KSL Capital Partners has arranged a $270 million refinancing for the 138-year-old Grand Hotel and another hotel on Mackinac Island, the car-free Michigan vacation hot spot.
Morgan Stanley is set to originate the loan and roll it into a new single-borrower, single-asset commercial mortgage-backed securities offering, according to analysis of the deal by bond rating firm Morningstar DBRS. The deal comes as the hotels prepare to open for the season, which runs from May to October.
The Grand Hotel sits on a 61.2-acre site atop a bluff that provides panoramic lakefront vistas overlooking the Straits of Mackinac and the Mackinac Bridge. Built in 1887, the hotel is known for its 19th-century charm, making it one of the most recognizable historic hotels in the United States. Cars are famously prohibited on Mackinac Island, with the exception of authorized emergency vehicles.
Listed as a National Historic Landmark, the Grand Hotel is arguably best recognized as the main backdrop for the 1980 romantic fantasy film "Somewhere in Time," starring Christopher Reeve and Jane Seymour. It is also known for its 660-foot-long porch, the longest in the world.
The two-year loan with three 1-year extension options covers the 388-room Grand Hotel as well as the 84-room Bicycle Street Inn. Together, the two properties make up 38% of the luxury and upper-upscale properties on Mackinac Island, according to CoStar data. They are also two of the highest occupancy properties on the island while open.
With an average portfolio occupancy of 94.1% in the 2024 season, the Grand Hotel's revenue per available room increased by 11.6% from 2023, recording a peak of $661.91 in July 2024, according to Morningstar. Bicycle Inn's revenue per available room increased by 34.5% from 2023 to 2024.
The portfolio generates negative net operating income for six months of the year when the hotels are closed to guests, according to Morningstar. However, the portfolio generated $30 million in NOI for the full year 2024.
KSL Capital acquired the Grand Hotel in 2019 and the Bicycle Inn in 2021. The firm has invested an additional $106.6 million in the Grand Hotel, or about $225,795 per room, according to Morningstar. In 2021, the pool and guest bathrooms were fully renovated and modernized. Additionally, the retail corridor was expanded with two new tenants.
The Bicycle Inn is a limited-service independent hotel on Mackinac Island's Main Street commercial strip. The property's three buildings were constructed between 2013 and 2019.
Proceeds will be used to repay $185 million in outstanding debt and return about $80 million to KSL, according to Morningstar.
KSL Capital did not respond to a request for comment from CoStar News.