A battle between the manager and owners of a Whistler hotel-complex which has landed in B.C.’s Supreme Court against the background of a noisy social media campaign has exposed low returns and plunging prices – down as much as 80 per cent in seven years – in a key sector of the resort’s hospitality industry.
At the heart of the conflict is the 77-unit Nitka Lake Lodge, completed in 2008.
The Nitka units are among approximately 5,000 Phase II properties in the Resort Municipality of Whistler. Phase II properties are freehold, but with a municipal covenant registered on title that restricts owner usage to 28 days in the summer and 28 days in the winter. The remainder of the year the property must be managed through an on-site rental management company. Most of the well-known hotels brands such as the Delta, Pan Pacific, Westin and Four Seasons are Phase II properties.
The lakefront Nitka Lake Lodge, which also contains retail commercial space, sank into insolvency in 2011 and investor Michael Scholtz, an owner in the complex, stepped in as manager and majority investor.
Scholtz, former president of Great Canadian Gaming, now owns 55 of the Nitka Lake Lodge suites as well as all five commercial spaces under his company, NLL Holdings Ltd.
“We turned the Lodge around,” Scholtz said, noting that occupancy levels have risen, the retail space is leased and the lodge is turning a small profit. TripAdvisor, the giant online hotel booking site, now ranks Nitka the No. 1 hotel in Whistler.
Scholtz worked out a deal with most remaining owners that they will receive 25 per cent of rental income, rising to 50m per cent if performance levels are reached. Under the original agreement before the Nitka went into insolvency, owners had been receiving a 55 per cent share of rental incomes that can run to more than $400 per night during the high season.
However, owners of nine of the units are refusing to have their units placed in the rental pool at Nitka, claiming they are being “locked out.” The owners are from the U.S., Singapore and Ontario. Due to the municipal covenant, the owners can’t use their units or rent them out if they are not under a rental agreement.
On May 26, Scholtz filed a notice of civil claim against the owners in the Supreme Court of BC, claiming breach of trust and seeking $395,000 in damages.
The owners countered with a social media campaign to warn the international investment community of the “economic and political risks of investing in Whistler.”
San Francisco, CA-based Jon Sobel, speaking for the group of owners, says, "Some people put a lot of their life savings into this project and they're being starved out. In business you expect ups and downs, but you don't expect that a world-class resort would enable such conduct." The group wants Whistler to exempt Nitka from the Phase II covenant and allow them to rent the units independently. Such a move, Scholtz contends, would “cause chaos” at Whistler because the entire Phase II structure is based on controlled and consistent rental management.
Sobel claims the value of Nitka Lake Lodge hotel-condo suites has fallen 80 per cent since 2007, when most owners bought the units before construction began in a pre-sales blitz.
Scholtz agreed. He said the original Nitka hotel condo units originally sold for from $800 to $1,000 per square foot. Today that price is maybe $200-$250 per square foot, he said.
