KSL collects $1.5bn for Fund III

The firm, a former affiliate of KKR that employs a hybrid real estate and private equity investment strategy, will be close to hitting its hard cap of $2bn by summer.

Former Kohlberg Kravis Roberts affiliate KSL Capital Partners has raised $1.5 billion for Fund III and is likely to hit its $2 billion hard cap, according to filings with the US Securities and Exchange Commission and a person with knowledge of the situation.

KSL, which pursues a hybrid real estate and private equity strategy, may hold a final close on Fund III, which is actually the firm’s second independent fund, by the summer, the person said.

KSL, which invests in travel and leisure businesses, employs a buyout strategy, making operational improvements to operating companies rather than just buying property. “[The firm] does all sorts of things to enhance revenues [of the operating companies], and some people see that as a private equity play,” the person said. KSL declined to comment.

The firm was established in 2005 by managing directors Michael Shannon and Eric Resnick and raised about $1.1 billion for its prior fund in 2006 with commitments from the likes of the Canada Pension Plan Investment Board and the Oregon Public Employees’ Retirement System. The firm collected an additional $375 million in a supplemental vehicle to Fund II to bolster its investment power. KSL considers its first fund to be KSL Recreation, which was a portfolio company of KKR.

Fund II was producing a 1.14x multiple and a net internal rate of return of 9.7 percent as of 30 September, according to a market source. That is considered first quartile for real estate funds of a 2006 vintage, according to a market source.

Last year, KSL acquired Squaw Valley Development, which operates the 4,000-acre Lake Tahoe ski resort, Squaw Valley USA, along with the resort’s village and related real estate holdings. The resort was the site of the 1960 Olympic Winter Games.