It's now been more than three years since the Shadow Mountain development became part of Cranbrook, as the City extended its boundaries to include the choice chunk of land on the banks of the St. Mary River almost five km. from downtown.

Much fanfare accompanied the development which was to include an 18 hole championship golf course and an upscale residential development of 404 residential lots in a park-like setting on a river renowned for some of the finest dry-fly trout fishing in the Interior of B.C.

Five years later the fanfare is subdued as Shadow Mountain, like many similar resort projects all over the province, struggles to live up to its early dreams and expectations. A world-wide recession beginning in 2008 shattered many of those dreams. And even though the Great Recession is supposed to be officially over things have not returned to "normal." The real estate market for recreational resort communities is down. Sales are slow, recovery tentative at best and some even wonder if we'll ever return to the boom years of the late 1990's and mid 2000's.

Despite this, Shadow Mountain has opened a stunning golf course that has started to garner awards and some equally stunning homes have started to get built, albeit three years late. So wither goes Shadow Mountain now? For this, you've got to talk to Fred Mehl, a former banker and partner in the development along with Gary Barrett and Trent Koehler, the other two partners in the project.

Mehl, the main visionary behind the project and its public face, was the keynote speaker at a Reverse Trade Show sponsored by Kootenay Business Magazine and the Kootenay Rockies Regional Economic Alliance (KRREA) Nov. 4, 2010, and after he candidly addressed an audience of more than 100, he gave an interview to the Daily Townsman.

Despite many rumors to the contrary, Shadow Mountain is not for sale, Mehl says. "Shadow Mountain has never marketed itself. We've never advertised. We've never been listed by anyone with the intention of selling. We've been approached over the last two or three years by no less than 10 outside organizations that have attempted to make us an offer."

The only offer Shadow Mountain has seriously entertained was one late in 2010 by a party that wanted to be an equity partner in the development. That offer has since fallen through, Mehl says. "At this point in time, nothing is happening. So we're going out and trying to get our own financing."

Despite the initial good start Shadow Mountain had, Mehl says he can remember the day when things started to go sideways. "It was in September, 2008, and I was in San Francisco and I knew it was bad. It didn't hit us right away, but it hit us two or three months later. And then the HST announcement; lots of bad news."

The advent of the HST coming into effect July 1, 2010, was like a double whammy for the project because it meant purchasers from outside the province buying a lot that wasn't going to be their primary residence would now be hit by an extra seven per cent tax on their purchase.

"When people buy lots they have certain expectations," Mehl says. "In 2007 and 2008 when we were writing contracts, purchasers were expecting to pay GST which was five per cent across the country ? Now if they buy a $300,000 lot, they're looking at an additional seven per cent which is $21,000 and $36,000 in total taxes on the sale which is a pretty hefty number."

Even though there is a HST rebate for people paying $300,000 or more if the lot or home is their primary residence, this doesn't help Shadow Mountain much, Mehl explains.

"The majority of our clients are out of town and out of province. Also, a lot of people will be building a second home on an interim basis and 10 years down the road it will be a permanent home, but they won't be able to apply for a HST rebate at that time."

However, 2010 also saw some good news for Shadow Mountain. Despite the slow economy and the impact of the HST, some 53 lot "pre-sales" (deposit only) were completed at the project by the end of 2010, releasing money to flow into the hands of the developer. Close to half a dozen homes had also been started by the end of the year with the potential for another 150 pre-sold lots to complete and generate more building and more revenue in 2011 and beyond.

This is good news for the long-delayed development, but there could still be some bumps along the way depending on the real estate market this year. "We know that not everybody in that group will close," says Mehl. "But in this group there are a bunch of very well qualified clients that love Shadow Mountain and have been interested in the project from the very beginning."

This could result in a brighter future for the company, he says.

"We're looking at moving another 20 to 25 people towards closing. That represents four of five million dollars that we can ultimately pay down to our lenders. We're also working with our investors to shore up their investment so that they have a tangible security by holding real estate as opposed to holding a share. And we're being creative in talking with our bankers on how we can restructure things as well."

Mehl says the original plan with Shadow Mountain was to borrow investment capital to get the project started and within a year pay it back from pre-sales of the properties. "And life would have been good. We could have moved forward." But all that changed when the recession struck in 2008 and many of the pre-sales collapsed, he says. People who didn't go forward with their pre-sales forfeited their 10 per cent deposits. This was a blow to both them and Shadow Mountain, Mehl says.

"I would have much rather had them close on their lots than have them walk and forfeit their deposits. The ones that walked cost Shadow Mountain about $6 to $7 million in lost sales, Mehl says.

Asked how he feels about the lost sales and the rocky road Shadow Mountain has traveled since opening with so much promise, Mehl is philosophic. "There's one thing getting pre-sales, but if you can't actually close on the real estate, well? But I know developers of this magnitude of project have struggled all over British Columbia because of the timing. Some of these projects are taking 15 years to come to market."

Lots at Shadow Mountain have been selling in the $180,000 to $300,000 range and this compares very favorably with similar projects in the Okanagan and Lower Mainland where it's hard to get a single building lot for anything less than $500,000. "Our river lots are $300,000. So they are already half the price of anything you would have brought in the Okanagan. And we believe that represents value," says Mehl.

And thanks to Cranbrook City Council extending Shadow Mountain's PLA (Preliminary Lot Approval) for eight years Oct. 28, the development has a new lease on life and can market more aggressively in the future. Currently the project has 278 serviced lots it can sell and the PLA enables more lots to be serviced in the future if more inventory is needed. The PLA also covers lots that were pre-sold in the past but still haven't completed.

Shadow Mountain is even trying to help some of the pre-sale purchasers that walked away from the project earlier by offering them a credit on a future lot when the economy turns around again. "We try to work with everybody," says Mehl. "We want it to be a win-win situation."

Asked what message he would like to get out to the community, Mehl says, "I think people are still waiting and watching. We have done everything we can to diligently ensure that our real estate prices hold. We don't want to discount because that has a negative reflection on the value of what we're selling and what people have already bought.

"I know there's other developments (in the Okanagan, Lower Mainland and Vancouver Island) giving 50 per cent discounts, but they were selling comparable inventory at twice or three times what we were. We truly believe we have value here. I want people to understand that, yes, Shadow Mountain with the economy and the HST has its challenges.

"But we are fine. Shadow Mountain's debt load is a third of any other project this size. It's a very viable project, and from an investment standpoint, we just need to wait for the cycle to change again and get back to the 2006 and 2007 momentum."

And it doesn't hurt that ScoreGolf Magazine named Shadow Mountain the second best golf course to open in Canada in 2010, just behind Predator Ridge in Vernon.

Mehl says Shadow Mountain will be taking a higher profile in the community this year. "Do a lot of the locals have skepticism? I think they have, but a lot of them don't understand the opportunity and I think it's up to us to do a better job of sharing that."

Shadow Mountain has already put $40 million into the local economy and this is only the beginning because Shadow Mountain is more than just a golf resort, says Mehl.

"Here (Shadow Mountain), we're selling community lifestyle. We're looking at selling and having people integrate into Cranbrook and live here. Everybody believes Shadow Mountain will eventually be their primary residence."