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KSL swings into Europe

Private equity firm KSL Capital Partners, which owns 180 clubs and resorts in the US, is launching a European platform. By Robin Marriott

The private equity firm KSL Capital Partners, which owns 180 clubs and resorts in the US, is launching a European platform and recruiting a hotel real estate pro.

KSL has hired Adrian Constant from Orient Express to spearhead its expansion into the region, hoping that he can replicate some of the deals he has been involved in. One example would be the purchase of St. Petersburg's 130–year old Grand Hotel for $125 million in 2005, which became the largest single asset deal in Russian real estate history.

Denver–based KSL is a specialist in repositioning under-managed or under capitalised businesses.

Henry Kravis and his buyout giant KKR formed a joint venture with the firm in 1992 to invest in service and leisure industries when KSL Capital Partners was known as KSL Enterprises. The partnership was a departure for KKR more closely associated with billion dollar deals in the 1980s. The joint venture went on to roll up golf resorts until 2004, the year KKR sold its interest. It reportedly made $1.2 billion or 3.5x its money on the investment sale.

Since then, KSL founders Michael Shannon and Eric Resnick have launched their debut institutional investor fund to invest in property. KSL Capital Partners II raised $1 billion in September last year having set an original target of $750 million. Canada's Ontario Municipal Employees Retirement System invested Canadian $40 million in the vehicle. The strategy will invest in five sectors: hospitality, recreation, clubs, real estate and travel services.

Shannon said the appointment of Constant would greatly accelerate plans to expand beyond north America. Co–founder Resnick said: “We believe that there will be an increasing number of attractive opportunities not only in Europe but internationally as a whole as demographic and travel trends are both positive internationally.”

KSL owns or has interests in 11 assets in North America. The first deal was the acquisition of the Rancho Las Palmas Resort & Spa in Rancho Mirage, California. Among the clutch of other investments are La Quinta Resort and Club in California and ClubCorpInc, the world's largest owner and operator of golf, country and business and sports clubs. The latter owns almost 170 clubs and two renowned resorts including Barton Creek Resort and Spa in Austin, Texas, and The Homestead in Hot Springs, Virginia.

Shannon began his career at the First National Bank of Chicago, but he cut his teeth in the real estate industry as head of ski resort operating company Vail Associates where Resnick is also an alumnus. While Shannon was president, the company developed one of north America's top ski resorts, Beaver Creek. It was this development prowess and improvements made to the company that first attracted the attention of Henry Kravis.

His European recruit, Constant, has been in the hotel industry since 1983 and has completed stints at Intercontinental, Forte hotels and also Le Meridien from 1993 to 2001 where he was general manager of Le Meridien Copacabana with specific responsibility for development in South America. At Orient Express where he was vice president, he was in charge of the company's European properties and tasked with development in Europe, the Middle East and Asia.

He said: “I am going to be focused very much on doing what KSL has been doing in the US where it has been very successful in buying large resorts and hotels and getting involved in the management of those assets.”