Birth pangs
Revelstoke Mountain Resort is paying off for Tom Gaglardi and Vancouver-based Northland Properties Ltd.
Northland acquired a majority stake in the project in January 2009 when the original owner could no longer finance it. Condo sales at the property helped pay down more than $100 million in debt in Northland’s first year of ownership, while refinancing of other assets eventually helped put the development on a solid footing.
“We ended up having to sock way too much cash to survive that process, but we did – and we’re glad that we did,” Gaglardi told the recent Western Canadian Hotel and Resort Investment Conference. “The great thing about a resort like this is, if you look at history, it says that one of these major resources only comes down the birth canal, really, every 20 years.”
With its baby in good shape, Northland aims to take care of it.
Revelstoke Mountain Resort’s 220-room hotel operates under Northland’s Sutton Place brand, and Northland has no plans to sell the 120 units it owns in the property. They’re generating cash, and any sale would have to be at a discount – which would hurt the value of the 100 units other investors own.
Northland is focusing on taking its Sandman brand to the U.K., as well as ramping up development in North America with four properties under development now and another eight on the books.
Railway ties
Northland may be taking Sandman to the U.K., but John O’Neill, president and CEO of O’Neill Hotels and Resorts in Vancouver, is eyeing opportunities in the U.S.
Affordable properties and plenty of upside – as well as some long-term relationships – are helping O’Neill fast-track growth.
O’Neill is currently deploying more than $60 million in capital to buy four hotel properties in Pittsburgh, as well as a portfolio of hotel properties in Virginia.
“Canadian hotel vendors still have a very high expectation of the worth of their assets versus our American friends,” O’Neill told listeners at the Western Canadian Hotel and Resort Investment Conference. “The four properties we’re buying in Pittsburgh right now came at a trailing 9.5% cap rate; lever them up with 5% debt, it’s a 13% return on equity. You can’t do a deal like that [in Canada].”
Working through American Hotel Income Properties REIT LP, O’Neill paid US$127.5 million for Kansas-based Lodging Enterprises LLC in February 2013, adding 32 hotels and 24 diners across 19 states.
Lodging Enterprises’ primary brand is Oak Tree Inn, which provides lodging – don’t call them bunkhouses – tailored to the needs of workers of Union Pacific and other railroad operators. With expansion of U.S. rail networks, such as Union Pacific’s $500 million development in Santa Teresa, New Mexico, new Oak Tree Hotels are helping accelerate growth.
“We have a long-term deal with that company to house their freight train engineers and train men, so we’re building a hotel there right now,” O’Neill said. “It will open in seven months, and it will basically open at 85% to 90% occupancy on day one.”
The business is one familiar to the O’Neill family. O’Neill Railway Caterers Ltd. and other family ventures served clients including Pacific Great Eastern Railway (later BC Rail) and Canadian Pacific Railway Ltd. from 1959 through 2002.
Meanwhile, in Vancouver ...
A hotel will likely feature in the redevelopment BC Investment Management Corp. plans for the landmark Canada Post property on West Georgia Street.
Doug Pearce, CEO of the asset manager for provincial pension funds, told the recent Western Canadian Hotel and Resort Investment Conference that the mix of uses will depend on the projected returns – and residential and hotel uses are looking good.
“Do we want any more offices in downtown Toronto or Calgary? No. So we’re more into residential, and part of the residential is hospitality,” he explained.
With limited new hotel development planned for downtown Vancouver, Pearce believes a hotel could be an ideal element. •
