KSL hits the slopes in Squaw Valley deal

KSL Capital Partners has acquired the site of the 1960 Olympics Winter Games with plans to plough $50 million of cash into the resort.

The Denver-based private equity firm said in a statement it had bought almost all the shares of the Squaw Valley Development Company, which operates the 4,000-acre Lake Tahoe ski resort, Squaw Valley USA, along with the resort’s village and related real estate holdings. No financial details were disclosed.

In September, PERE revealed the travel and leisure-focused firm was in the process of raising its third fund, KSL Capital Partners III, trying to attract $1.5 billion in capital commitments. KSL, a former affiliate of private equity giant Kohlberg Kravis Roberts & Co, is understood to be aiming for a final closing for the vehicle in 2011.

The firm typically invests in assets where it can assume a controlling position. Its minimum equity outlays are $25 million but, according to marketing literature, KSL has the ability to commit up to $500 million in a single deal. In the Squaw Valley deal, KSL is expected to invest $50 million in capital improvements over the next three to five years.

In one of its last major deals in February, KSL took back control of the 400-acre hotel resort, La Costa Resort, from Goldman Sachs’ Whitehall Street real estate funds. KSL reportedly paid about $120 million to take over the Carlsbad, California asset, which was secured by a $147 million first mortgage and $233 million of mezzanine debt.

KSL sold a majority interest in the resort to Whitehall in June 2007, according to data provider Real Capital Analytics. However, in the wake of the credit crisis, occupancy levels fell to 48 percent and annual cash flows plummeted to $12.8 million in the year to May 2009, compared to $22.6 million in 2006. With the debt maturing in February 2010, lender Citigroup sold the notes at discount to KSL, which had continued to manage the property.