Dealmaker: Braemar Hotels & Resorts Pays $120M for Ritz-Carlton Lake Tahoe

Braemar Hotels & Resorts, Dallas, acquired the Ritz-Carlton Lake Tahoe, Truckee, Calif. for $120 million.

The transaction included $103.3 million for the hotel, $8.4 million for a 3.4-acre undeveloped land parcel and $8.3 million for capital reserves. Braemar Hotels plans to build upscale townhomes on the undeveloped land.

Braemar closed on a $54 million non-recourse mortgage secured by the property. The five-year interest-only loan bears interest at LIBOR plus 2.10 percent. The hotel will continue to be managed by Ritz-Carlton.

Kennedy Wilson, Beverly Hills, Calif., sold the 170-room resort. Kennedy Wilson Chairman and CEO William McMorrow said his firm acquired the hotel property from a group of lenders at “a significant discount to replacement cost” in 2012. Since then, the firm grew the resort’s average daily rate by 63 percent and doubled revenue per available room through capital and operational improvements including more outdoor attractions, children’s activities and summer programming.

The Ritz-Carlton Lake Tahoe opened in 2009 and received $18 million in renovations in recent years. It includes 37,000 square feet of flexible indoor/outdoor meeting space.

In conjunction with the transaction, Braemar entered into an Enhanced Return Funding Program with Ashford Inc., Dallas, which agreed to provide Braemar with $10.3 million in cash via the future purchase of hotel furniture, fixtures and equipment at Braemar properties. This lowered Braemar’s adjusted net purchase price per key to $547,000. Braemar said the ERFP should improve the estimated unleveraged internal rate of return of the transaction by 100-200 basis points.