A battle between the manager and owners of a Whistler hotel-complex – which has landed in British Columbia’s Supreme Court against the background of a noisy social media campaign – has exposed the frustration seen in low returns and plunging prices in a key sector of the resort’s hospitality industry.
At the heart of the conflict is the 77-unit Nitka Lake Lodge, built in 2008.
The Nita units are among approximately 5,000 Phase II properties in the Resort Municipality of Whistler. Phase II properties are freehold, but with a municipal covenant registered on title that restricts owner usage to 28 days in the summer and 28 days in the winter. The remainder of the year the property must be managed through an on-site rental management company. Most of the well-known hotel brands such as the Delta, Pan Pacific, Westin and Four Seasons are Phase II properties.
The lakefront Nita Lake Lodge, which also contains retail commercial space, sank into insolvency in 2011 and investor Michael Scholtz, an owner in the complex, stepped in as manager and majority investor.
Scholtz, former president of Great Canadian Gaming, now owns 55 of the Nita Lake Lodge suites as well as all five commercial spaces, under his company, NLL Holdings Ltd.
“We turned the lodge around,” Scholtz said, noting that occupancy levels have risen, the retail space is leased and the lodge is turning a small profit. TripAdvisor, the giant online hotel booking site, now ranks Nita the number one hotel in Whistler.
Scholtz worked out a deal with most remaining owners that they will receive 25% of rental income, rising to 50% if performance levels are reached. Under the original agreement before the Nita went into insolvency, owners had been receiving a 55% share of rental incomes that can run to more than $400 per night during the high season.
However, owners of nine of the units are refusing to have their units placed in the rental pool at Nita, claiming they are being “locked out.” The owners are from the United States, Singapore and Ontario. Due to the municipal covenant, the owners can’t use their units or rent them out if they are not under a rental agreement.
On May 26, Scholtz filed a notice of civil claim against the owners in the Supreme Court of BC, claiming breach of trust and seeking $395,000 in damages.
The owners countered with a social media campaign this week to warn the international investment community of the “economic and political risks of investing in Whistler.”
San Francisco-based Jon Sobel, speaking for the group of owners, said, “Some people put a lot of their life savings into this project and they’re being starved out. In business you expect ups and downs, but you don’t expect that a world-class resort would enable such conduct.” The group wants Whistler to exempt Nita from the Phase II covenant and allow them to rent the units independently. Such a move, Scholtz contends, would “cause chaos” at Whistler because the entire Phase II structure is based on controlled and consistent rental management.
Sobel claims the value of Nita Lake Lodge hotel-condo suites has fallen 80% since 2007, when most owners bought the units before construction began in a pre-sales blitz.
Scholtz agreed. He said the original Nita hotel condo units originally sold for from $800 to $1,000 per square foot. Today that price is maybe $200-$250 per square foot, he said.
