Golf Resort Chips in 14% Cap for Eagle-Eyed Investor
The new owner of Thumper Pond Resort in Minnesota didn’t just buy one business. He bought six.
Between an 18-hole championship golf course, a 78-key hotel, an indoor water park, event space, a restaurant and neighboring residential lots, the 206-acre lakeside property in Ottertail, Minnesota, boasts diverse revenue streams and robust profits. The resort and its business lines sold for $4.5 million last month, with a 14% cap rate after factoring in an annual net operating income of $643,000, according to CoStar, the publisher of LoopNet.
“2022 ended up being a stronger year than 2021. The financials got better and that helped push interest,” said listing broker Ned Rupp at SVN Northco.
Rupp walked LoopNet through the sale of the property, which sold in June and was on the market for 369 days from listing to close.
A Package Deal
Located between two lakes in the Minnesota Northwoods, Thumper Pond Resort was carved out of 90,000 red pine trees and sits about three hours from the Twin Cities of Minneapolis-St. Paul. The resort offers lodging packages including golf and access to its 12,000-square-foot waterpark, which opened in 2016. The resort, built in 2005, is also a popular wedding venue and corporate retreat with event space for up to 500 people. The house restaurant, Willy T’s Tavern & Grill, is often frequented by locals.
As for the golf course, which opened in 2001, Golf Magazine once described it as a "must-play" for the area with its challenging holes and serene location. The course has hosted local pro-am and junior tournaments.
The indoor waterpark features a three-story tower with two slides that twist outside, plus a toddler pool and a lazy river tube ride.
Passive investors and owner-operators alike toured the property, Rupp said. The buyer, identified by CoStar as Portland, Texas-based Jatin Patel, owns and operates several flagged hotels in Texas but is now targeting Minnesota and other Midwestern states, citing the area’s opportunity for organic growth and “undervaluation” by competitors.
The resort had previously been independently owned.
While direct comps are hard to find because of the resort’s location and variety of revenue centers, Rupp said “it’s a pretty good asset on a ‘price per pound basis.’” The property sold for about $59,000 per key.
Resorts Reimagined
Resorts have rebounded from the depths of the pandemic, and in some cases have even evolved into remote work destinations.
In Minnesota, hotel occupancy, average daily rates and revenue per available room (RevPAR) are all up year-over-year, according to CoStar data. In the Minnesota North region where Thumper Pond is located, RevPAR is up 10.8%.
Rupp said that double-digit cap rates in this high inflationary and interest rate environment have also added to resorts’ allure.
“Resort deals are financeable where other lower cap rate deals are not, given the interest rate environment,” he said.
Thumper Pond is between Otter Tail Lake and Buchanan Lake in the heart of Minnesota lakes country. The region includes hundreds of lakes and wooded areas ripe for boating, hunting, fishing, camping and other recreational activities. The sale included 17 residential lots on the resort’s more than 200-acre property, which has ample space for expansion.
