G8 summit site Deerhurst up for sale

Posted July 15, 2010, 10:34am EDT

Source: The Globe and Mail, Monday July 12, 2010

The Muskoka region’s Deerhurst Resort is up for sale just weeks after playing host to the Group of Eight summit, as its U.S. owners try to take advantage of the resort’s sudden high profile and the perceived safety of the Canadian real estate market.

The deal’s ramifications extend far beyond Ontario cottage country. The recession has been brutal on resorts across North America, so much so that industry insiders have no idea how much the 114-year-old property may fetch on the open market.

The metrics used to value these properties – average rental rates and comparable sales – are thin because there have been so few properties sold in the past four years. That means all eyes are on Huntsville, Ont., because a successful sale could set the tone for future transactions.

“All we know is values are way down from a few years ago,” said Queen’s University Professor John Andrew, who specializes in commercial real estate. “We have no idea if values are down 15 per cent or 50 per cent, so this process is quite important to the broader industry.”

Real estate consultant Colliers International said in its annual review that the number of hotel sales – including resorts – fell by 20 per cent in 2009. Sales volume dropped 61 per cent to $414-million, as buyers exited the market in anticipation of more hard times for the tourist-dependent sector.

There were a slew of distressed sales among smaller players that couldn’t pay their bills. Industry giant Intrawest ULC, meanwhile, struggled under the weight of its debt and had to refinance in the middle of the Winter Olympics to hold onto its prized Whistler-Blackcomb resort in British Columbia.

“If you look through the deals over the years, you don’t see these types of properties sell very often,” said Colliers executive managing director Alam Pirani. “The last significant transaction was in 2006 when the Fairmont portfolio was sold, so it’s hard to gauge values.”

Deerhurst was founded in 1896 and run by the Waterhouse family until 1990, when it was sold to Apotex Corp. chairman and chief executive officer Barry Sherman, who had hoped to develop a casino on its grounds.

It was bought in 1998 by Cornerstone Real Estate Advisers LLP, a Hartford Conn.-based fund, for an estimated $21-million. Cornerstone has since spent an estimated $60-million on renovations.

Deerhurst now has space for 1,000 guests in 400 rooms and suites, two golf courses, conference facilities, seven restaurants, a spa and salon, and 3,000-foot airstrip.