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Toronto’s K2 Group building diverse real estate portfolio

K2 Group’s recent acquisition of the Travelodge by Wyndham Niagara Falls Lundy’s Lane hotel is th...

IMAGE: The Lundy's Lane Travelodge in Niagara Falls is the most recent acquisition by Toronto's KR Group. (Courtesy K2 Group)

The Lundy’s Lane Travelodge by Wyndham in Niagara Falls is the most recent acquisition by Toronto’s K2 Group. (Courtesy K2 Group)

K2 Group’s recent acquisition of the Travelodge by Wyndham Niagara Falls Lundy’s Lane hotel is the latest example of how the Toronto-based company has been quietly growing.

The privately held company is interested in strategically acquiring, developing and repositioning hospitality, petroleum and real estate assets throughout Canada.

“We’re a very opportunistic group and are always looking for assets that have potential to be developed, whether it’s renovating and changing the banner or new development for food and beverage,” K2 Group vice-president of operations Thomas Jacob told RENX.

“We’re looking for unpolished stones where we can put in the work and increase the value. We’re very hands-on with operations as well. It’s not just a real estate play for us. With everything we do, we try to look at it from the perspective of how we can create value for a community.”

K2 Group founder and president Kailash Kasal – Jacob’s father -in-law – had been involved with the hospitality industry for several years and was a behind-the-scenes investor in hotel groups before establishing the company.

K2 Group has passive investments in eight hotels and owns and operates two Niagara Falls hotels. It owns eight gas/service stations and two seniors living facilities and has a development deal with Glendale, Calif.-based Dine Brands to grow the IHOP restaurant brand across Ontario.

“Thus far, all of the investment has been in-house,” said Jacob. “We’re self-funded but, as we grow, we’re open to investment.”

K2 Group’s hotel portfolio

K2 Group owns and operates Ramada by Wyndham Niagara Falls Fallsview on Stanley Avenue, which Jacob said was one of the few Niagara Falls hotels to remain open throughout the pandemic.

K2 Group recently acquired Travelodge by Wyndham Niagara Falls Lundy’s Lane for $10.5 million from a local ownership group which was looking to divest the asset.

The new owner is spending another $1 million to redevelop the property, including enhancements to the indoor and outdoor pools, restaurant, fitness centre, meeting spaces, banquet halls and its 118 guest rooms.

A Starbucks Express is slated to open on-site by the end of the year and negotiations for a new franchise food and beverage offering are underway to occupy the existing restaurant.

The hotel is located close to Canada One Outlets and other shopping, entertainment and dining options.

“We thought we would take a risk and double down and make another acquisition in Niagara Falls,” said Jacob. “It made sense.”

K2 Group expects to close on the acquisition of another Niagara Falls hotel in March, but Jacob said it’s too early to provide any details.

According to a profile created by Niagara Economic Development, the region attracts more than 13 million tourists from around the globe each year. Tourism expenditures total $2.4 billion, with $1.7 billion of that coming from overnight visitors.

With proof-of-vaccination protocols in effect and the Canada-United States land border now fully open, tourism has been starting to recover from the impact of COVID-19.

A recent CBRE report projected Niagara Falls to have 2022 hotel occupancy of 59 per cent, the highest of any market in Canada, but still down eight points from its 2019 level.

“We were in the process of closing on a large U.S. portfolio and then COVID hit,” Jacob added. “We were three weeks away from signing and are now thankful that didn’t happen.”

K2 Group’s seniors living portfolio

K2 Group acquired Georgian Bay Seniors Lodge in Penetanguishene, Ont. from a private owner for an undisclosed price four years ago.

The independent living facility provides three meals a day and snacks.

Its amenities include: a private dining room; a common dining room and refreshment areas; a chapel/auditorium; a beauty and barber salon; a multi-purpose lounge/library; weekly housekeeping; a pharmacy service; outdoor walking path gardens; and parking.

K2 Group completed the acquisition of Riverside Living, a retirement residence in Meaford, Ont., earlier this year. The multiresidential asset, consisting of three single-level apartment buildings with 25 units and one residential home, was purchased from MCT Investments Inc. for an undisclosed price.

K2 Group manages and owns both facilities. It’s actively involved in every aspect of customer and guest experience service at all of its properties, according to Jacob.

Planned updates for the facility, which sits on 1.4 acres of land with a large green space area directly along the Bighead River, will include a new outdoor grilling station and general refurbishments.

“The operational expenses are much less compared to a hotel and it’s rental income,” said Jacob, an entrepreneur who is also chief creative officer of the Contrabande advertising and design agency and co-founder of solar energy firm Sunly Energy.

“It’s not as intensive from a cap-ex perspective, but there are seniors that you have to take care of. It’s still hospitality, but with a different sensibility. We felt that we could bring value to that industry. We tried it and have done really well.”

K2 Group is scheduled to close on the acquisition of two more seniors living facilities in March.

“We’re very selective, but we’re looking for seniors living assets that we can grow and develop,” said Jacob.

More growth coming

K2 Group entered a non-traditional restaurant franchisee deal with Dine Brands, a full-service dining company franchising IHOP and Applebee’s restaurants in Canada.

The agreement calls for a minimum of five IHOP openings over the next five years in the Ontario cities of Belleville, Hamilton, Waterloo, London and Windsor.

The first is scheduled to open at the 10 Acre Truck Stop in Belleville in February. K2 Group acquired the property in May 2021 and has made improvements that have led to increased traffic.

Its $2-million investment in the IHOP, the first in Ontario outside of Niagara Falls, will employ more than 60 and seat up to 184 diners.

Jacob said K2 Group is looking at 16 deals, including portfolios, so even more growth across different asset classes is expected in the coming year.

“We’re a family business that wants to do good things and acquire good legacy assets, whether we leave them to our children or not.”

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