle and his backers decided to hold

off on filing for final plat with the city, which would have

changed the project’s tax structure.

“We weren’t sure how bad it would get,”

he said. “We decided to wait six months to the next buying

season.”

O’Brien Bluffs is located on a low hill

surrounded by trees. It has a rural feeling, but it’s a short

distance to downtown for walkers and bikers.

“I timed myself,” Kahle said. “I can

make it to Coffee Traders in under four minutes.”

The subdivision has 37 residential

lots, with sidewalks on both sides and a new city park. A

stormwater system with underground storage tanks is in place and

operational. Everything is in place except for buyers, something

Kahle thinks will change this year.

“Last year, we had at least seven

serious inquiries,” he said. “A mixture of in-city and out-of-city

people.”

The offers, however, didn’t match what

Kahle and his backers needed, and rather than apply for final plat

for just one buyer, they decided to hold off again. They went back

to the bank and came up with a “long-term workout” — not an easy

task considering all that had happened over the past two years.

“The rules of real estate development

have changed drastically — on the lending and the developing

sides,” Kahle said. “The recovery of the economy is contingent on

banks acting like banks again.”

Kahle said he heard of people with

adequate income and credit scores getting loans rejected “for a

little nuance.” On the other hand, a speculator approached Kahle

about buying 10 lots at once. Not only was the price off the mark,

but Kahle’s goal is to have homeowners or spec-home builders put up

the houses.

“We want end-users,” he said.

With a little help from his bank,

Kahle’s investors recently put some money in an escrow account so

two houses can be built on the north side of O’Brien Bluffs. Tom

Watson Construction, of Kalispell, will build the homes starting

this spring, with Kahle managing the work.

The homes will fit the neighborhood and

hopefully the market, Kahle said — 1,600 square feet, three

bedrooms and 2 1/2 baths, with an unfinished bonus space above the

garage. Prices will be in the $275,000 range, he said. Gone are the

days of buyers mortgaged to the hilt seeking a McMansion to

flip.

“There’s been a change in what buyers

want — it’s not so much what they can afford as what they need,”

Kahle said.

Kahle has confidence in the local real

estate market. Whitefish has a broader appeal than most towns in

Montana — and the rest of the Flathead, he said. And with lots

ranging from 7,500 to 30,000 square feet, O’Brien Bluffs should

appeal to families or retired couples who want an alternative to

condos.

“All the amenities of Whitefish are

still here — Glacier Park, Whitefish Lake, Big Mountain, the

O’Shaughnessy and Alpine Theatre Project, The Wave,” Kahle said.

“There’s also the community spirit. These are great, great people.

I learned that from the outpouring of support after my accident

last year.”

Developers need to dig in and find a

way to buy themselves some time, Kahle said. In some cases, that

will mean throwing developing costs out the window and just trying

to cover the debt.

“There are psychological reasons for

why we got into this mess,” he said. “We need more jobs, obviously,

and the market fundamentals need to change. But people are scared

of real estate, and that needs to change.”