Freed Corp. will pay $210 million to acquire Ontario’s Deerhurst Resort, Horseshoe Valley Resort and development lands at Blue Mountain Resort from Skyline Investments Inc., the firms announced Monday morning.
The transaction involves the creation of a new subsidiary by Toronto-based Freed, to be called Resort Communities LP. Skyline will take a 29 per cent equity stake in Resort LP, which represents about $33 million of the purchase price.
The transaction is expected to close on or about Oct. 31.
“This is a milestone for Skyline that provides significant new liquidity to capitalize on our stated strategy to redeploy our investment and operational focus from resorts and development lands into hotels,” Skyline CEO Blake Lyon said in the announcement.
“This transaction represents one of the largest resort sales in Canada in the last 15 years, according to Beechwood Real Estate Advisors who advised Skyline on the transaction, and we are excited to be a 29 per cent partner in Resort LP along with Freed, who will now own an expanded portfolio of premier, drive-to resorts in Ontario, Canada.”
Well-known Ontario resorts
The properties are among the best-known resorts in Ontario, all located in prime vacation regions; Blue Mountain is at Collingwood; Deerhurst in Huntsville; and Horseshoe Valley is just outside Barrie.
“This transaction allows us to realize the full net asset value of our Canadian resorts, while still participating in the value creation that Freed’s proven development team can produce,” Lyon said in the release.
“Skyline’s investment partner in Blue Mountain, Serruya Private Equity, also expressed their satisfaction and support for this transaction.”
As part of the transaction, Freed will roll its existing interest in Muskoka Bay resort into Resort LP, at a $90 million valuation.
Muskoka Bay is an 869-acre four-season luxury resort community in Gravenhurst, between Horseshoe and Deerhurst. Muskoka Bay has 65 hotel rooms and villas owned or managed by Freed and one of Canada’s top-10 golf courses, as ranked by ScoreGolf.
“The acquisition of these iconic resort properties will allow us to execute our strategy of modernizing the traditional resort community market to the highest and best use through design-driven development and benefits of world-class amenities with all season access,” said Freed’s founder and CEO, Peter Freed, in the release.
“In addition, the acquisition of these resorts further stimulates the growth in the hotel and resort sectors for Freed.”
Financial details of the transaction
Other financial details of the transaction involve several components in addition to the equity stake in Resort Communities LP.
Upon closing, Skyline will receive a cash payment of approximately $109 million, and after debt and bond repayments, taxes and minority interest payouts, is expected to have approximately $30-$35 million.
A further $80 million in payments (including approximately $12 million in interest) is expected to follow over the ensuing 24 to 48 months. Net income before tax relating to the transaction on closing is expected to be $35-$45 million.
After tax, net income is expected to be $25-$35 million and the net impact on the company’s equity is expected to be $15-$25 million.
The deal also includes options for Resort LP to acquire Skyline’s 29 per cent interest in December 2022, and put and call options for Skyline and Freed at the end of years four and five following the transaction.
Skyline will host an investor call to discuss the transaction on Sept. 30 at 9:30 a.m. (Israel time).
About Skyline, Freed and Serruya
Skyline is a Canadian company that specializes in hospitality real estate investments in the U.S. and Canada. It owns 18 income-producing assets with 3,266 hotel rooms and 85,238 square feet of commercial space and development lands with rights for approximately 2,315 residential units located in three main areas north of Toronto.
The company is traded on the Tel Aviv Stock Exchange (SKLN) and is a reporting issuer in Canada.
Freed Developments was founded over 25 years ago and has grown to become one of the largest private developers operating in the City of Toronto.
Freed has completed over 30 projects and has expanded to include vertical operating divisions in construction management, real estate and Freed Hospitality, a lifestyle-experience hotel, resort, restaurant and nightlife portfolio.
Serruya Private Equity is a global private equity firm in a broad range of asset classes with an emphasis on retail and consumer packaged goods.
SPE’s principals have developed brands including Weight Watchers, Tropicana, Godiva Ice Cream, Cold Stone Creamery, Round Table Pizza, Great American Cookies, Marble Slab Creamery, Hot Dog on a Stick, Taco Time, Blimpie Subs, and Pretzelmaker.
SPE’s platform currently includes global brands Yogen Früz, Pinkberry and Swensens with over 1,300 stores across 40 countries.