Lake Tahoe Ritz-Carlton Commands $120M

Kennedy Wilson sold its interest in the 170-key hotel, which underwent capital and operational improvements including expanded culinary and wellness offerings and enhanced outdoor attractions.
Ritz-Carlton, Lake Tahoe
Ritz-Carlton, Lake Tahoe

Kennedy Wilson has sold Ritz-Carlton, Lake Tahoe for $120 million, nearly seven years after acquiring the 170-key hotel in Lake Tahoe, Calif., in a $74 million deal that also included 23 condominiums and a 3.4-acre development parcel.

During its ownership, Kennedy Wilson increased the ADR of the hotel by 63 percent and revenue per available room by 100 percent as a result of a number of capital and operational improvements. The company expanded the property’s culinary and wellness offerings, and enhanced outdoor attractions, children’s activities and summer programming.

“When we and our partner acquired the property in 2012, the Ritz-Carlton, Lake Tahoe was the premier highlands resort west of the Rockies,” William McMorrow, Kennedy Wilson’s chairman & CEO, told Commercial Property Executive. “Situated mid-mountain on the Northstar California ski area, it was well-located and we saw significant potential for operational upgrades and capital improvements to take it to the next level.”

Lake Tahoe is one of the country’s most popular tourist destinations, which has undoubtedly benefitted from the tech boom in San Francisco and the upswing in that economy.

One of the big changes the company made to the resort was installing a new multi-level dining and bar facility called Lake Club, which transformed the Ritz-Carlton, Lake Tahoe from a primarily winter resort into a year-round destination.

“Our experience with the Ritz-Carlton, Lake Tahoe is a great example of our opportunistic and value add investment strategies—buying where we see strength in the local market at a discount to replacement cost and with the potential to grow revenues through operational and capital improvements,” McMorrow said. “We also provided guests indoor and outdoor lakefront amenities and new recreational opportunities through the development of Lake Club, which has been very well received.”

Kennedy Wilson also sold out all 23 condo units at The Ritz-Carlton Residences in 2016 for a total gross sales price of approximately $50 million. “We also saw opportunity in the sales of the 23 penthouse units at the Ritz-Carlton Residences as the Bay Area economy and housing market were on the upswing,” McMorrow said. “Importantly, we had the opportunity to acquire the property at a significant discount to replacement cost.”

The company plans to recycle the proceeds from the sale of the Ritz-Carlton, Lake Tahoe into new strategic investment opportunities.

Deals across the pond

The global real estate company has been busy. Just last month, Kennedy Wilson sold a portfolio of hotels located across the U.K. for $54 million. Between the two deals, the company made a profit of $73 million over the lifespan of both investments. In that deal, Kennedy Wilson sold the remainder of a loan portfolio backed by six hotels totaling 864 keys, obtaining a 45 percent return on cost over the life of its investment.

In November, Kennedy Wilson signed two of the largest European deals in the company’s history with two major tenants—WeWork and ASOS—in its London-based properties.

Image courtesy of Kennedy Wilson