Investment Banking - Americas - Success Stories

HVS Capital Corp Maximizes Sales Proceeds of Diverse Portfolio of Assets

Project

Ski Times Square Enterprises, a joint venture of Starwood Hotels & Resorts and a consortium of investors from New Orleans, owned a diverse collection of assets at the base of the world famous Steamboat Ski Resort in Colorado. Included in the portfolio were the Sheraton Steamboat Resort Hotel & Golf Club, Thunderhead Lodge & Condominiums, Ski Times Square Retail Mall, and 11.3 entitled acres of residential land adjacent to the golf course. Situated on nearly 7 acres of land at the base of one of North America's major ski resorts, the improvements at Thunderhead Lodge and Ski Time Square Mall, originally constructed around 1970, were past their useful lives. The Sheraton, a superbly located ski-in/ski-out hotel, was a mature property with stabilized NOI. Consequently, in order to maximize the sale price, an approach to pricing other than a discounted cash flow value would be necessary.

The HVS Assignment

Once HVS Capital Corp was engaged to market the portfolio for sale, it became evident that due to the eclectic nature of the assets - an operating resort hotel & golf club, redevelopment parcels (Thunderhead and Ski Time Mall), and residential land, achieving the maximum proceeds would be accomplished by selling the various assets in selected groupings to separate buyers. Interestingly, within days of our engagement, it was announced that the ski mountain would be also marketed for sale. Thus, the stage was being set for a major infusion of new capital, operating and development expertise to the Steamboat Ski Resort. This coincidence injected even more optimism into the universe of potential buyers.

Results

HVS Capital initially conducted a careful assessment of each asset in terms of a highest and best use analysis. Given that some of the assets were clearly outdated - Thunderhead and Ski Time Square Mall - we concluded that new resort residential use would accrue the highest value to our client. Accordingly, the prospective buyer(s) of these assets was identified as a resort developer. The stabilized hotel was one of the only lodging facilities in the market that was not condo-owned; thus the acquisition opportunity for this asset would be directed to a hospitality firm with experience in condominium and/or fractional ownership marketing strategies. Given the nationally prominent purchasers that would likely be attracted to these two asset categories, it was felt that the residential land would fall "below the radar" of such prospective purchasers. Consequently, this asset was marketed to local developers specializing in luxury custom homes and subdivisions.

To estimate the value to a purchaser, HVS Capital created a development model utilizing a residual land value approach. Existing architectural studies were utilized to determine density and developable new square footage, a construction cost consultant was engaged to estimate new construction costs, and in-depth market research was conducted on the demand for, and forecast sell-out prices of, residential resort condominiums. With this data, we established not only pricing guidance for individual properties, but were able to provide straightforward methodology on how the pricing was calculated.

As a result, we achieved a remarkable sales price for the entire portfolio, with values higher than anything that had been realized to date in the Steamboat market. And, with the major redevelopment plans of the buyers, set the stage for the largest re-development transformation of the resort in its history.