Peter Freed, the founder of Freed Developments, is paying more than $330-million to take control of a handful of Ontario’s most familiar resort properties.Ryan Carter/The Globe and Mail
Peter Freed has built a fortune over the past 25 years as a developer of condominium apartment towers, mainly in downtown Toronto.
Then, in late 2021, the founder of Freed Developments announced he was paying more than $330-million to take control of a handful of Ontario’s most familiar resort properties. Mr. Freed has ambitious ideas to expand Freed Hotels & Resorts, and his main strategy is to build 5,000 to 7,000 condominium units designed for recreational use over the next decade.
It’s a bold move. Not only did the hospitality businesses take a thrashing during the COVID-19 pandemic, the sheer size and scope of this land deal could be the biggest swing yet in a career of big swings. So why, at age 53, has a guy known for building big in Toronto’s King West district decided to shift his focus to Muskoka and Huntsville?
Mr. Freed has some experience in the space. He founded the Muskoka Bay Resort in 2002, carving a golf course out of a rocky forest valley and filling the grounds with high-design clubhouses and luxury villa condominiums. But the timeline on that 20-year project didn’t whet his appetite to repeat the process. Then the pandemic came, and Mr. Freed said his perspective on the bounty of Ontario’s outdoor offerings began to change.
“I used to spend one or two nights at Muskoka Bay. I don’t think I ever spent more than two or three nights in a row here pre-COVID,” he said. “And then I was here for 80 out of 90 days in January, February, March, [2021], and I had never been happier.
“When I leave the city and come here, I actually relax. You know, my shoulders dropped two inches, my neck loosens up a bit, it’s a different headspace,” Mr. Freed said.
The deal included the 125-year-old Deerhurst Resort, the 60-year-old Horseshoe Resort ski property and a package of development lands at Blue Mountain Resort. Added to Muskoka Bay Resort in Gravenhurst, Mr. Freed has assembled one of the largest outdoor recreation companies in Canada, with four golf courses, a half-dozen restaurants and a collection of amenities that employ more than 2,000 people.
“I grew up as a kid visiting some of these properties, I went to Deerhurst as a teenager, skied at Horseshoe as a teenager. … I always left with a feeling those are large open properties. I always felt they were a little tired, that they needed a little bit of love,” he said.
Freed recently purchased the 125-year-old Deerhurst Resort, the 60-year-old Horseshoe Resort ski property, and a package of development lands at Blue Mountain Resort.Ryan Carter/The Globe and Mail
Mr. Freed grew up in Toronto’s Forest Hill neighbourhood and got his start by building custom homes in suburbs in the 1990s, financed with partners such as the Goldhar family of the SmartCentres real estate billions. He actually bought the land for Muskoka Bay before he ever built his first condominium (a nine-storey building on Portland Street near King Street in Toronto’s downtown core, finished in 2006). He has erected a dozen more condo towers since then, with more in development.
Then, a few years ago, when he heard Skyline Investments Inc. was looking to unwind some of its Ontario hotel portfolio, he was interested. “We were a natural potential purchaser of these assets because most people who are in the development business, they’re not also in the golf business, or the hotel business,” he said.
Back in 2010, when Skyline was fronted by Canadian-Israeli businessman Gil Blutrich, the company went on a buying spree after the financial crisis that included snapping up the King Edward Hotel in Toronto for a reported $48-million, and later Deerhurst for $26-million. To build out his portfolio, Mr. Blutrich partnered with the Serruya family (whose CoolBrands International frozen-dessert empire included chains such as Yogen Fruz, Menchie’s and Pinkberry, and brands such as Chipwich and Breyers, before it imploded in the early 2000s) and Russian-Canadian businessman Alex Shnaider.
At the time Mr. Shnaider was a little-known operator who appeared to have made some of his money in the post-Soviet privatization frenzy.
Mr. Shnaider’s connections to Kremlin-backed business entities in Russia and Ukraine (he had dealings with now-sanctioned Vnesheconombank, or VEB) would face further scrutiny in Canada because of his role in financing the Trump International Hotel & Tower in Toronto, particularly as Donald Trump’s foreign business entanglements were highlighted during his 2016 presidential campaign and subsequent administration. The hotel-condo tower was later pushed into insolvency, sold and rebranded as the St. Regis after Mr. Shnaider’s real estate company, Talon International Development Inc., defaulted on a loan for the $500-million project in 2016.
Mr. Blutrich left Skyline in 2020 and waged a legal battle against Mr. Shnaider in Israel, but the Skyline deal with Freed leaves Mr. Shnaider with a 29-per-cent share in Mr. Freed’s new hospitality company.
Mr. Freed is reluctant to talk about the partnership with Mr. Shnaider, who is not on any public sanctions lists.
“I don’t like talking about politics,” Mr. Freed said. “I’ve honestly met him once.”
Mr. Freed said Skyline’s involvement was primarily to help with the purchase and he noted that he had the option to buy them out at the end of 2022, though that did not happen and Mr. Freed remains partners with Skyline on the resorts.
Skyline didn’t make Mr. Shnaider available for comment, but said in a statement it intends to remain partners with Mr. Freed’s company going into 2023. “The resorts are performing well and we look forward to this continuing,” said Neha Kapelus, vice-president of finance with Skyline.
After his first summer as the new owner, Mr. Freed also has new proof that one of his bets – that the booming interest in outdoor lifestyles won’t slow as the pandemic recedes – is paying off.
Horseshoe, near Barrie, Ont., is primarily known for its downhill and cross-country skiing, but according to general manager Jonathan Reid, the crowds that began showing up the summer when international travel was extremely limited haven’t vanished as destinations outside the country have opened up.
“Four, five years ago we sold $200,000 in lift tickets in summer,” mainly for mountain biking, Mr. Reid said last summer. “We were static there for probably 10 or 11 years. Last year, we jumped to $850,000, and maintained that pace this summer as well.” Mr. Reid said Horseshoe’s annual revenues have exceeded expectations, and are on track to hit $25.5-million, well above a budgeted estimate of $20-million.
Having the resorts work as destinations supports the hospitality side of Mr. Freed’s business, but it also sets the table for what is ultimately the more lucrative play: selling more of the land as recreational properties.
“Somebody like Mr. Freed knows this. He’s not investing in these properties as an operational advantage only,” said William Murray, an associate professor at the University of Guelph’s School of Hospitality, Food and Tourism Management. Dr. Murray notes that while most tourist and investor demand for Ontario’s resorts will come from North America, rather than from overseas, the surge in “closer-to-home” travel has exceeded expectations in recent years.
Even after high interest rates took a bite out of real estate sales in late 2022, prices in cottage country are still near historic highs. “I think you’re going to see a lot of real estate movement in the lodging field, values have gone up and operations are coming back,” Dr. Murray said.
Mr. Freed’s redevelopment plan is showing early signs of success. Last summer, the company opened a sales office for a 183-unit condominium project at Horseshoe. “We sold $60-million worth of units in the first three weeks,” Mr. Freed said, with prices that start in the mid-$400,000 range. Even though demand for new condominiums slowed in big urban centres, his company’s offering is not aimed at people who can barely afford to buy real estate.
“Less than 1 per cent of people can afford a multimillion cottage, but a lot of people want to have a recreational property,” Mr. Freed said.
Cottage country real estate cools down as investors circle
His manner is calming, soothing even, when he talks about his passions and his projects, but there’s a lot of nervous energy boiling beneath the surface. Mr. Freed keeps a leather folio that is almost bursting with jotted notes, sketches and ideas. He speaks often in terms of legacy, of wanting to achieve some of his milestones before he turns 60.
For someone who’s built thousands of condominiums and managed budgets in the hundreds of millions of dollars, he is refreshingly frank in saying that sometimes the thousand details he’ll need to manage for his resort vision can make him a little nervous.
“If you stop becoming nervous in this business maybe it’s time to step back and let another nervous nelly take over,” he said, with his signature modest grin. “I think a lot of what we learned – good and bad over the first 25 years – we’re now leveraging that knowledge and experience into this chapter.”