Real Estate Update
The general thesis addressed in the Jackson Hole Real Estate post was confirmed earlier this week when Real Estate of Jackson Hole announced that it would be restructuring and perhaps filing for bankruptcy. The JH News and Guide has an article today with an interview of the two majority owners.
The real estate transaction numbers listed in the post below are incorrect. In November 2008, 7 free standing houses were sold in Teton County. While not zero, this is a minuscule number and as pointed out in the News and Guide article, the real estate firms have a cost model built around processing significantly more transactions per month.
I believe that Real Estate of Jackson Hole ran into problems for a two reasons:
1. They are one of the largest players in the market and thus have a large number of fixed costs and a significant amount of employee overhead with their support staff
2. The majority of the company was recently purchased by new owners. They now need to service a significant amount of debt in addition to paying down monthly operational costs. Not to mention that the firm was sold at the peak of the bubble. Traditionally, a real estate firm is built from the ground up/grass roots level so servicing debt is not a large concern unless capital investments are made by the owners. It will be interesting to see how the downturn effects other brokers, but I would assume that most are still controlled by the original owners and that they do not carry a large amount of corporate debt.
The real estate transaction numbers listed in the post below are incorrect. In November 2008, 7 free standing houses were sold in Teton County. While not zero, this is a minuscule number and as pointed out in the News and Guide article, the real estate firms have a cost model built around processing significantly more transactions per month.
I believe that Real Estate of Jackson Hole ran into problems for a two reasons:
1. They are one of the largest players in the market and thus have a large number of fixed costs and a significant amount of employee overhead with their support staff
2. The majority of the company was recently purchased by new owners. They now need to service a significant amount of debt in addition to paying down monthly operational costs. Not to mention that the firm was sold at the peak of the bubble. Traditionally, a real estate firm is built from the ground up/grass roots level so servicing debt is not a large concern unless capital investments are made by the owners. It will be interesting to see how the downturn effects other brokers, but I would assume that most are still controlled by the original owners and that they do not carry a large amount of corporate debt.
posted by Bradley Krugh at 8:18 AM
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