DALLAS—Braemar Hotels & Resorts Inc. has entered into a definitive agreement to acquire the 170-room Ritz-Carlton Lake Tahoe in Truckee, California. In addition, the company is also acquiring a 3.4-acre plot of vacant land adjacent to the hotel that is being entitled for luxury residential townhome development. The acquisition is expected to close on or prior to January 15, 2019, but in no event earlier than December 12, 2018, subject to customary closing conditions.
“The acquisition of the Ritz-Carlton Lake Tahoe is an opportunity for us to acquire an iconic and irreplaceable luxury resort property with a premier location on the Northstar ski mountain in the world-famous Lake Tahoe area,” says Richard J. Stockton, Braemar’s president and CEO. “This property fits perfectly with our strategy of owning luxury hotels and resorts and further diversifies our portfolio while also increasing the overall RevPAR of our portfolio, which is already the highest among our hotel REIT peers. This will be the third Ritz-Carlton in our portfolio, and with the strong market fundamentals in the Northern California area along with our proven ability to work with Ritz-Carlton to maximize property level performance, we are excited about the future prospects for this iconic property.”
Located in the North Lake Tahoe area, the property is situated mid-mountain at the Northstar Ski Area. With its premier location and luxury brand affiliation, the Ritz Tahoe is positioned as the leading resort in one of the country’s most popular tourist destinations. North Lake Tahoe, located approximately 45 minutes from Reno, Nev., and 1.5 hours from Sacramento, Calif., is a popular and growing upscale, year-round tourist destination. Beyond the first-class hotel experience, guests have easy access to the Lake Tahoe area’s many amenities and activities, including skiing and winter sports, boating, fishing, hiking, golfing, dining, and shops.
The Ritz Tahoe was built in 2009 and has 170 rooms, including 17 suites. The resort also offers an array of amenities, including ski-in/ski-out access to Northstar Ski Mountain; an ultra-luxury Lake Club on the shore of Lake Tahoe; a 17,000 sq. ft. full-service spa; six food and beverage outlets, including Manzanita; over 37,000 sq. ft. of flexible indoor/outdoor meeting space; two outdoor pools; a fitness club and yoga studio; and the Ritz Kids Club. The property has had more than $18 million spent for capital improvements during the past few years. Post-closing, the property will continue to be managed by Ritz-Carlton.
The total consideration for the acquisition is $120 million and consists of: $103.4 million for the hotel ($608,000 per key); $8.4 million for the adjacent development parcel; and $8.2 million for Capital Reserves. The purchase price for the Ritz Tahoe represents, as of September 30, 2018, a trailing 12-month capitalization rate of 5.8 percent on hotel net operating income of $6 million and a trailing 12-month 13.5x hotel EBITDA multiple, according to the company’s preliminary estimates based on unaudited operating financial data provided by the sellers. The company expects to realize a stabilized yield of approximately 8.5 percent on its investment. On a trailing 12-month basis as of September 30, 2018, the property achieved RevPAR of $372.35, with 67 percent occupancy and an average daily rate (ADR) of $556.51, according to unaudited operating financial data provided by the sellers. A reconciliation of non-GAAP financial measures is included in the financial table below.