Skyline gearing up for IPO

After nearly a decade and a half as a privately held entity, hospitality resort and destination community owner and operator Skyline International Development Inc. is gearing up to go public.

“We would like to go public when the time is right,” said Michael Sneyd, Chief Executive Officer, in an interview last week at the real estate company’s Toronto head office. “We are definitely in a growth mode, Skyline is, definitely.”

The Skyline CEO envisions a public offering taking place within the next 18 months.

For those paying attention, the leisure real estate owner and operator has been laying the groundwork for some time now. In November the company raised $27 million from major banks and pension funds, broadening its ownership base beyond company founder, chairman and CEO Gil Blutrich and two Tel-Aviv listed companies he is associated with. As well, Skyline beefed up its advisory board in June, adding former Ontario Premier Mike Harris and Dundee Corp. President and CEO Ned Goodman.

Savvy Buyer Blutrich Sets the Stage

From its inception until today, Skyline has been majority owned and controlled by Blutrich, an Israeli real estate entrepreneur who moved to Canada in 1997 with about half a million dollars worth of money to invest. He has built the company on the back of a series of shrewd acquisitions to a current book equity of approximately $110 million and 2 million sq. ft. of real estate. “He did it with a tried and true strategy of looking for opportunities that others missed and looking at properties that others were bidding on but looking at them in different ways and finding hidden value where others didn’t,” said Sneyd.

The founder and chief bargain hunter also realizes that he will most likely have to give up majority control when the company goes public. “When we go public, he realizes that it is difficult to successfully have an initial public unless you are offering enough that you are below 50%. That’s fine,” said Sneyd.

Blutrich, named Ernst & Young’s Entrepreneur of the Year in 2004, got his start buying, renting and selling condominium units before graduating to commercial real estate. Those holdings were sold off to finance another shift with the acquisition of the Pantages Hotel (2004), building the Cosmopolitan Hotel (2005), Port McNicoll lands (2007), Horseshoe Resort (2008). “He really decided as the Chairman of Skyline to focus the company in hospitality and what we call destination community which is really residential development, but a special kind of residential development.”

Resorts and Hotels are Skyline’s Formula

Today Skyline’s holdings can be divided between destination or holiday resorts and downtown hotels. Destination holdings include Ontario’s Horseshoe Resort, a 437-acre ski and golf resort an hour north of Toronto acquired for $37 million and currently the target of ambition development plans; the 530-acre golf and convention destination Deerhurst Resort in Muskoka, Ont., purchased for the bargain price of $26 million; and the 825-acre waterfront investment in Port McNicoll, Ont. on Georgian Bay. (read Property Biz next week for more on Skyline’s resort development).

Toronto hotel properties consist of the landmark King Edward Hotel in which Skyline is manager and maintains a 17% equity interest which includes development of 145 condominiums on three vacant floors; the 84-room, Cosmopolitan boutique hotel; and the 95-room Pantages boutique hotel.

In December, Skyline added to its hotel portfolio with the purchase of the Hyatt Regency and Arcade in downtown Cleveland, Ohio for $7.7 million. Skyline’s first U.S. purchase, the property includes the 293-room Hyatt hotel and adjoining restaurants and shops. The property underwent a (US)$60-million renovation and was put up for auction after its Chicago owner defaulted on a (US)$33.3 million mortgage. Skyline was the only bidder for the property.

Skyline also made a $4.7-million purchase offer for the 112-room Le Grand Lodge in Mont-Tremblant, Que., which is currently awaiting due diligence.

Despite the recent acquisitions and development plans now in the works, Sneyd said Skyline is far from finished. “We are actively looking for other opportunities. It would be great if we could pick up another property in southern Ontario but we are also actively looking in the northern U.S. and Western Canada.”

Sneyd believes that Skyline’s current management capabilities and soon-to-be public ownership structure will allow it to acquire independently owned resort and hotel properties. “They don’t have the synergies that Skyline has, and the ability.” For example, when the company acquired the Deerhurst resort it was able to immediately save the $700,000 the former owners were paying a third party management firm.

Sneyd Plays Undercover CEO

Sneyd, a resort property real estate manager and development veteran hired by Skyline a year ago, has a unique, insider’s knowledge of the company’s operational strengths. His hair is currently back to the blonde of his youth instead of its customary grey, the result of the extravagant disguise he underwent for the filming of an upcoming television episode of Undercover Boss Canada.

“In the States, they stick a baseball cap on the guy and send him out,” he said of the U.S. version of the Undercover Boss reality show. “Here in Canada they had me go through quite a transformation,” which included dying his hair, growing a goatee, wearing an earring and adopting a hipster’s wardrobe.

In his “surfer dude” persona, Sneyd was able to work undercover for six days at the Deerhurst and Horseshoe resorts where staff were told he was the subject of a documentary on worker retraining to explain his trailing camera crew. He worked as a night maintenance manager, a waiter and bartender, stable hand, and on the slopes an artificial snow maker, ski lift attendant and rental shop staffer.

“The one thing I found is that we have fantastic employees,” he said. “This whole idea of me going undercover to find problems within the company is an interesting thesis but I think more interesting than that is the quality of the employees I was working with. These people are real stars,” he said.

He had some relevant experience as a ski instructor and waiter prior to graduating from university, but was nonetheless impressed. “These people have selected these careers and really made professions out of them because they have achieved a level of expertise well beyond what I was ever able to achieve as a waiter in university.”

As reassured as Sneyd was by his undercover stint, he and the rest of the executive team take some pride in the fact that the company was approached by the show’s producers to participate in one of the 10 episodes this season.

“It’s quite a large group of diverse but well-funded and well recognized brands and for Skyline to be included,” he said. “Everybody knows (the) TTC and everybody knows FedEx and Pizza Pizza, and hopefully someday will know Skyline the same way.”

Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

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Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

Read more

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