Peaks Capital Partners LLC Acquires Telluride Resort & Spa LLC and Peaks 122 123 LLC.
The Peaks was the first major hotel project in Telluride and is still the flagship of the area. First developed in 1992 by Doral, the Peaks was subsequently bought by Carefree Resort, which was later acquired by Patriot American in 1997. The property was then bought by Wyndham and eventually acquired by Blackstone in 2005. Since then, the Resort’s reputation and performance has been plagued by shifting strategic goals and a challenging economic environment. Over the last 4 years alone, the Resort has undergone a substantial renovation of the spa, a full condo-sales program, temporary closure, reopening as a transient hotel and several aborted sales efforts. The property is currently in the process of completing over $4.8 million in renovations related to the settlement of a lawsuit between Blackstone and the Resort’s HOA.
“Over the last three years this deal has been the equivalent of a Gordian Knot. It was certainly not easy untangling all the rope, but we worked hard with Blackstone to figure it out and to find a way to get it closed” notes Brian Patrick Martin, principal in Peaks Capital Partners LLC. “A lot of national, well heeled investment groups and hotel operators took runs at the deal, but in the end it was a local group aligned with a specialized management company who could proceed with confidence where others backed off.”
John V. Cullen IV’s management company, Grand Heritage Hotel Management, has signed a long-term management contract to reposition the hotel. He said “We think The Peaks has strong operational upside in a world class destination. Both ski and summer offer great recreational opportunities, and the airport modernization that is nearing completion will open Mountain Village, the Town of Telluride and the Peaks to a wider audience. To me the bottom line question is ‘If it were not here now, would you build it again?’ My unequivocal answer is YES”.
As to committing to an asset at this point in the cycle, Mr. Herrick points out, “Although there is a lack of debt available in the market, we were able to secure a low loan-to-cost loan through an affiliate of Bixby Bridge Capital, LLC, a Northbrook, Illinois based private lender who patiently and intelligently waited through the process with us. This did require the partnership to commit a large cash position relative to the total investment, but the opportunity justified this commitment.” Todd Herrick added “Many investors are paralyzed by the current news headlines and are either out of this sector all together or are taking a wait-and-see approach. This allows some very attractive opportunities to slip through the cracks. We think Peaks is one of these.”
Mr. Cullen summed up the groups thoughts on the acquisition timing, “My first hotel acquisitions were in the early 1990’s. History has taught me not to let opportunities pass when there are tangible asset level opportunities. In the long run, the risks of ‘holding out’ on good opportunities, as opposed to getting into the operations and starting the process of rejuvenating the staff and rehabilitating the bottom line, are just not worth it.”
Managing Member, Peaks Capital Partners LLC