A $300 million Ritz-Carlton hotel and condominium development in Lake Tahoe is expected to sell for less than a third its development costs.
Colorado-based developer East West Partners and Texas’ Crescent Real Estate Equities Co. broke ground on the 170-room hotel and 23 condominiums in 2006. The Ritz-Carlton, Lake Tahoe—“situated mid-mountain at the Northstar Resort,” according to its Web site—was completed in 2009. Besides ski-in, ski-out accommodations, hotel workers warm guests’ boots before they hit the slopes.
Holden Lim, managing director for Holliday Fenoglio Fowler L.P. in San Francisco, which is selling the property, said he does not expect a sale for another 90 days or more; the banks are currently soliciting bids from potential buyers.
Despite the well-documented troubles of resort hotels globally since the financial crisis, Lim said there are signs of revival as the broader economy gains steam. “During the global recession, there was an outcry about companies spending money, and resorts in general were hit. Now that the economy is coming back—and really strong in some areas—a lot of the resorts are picking up,” Lim said. At one point, the resort’s condominiums were under contract to sell for $1,800 a foot.
Investors clearly have evidenced an appetite for Bay Area hospitality real estate. Nineteen hotels traded in San Francisco last year, up from 15 the year before, according to Atlas Hospitality Group. Statewide, hotel sales reached a new high in 2011. In a more typical year, three or four San Francisco hotels are sold, Lim said.
“Tahoe is an extension of the Bay Area,” Lim said, and the potential for more group business is rising as the economy improves. “For companies that are looking for a retreat, it is definitely a very strong leisure market, and companies are increasing revenues and profits. Knowing that a property like the Ritz is a three-hour drive, people will go there.”
High-end resort development is risky at any time, said Alan Reay, president of Atlas, and the timing on the Tahoe property was very tough. Lake Tahoe has been especially hard hit by the recent recession with multiple property foreclosures and a planned convention center never consummated.
“It is tough to get to South Lake Tahoe unless you are flying in on private jet,” he said, and the resort is reliant on the ski season, even if it is able to pull in patrons who want to hike, bike and recreate at other times of year. Still, he said, “It is a beautiful property.”
Lim said buyer interest is strong, primarily from private-equity firms, foreign groups, opportunity funds and high-net-worth individuals, who are responding to Tahoe’s winter and summer leisure business.
Image courtesy of www.lindagranger.com.