fa14-KSL_Capital_Par.. - Hospitality Asset Managers Association

Hospitality Asset Managers Association
Mike Shannon
September 17, 2014
PROPRIETARY AND CONFIDENTIAL
PROPRIETARY AND CONFIDENTIAL
This presentation
Thi
i contains
i highly
hi hl confidential
fid i l information
i f
i regarding
di KSL Capital
C i l Partners,
P
LLC’s
LLC’ (“KSL”) investments,
i
strategy andd organization.
i i
Your
Y
acceptance off
this presentation from KSL constitutes your agreement to (i) keep confidential all the information contained in this presentation, as well as any information derived by
you from the information contained in this presentation (collectively, "Confidential Information") and not disclose any such Confidential Information to any other
person, (ii) not use any of the Confidential Information for any purpose other than to evaluate entering into a relationship with KSL, (iii) not use the Confidential
Information for purposes of trading any security, (iv) not copy these documents without KSL's prior consent, and (v) promptly return these documents and any copies
thereof to KSL upon KSL's request.
This presentation is for information purposes only and does not constitute, and should not be constituted as, an offer or solicitation with respect to the purchase or
sale of any security. This presentation may not be reproduced or redistributed in any manner and is strictly confidential. Certain information contained herein has been
obtained from published sources prepared by third parties. In addition, certain information contained herein has been obtained from companies in which investments
have been made by a prior investment vehicle and its affiliated entities. While such information is believed to be reliable for the purpose used herein, none of KSL nor
any of its affiliates assumes any responsibility for the accuracy of such information. This presentation includes certain historical investment performance information
relating to partnerships managed or advised by us and our affiliates. The delivery of this presentation at any time shall not under any circumstances create (i) an
implication that the information contained herein is correct at any time subsequent to such date or (ii) an obligation on KSL to update any information subsequent to
the date hereof. Past performance is not necessarily indicative of future results and there can be no assurance that we will be able to achieve comparable results or
implement our investment strategy or achieve our investment objective. KSL Advisors, LLC is an investment adviser registered with the United States Securities and
Exchange Commission and nothing contained in this presentation is intended to establish an adviser-client or any other fiduciary relationship between KSL Advisors
p
and the recipient.
1
PROPRIETARY AND CONFIDENTIAL
The James Royal Palm
»
Overview:
– 393-key hotel located in the South Beach District of Miami Beach
– Situated on a two-acre, fee simple beachfront site
– 140 feet of frontage to both the Atlantic Ocean and Collins Avenue
»
Investment Rationale:
– A+ oceanfront location in A+ market
– History of mismanagement and poor positioning
– Opportunity to invest transformative capital to reposition asset into
luxury tier under The James brand
– Property in good structural condition allowing the vast majority of
renovation dollars to be dedicated to improving the guest experience
– Off-market transaction at seller’s basis and well below replacement
p
cost with attractive seller financing
– Significant EBITDA increase since acquisition
»
Value-added:
– Comprehensive
C
h i $47 million
illi renovation
i completed
l d by
b internal
i
l
portfolio management group
– Rebranded The James Royal Palm in November 2012
– Installed entirely new senior management team headed by Mike Shaff
(who formerly was the general manager of Montelucia)
2
PROPRIETARY AND CONFIDENTIAL
Irreplaceable Location
Fontainebleau
Miami Beach Convention Center
W Hotel
Lincoln Road Shopping
The Standard
Shore Club
Kimpton Surfcomber
SLS Hotel South Beach
Delano
Mondrian
Historic Ocean Drive
Ritz-Carlton
Loews
The James Royal Palm
3
PROPRIETARY AND CONFIDENTIAL
Miami Beach – Top Performing Market
Top U.S. Sub-Markets by RevPAR (TTM Q2 2014)
90%
Luxury
Chain Scale
Times Square Area
Midtown NYC
85%
Occcupancy
80%
San Francisco CBD
Lake Buena
Vista
Disneyland
Nashville CBD
San Diego CBD
Boston CBD
Midtown NYC Luxury
/
Santa Monica/
Marina Del Rey
Miami Beach
75%
Atlanta, CBD
70%
G
Grapevine,
i
TX
65%
Denver CBD
DC CBD
Chicago CBD 171 Hotels / 20,500 Rooms
Philadelphia CBD
$247 ADR
Houston CBD
76.8% Occupancy
$190 RevPAR
New Orleans CBD
Miami Beach Luxury
Maui
31 Hotels / 7,900 Rooms
$370 ADR
75.0% Occupancy
$278 RevPAR
Sarasota/Florida Beaches
St. Louis CBD
60%
$100
Scottsdale
$150
$200
$250
ADR
$300
$350
$400
$450
4
PROPRIETARY AND CONFIDENTIAL
Miami Beach Growth
Miami Beach RevPAR Beyond Prior Peak
$300.00
$277.67
$263.38
$240.43
$250.00
$233.40
$222.48
Prior Peak (Luxury)
$221.48
$19 4
$197.74
$183.91
$200.00
$168.45
$150.00
$150.02
Prior Peak (Total)
$124.31
$158 57
$158.57
$121.95
$115.00
$144.29
$103.47
$100.00
$111.17
$
$83.31
$160.15
$187.92
$190.06
2013
TTM
(2Q '14)
$169.17
$146.90
$134.73
$121.76
$120.04
$93.90
$77.58
$50.00
$70.59
$79.64
$0 00
$0.00
2000
2001
2002
2003
2004
2005
2006
Total Miami Beach RevPAR
2007
2008
2009
2010
Luxury Chain Miami Beach RevPAR
2011
2012
5
PROPRIETARY AND CONFIDENTIAL
The James Royal Palm – Guest Room Renovations
BEFORE
AFTER
6
PROPRIETARY AND CONFIDENTIAL
The James Royal Palm – Hotel Renovation
BEFORE
AFTER
7
PROPRIETARY AND CONFIDENTIAL
The James Royal Palm – Hotel Renovation
BEFORE
AFTER
8
PROPRIETARY AND CONFIDENTIAL
The James Royal Palm – Hotel Renovation
BEFORE
AFTER
9
PROPRIETARY AND CONFIDENTIAL
Mike Shannon
• BBA from the University of Wisconsin
Education
• Masters of Management in Accounting and Finance from the Kellogg School of Management
Operating
Experience
• President and CEO of Vail Associates (owner of Vail and Beaver Creek resorts) in Vail, Colorado from 1986
to 1992
Investment
Track Record
• Founded KSL Recreation in partnership with Kohlberg Kravis Roberts (KKR) in 1992, serving as President
and CEO
• Functioned as dedicated investment vehicle for KKR
• Created to exploit growing demand for travel and leisure
• Founded KSL Capital Partners (KSL) in 2005
Independent
Fund
Other
Affiliations
• $4.3 billion in equity capital raised since 2006
• 45 employees; offices in Denver, Connecticut and London
• Currently serves on the boards of the United States Ski and Snowboard Team Foundation, the Northwestern
University Board of Trustees, the University of Wisconsin Foundation, the Vail Valley Foundation, Vail
H l h SServices
Health
i and
d Ei
Eisenhower
h
M
Medical
di l C
Center
• Member of the World Presidents’ Organization
10
PROPRIETARY AND CONFIDENTIAL
James Royal Palm
[Video clip; aerial video footage]
KSL CAPITAL
PARTNERS
11
PROPRIETARY AND CONFIDENTIAL
KSL Capital Partners Overview
»
Seasoned investment team focused on the travel and leisure industry
– Team of 45 people, including 32 investment professionals
– Headquartered in Denver with offices in Connecticut and London
»
Sector-focused thesis with long-term operating expertise
– Three-decade focus on Hospitality, Recreation, Clubs, Real Estate and Travel Services
– Sector
S t r expertise
p rti can provide
pr id advantage
d t
i ddeall sourcing,
in
r i ddue dili
diligence and
d iinvestment
tm t ddecisions
ii
– Travel and leisure is a large and growing investment sector with favorable demand trends
»
Historical success through multiple market cycles
– Fund I (aka KSL Recreation Corporation) (1993 – 2005)
»
Partnered with KKR to invest in travel and leisure businesses
– Fund II (2006)
»
$1 4 billion fund
$1.4
– Fund III (2011)
»
$2.1 billion fund
– Credit Opportunities Fund (2013)
»
$385 million credit fund
12
PROPRIETARY AND CONFIDENTIAL
Since We Last Met…May 2010
»
Acquisitions:
– Squaw Valley (2010) and Alpine Meadows (2011)
– Montelucia (2011), Grove Park Inn (2012) under KSL
R
Resorts
t
– James Royal Palm (2011), JW Marriot Essex House (2012),
Belfry (2012) under various managers
– Became the largest shareholder of Whistler Blackcomb in
2012
– Malmaison and Hotel Du Vin (2013) established our U.K.
hotel platform
– St. Regis Monarch Beach and Miraval in 2014
»
Dispositions:
– “Six Pack” sold to Omni (July 2013)
– ClubCorp IPO (Sept 2013)
– Western Athletic Clubs sold (June 2014)
»
»
»
»
»
»
»
Ranchos Las Palmas
The Homestead
Barton Creek
La Costa
Grove Park Inn
Montelucia (Jan ‘14)
14)
Firm Milestones
– Raised Fund III (2011)
– Raised Debt Fund (2013)
– Opened London Office
13
PROPRIETARY AND CONFIDENTIAL
Investment History
FUND III INVESTMENTS
FUND II INVESTMENTS
*
*
*
CNL Resorts Debt*
*
YYY Investments
*
*
*
*
*
*
(MEZZANINE)
First Creek
Kyo-ya Debt*
Pub I Investments
* Fully Realized Investments
FUND I INVESTMENTS (FULLY REALIZED)
FBOCO
14
*
PROPRIETARY AND CONFIDENTIAL
Focused And Experienced Team
INVESTMENT PROFESSIONALS
TRANSACTION SOURCING AND EXECUTION
ASSET MANAGEMENT
Ei R
Eric
Resnick
i k
Managing Director
20 years experience
14 years at KSL
Mik Sh
Mike
Shannon
Managing Director
29 years experience
22 years at KSL
S
Steven
Si l
Siegel
Partner & COO
27 years experience
9 years at KSL
Craig
C
i H
Henrich
i h
Partner
26 years experience
4 years at KSL
B
Bryan
Elli
Elliott
Portfolio Manager
26 years experience
7 years at KSL
Walt Disney
Imagineering
M Gaghen
Matt
G h
Portfolio Manager
23 years experience
2 years at KSL
Starwood
Hotels &
Resorts
Peter McDermott
Partner
17 years experience
11 years at KSL
Marty Newburger
Partner
20 years experience
8 years at KSL
Rich Weissmann
Partner
29 years experience
6 years at KSL
Coley Brenan
Principal
14 years experience
9 years at KSL
Greg Kennealey
Portfolio Manager
19 years experience
3 years at KSL
Strategic
Hotels
Todd Shallan
Portfolio Manager
29 years experience
14 years at KSL
Hotel Del
C
Coronado
d
(VP & GM)
John Ege
Principal
12 years experience
9 years at KSL
Dan Rohan
Principal
10 years experience
8 years at KSL
Bernie Siegel
Principal
29 years experience
8 years at KSL
Charlie Martin
Director of Finance
19 years experience
9 years at KSL
Marla Steele
Portfolio Manager
24 years experience
8 years at KSL
Vail Resorts
Bryan Traficanti
Portfolio Manager
20 years experience
12 years at KSL
Destination
Hotels &
Resorts
Kevin Rohnstock
Chief Compliance Officer
13 years experience
3 years at KSL
Adam Knox
Vice President
9 years experience
8 years at KSL
Jared Melnik
Vice President
10 years experience
8 years at KSL
Hal Shaw
Vice President
7 years experience
5 years at KSL
Stephen Walker
Portfolio Manager
14 years experience
7 years at KSL
HEI
Hotels &
Resorts
Orly Ripmaster
Senior Associate
10 years experience
2 years at KSL
Smith
Travel
Research
Michael Mohapp
Senior Associate
5 years experience
4 years at KSL
Tina Yu
Senior Associate
4 years experience
3 years at KSL
Mike Acierno
Associate
2 years experience
August 2014 Start
Jens Blomdahl
Associate
3 years experience
1 year at KSL
Jon Paul Testwuide
Associate Portfolio Manager
1 year experience
1 year at KSL
Noah Glick
Associate
4 years experience
2 years at KSL
Breck Jones
Associate
3 years experience
1 year at KSL
Harris Levinson
Associate
2 years experience
July 2014 Start
Vancouver Canucks
Concentrate on non-North American investments
Concentrate on debt-related investments
15
PROPRIETARY AND CONFIDENTIAL
Investment Sectors
HOSPITALITY
– Hotels,, resorts,, restaurants
RECREATION
– Ski,
Ski spa,
spa attractions,
attractions cruise
cruise, gaming,
gaming retail,
retail marinas
CLUBS
– Golf,
G lf health,
h lth social,
s i l dining
dinin
REAL ESTATE
– Second homes, condo-hotel, alternative ownership
TRAVEL SERVICES
– Private aviation, adventure travel, tour operators
16
PROPRIETARY AND CONFIDENTIAL
Broad Operational Expertise
»
Owner and operator of businesses with approximately 6,850 hotel rooms, 300 restaurants, 200
retail stores, 300 spa treatment rooms, 150 golf courses, 200 clubs and 225,000 club members(1)
HOSPITALITY















RECREATION


CLUBS


REAL ESTATE


TRAVEL SERVICES



(1) Figures based on Fund II and Fund III operating company investments. Investments shown are limited to currently held investments







17
PROPRIETARY AND CONFIDENTIAL
Experience Through Multiple Economic Cycles
»
»
During the last downturn, we actively rotated to more defensive investments such as distressed
debt, clubs and other recreation businesses
As the economy began to improve, we rotated back to hospitality in the U.S. and U.K.
80%
CNL Resorts Debt
S&
&P 500 Indexed Price
P
60%
Pub I
MEZZANINE
40%
First
Creek
20%
YYY
Kyo-ya
K
Debt
D bt
0%
15 months
(20%)
Equity - Offensive
(40%)
(60%)
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Equity - Defensive
Dec-11
Dec-12
Debt Investment
Dec-13
18
Source: Bloomberg
PROPRIETARY AND CONFIDENTIAL
Operating Focus Yields Strong Bottom Line Performance
»
We utilize a number strategies to enhance our investments, which has resulted in significant
EBITDA growth over the life of our investments
MULTIPLE STRATEGIES TO GROW CASH FLOW

AGGREGATE EBITDA INCREASE
FUND II AND FUND III REALIZED INVESTMENTS (1)
INTERNAL PORTFOLIO MANAGEMENT
$309 MM

TRANSFORMATIONAL CAPITAL
$215 MM

MANAGEMENT SUPPORT

SALES AND MARKETING

FISCAL DISCIPLINE
Acquisition
LTM Adj. EBITDA
Exit
LTM Adj. EBITDA
(1) Realized investments include ClubCorp – Clubs Only (Partially Realized), Barton Creek, The Homestead, Western Athletic Clubs, La Costa Resort and Spa, The Grove Park Inn, Montelucia Resort & Spa, Rancho Las Palmas
Resort & Spa, and Orion Expedition Cruises.
19
PROPRIETARY AND CONFIDENTIAL
Transformational Capital Examples
SQUAW VALLEY (OLYMPIC VALLEY, CALIFORNIA)
Before
After
THE BELFRY (BIRMINGHAM, ENGLAND)
Before
After
20
PROPRIETARY AND CONFIDENTIAL
Transformational Capital Examples (Cont’d)
CLUBCORP – BUSINESS CLUB DIVISION
Before
After
CLUBCORP – GOLF DIVISION
Before
After
21
PROPRIETARY AND CONFIDENTIAL
CURRENT INVESTMENT
CLIMATE
22
PROPRIETARY AND CONFIDENTIAL
Travel is a Significant Component of the U.S. Economy
»
~$860 billion of annual U.S. travel expenditures
– $426 billion of GDP contribution (~3% of total) (1)
– 14.9 million jobs supported by the travel industry
»
Leisure customer driving the recovery
– 70% of travel expenditures related to leisure travel
– Mass affluent customer continues to benefit from recovery in home prices and stock market
U.S. TRAVEL & TOURISM DIRECT OUTPUT
2013 U.S. TRAVEL EXPENDITURES
$1,000
$ Billions
$800
$600
$555
$587
$641
$692
$741
$781
$772 $775
$822
$856
$679 $707
Meetings,
Events
Events,
Incentive
Travel
12%
General
Business
B
i
18%
$400
Leisure
Travel
70%
$200
$0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: U.S. Travel Association and U.S. Bureau of Economic Analysis as of December 31, 2013.
(1) As of 2012, the most recent year for which data are available
23
PROPRIETARY AND CONFIDENTIAL
Travel & Leisure Subsectors Have Varying Cyclicality
»
Travel & Leisure is a broad sector that we believe offers both offensive and defensive investment
opportunities
INDEXED U.S. GROSS OUPUT BY SELECT TRAVEL & LEISURE SUBSECTOR
Restaurants (1)
120%
115%
Recreation (2)
110%
Retail (3)
105%
Hospitality (4)
100%
95%
90%
2007
2008
2009
Source: 2012 U.S. Bureau of Economic Analysis
(1) Includes output for all food services and drinking places under NAICS code 722
(2) Includes output for arts, entertainment, and recreation under NAICS codes 711AS, 713
(3) Includes output for general merchandise stores and other retail under NAICS codes 442-4, 446-8, 451, 452, 453-4
(4) Includes output for all accommodations under NAICS code 721
2010
2011
2012
24
PROPRIETARY AND CONFIDENTIAL
Lodging Cycle Heading for a New Peak
»
»
»
»
Current operating fundamentals being driven by healthy demand and limited supply growth
Capital markets recovery has accelerated
Hotel valuations approaching prior “peak”
We believe the current lodging cycle has reached equilibrium
LONG TERM U.S. TOTAL REVPAR GROWTH (1)
5 Years to Return
Prior Peak
CAGR 1995-2015F = 2.9%
2 Years to
New Peak
Years to
New Peak?
6 Years to Return
Prior Peak
$80.00
$60.00
$42.61
$48.99 $50.38
$45.16 $47.41
$53.48
$49.90 $48.71 $48.92
$52.81
$57 37
$57.37
$61.78
$65.55 $64.24
$53.55
$56 46
$56.46
$61.04
$65.09
$68.62
$72.35
$75.78
$40.00
$20.00
$0.00
1995
1996
Source: Smith Travel Research
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 2014F 2015F
25
100
40
0
Source: Green Street
Dec--03
Apr--04
Aug--04
Dec--04
Apr--05
Aug--05
Dec--05
Apr--06
Aug--06
Dec--06
Apr--07
Aug--07
Dec--07
Apr--08
Aug--08
Dec--08
Apr--09
Aug--09
Dec--09
Apr--10
Aug--10
Dec--10
Apr--11
Aug--11
Dec--11
Apr--12
Aug--12
Dec--12
Apr--13
Aug--13
Dec--13
Apr--14
Lodging P
Price Index
PROPRIETARY AND CONFIDENTIAL
Lodging Prices are Approaching Prior Peak
Green Street Lodging Sector Price Index
120
“Peak” April ’07
Index = 100
Today
Index = 93
80
60
“Trough” July ’09
Index = 43
20
26
PROPRIETARY AND CONFIDENTIAL
Commercial Credit Markets are Back
Commercial and Industrial Loans (All Commercial Banks)
$$1,800
,
$1 731
$1,731
$1,600
Billion
ns of Dollars
$1,600
$1,400
$1,200
$1,000
$800
$600
2000
2001
2002
Source: Board of Governors of the Federal Reserve System
Note: Shaded areas indicate U.S. recession
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
27
PROPRIETARY AND CONFIDENTIAL
Signs of Short Memory?
Credit Sector Heat Map
2006
2007
2013
2014 YTD
Covenant - Lite as a % of Total Loan Issuance
7%
25%
57%
62%
Purchase Price Multiples
8.4x
9.7x
8.8x
9.6x
LBO Leverage (Debt/EBITDA)
5.5x
6.2x
5.5x
5.9x
All High-Yield Leverage Multiple (Debt/EBITDA)
3.4x
3.6x
3.9x
3.8x
All High Yield Interest Coverage (EBITDA/Cash Interest)
4.2x
3.8x
3.5x
3.9x
Source: S&P Leveraged Commentary & Data (S&P LCD), BAML and Guggenheim as of June 30, 2014
28
PROPRIETARY AND CONFIDENTIAL
Hotel Loan Volume Has Increased…
Hotel Loan Volume
$80,000
$73,564
$70,000
Volume
V
l
fell
f ll b
by 94% b
between
t
2007 and 2009
Loan Volume in Millions
$60,000
+61%
CAGR
$47,460
$50,000
$40,000
$31,637
$31,422
$30,000
$20,000
$15,974
$10,871
$10,795
$10,000
$4,716
$7,439
$0
2005
2006
2007
2008
2009
2010
2011
2012
2013
29
Source: Mortgage Bankers Association
PROPRIETARY AND CONFIDENTIAL
…And Terms are Increasingly Favorable for Borrowers
ACCELERATION OF HOTEL LENDING TERMS
2007
“Peak”
2010
“Trough”
g
2014
Current
Loan-to-Value
80% - 90%
50% - 60%
70%+
Blended Spread
L+200 BPS
L+550 BPS
L+350 BPS
Light
Heavy
Light
Covenants
30
PROPRIETARY AND CONFIDENTIAL
In Conclusion – Creating a Strategy for the Current Climate
Strive to create value through cash flow growth not
financial engineering
Determine and stick to your core competencies
Active asset management is as important as ever
Create a unique selling proposition; d
C
deploy customerfocused, ROI justified transformational capital
Be wary of paying too much and over leveraging;
however, do take advantage of the current credit markets
With a new p
peak in sight,
g , what’s yyour firm’s exit strategy?
gy
31
PROPRIETARY AND CONFIDENTIAL
James Royal Palm
QUESTIONS AND
COMMENTS?
32

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