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Calistoga, US 48°F

Terrano Resort Napa Valley

Terrano Resort Napa Valley

Calistoga in Napa Valley, California

Terrano Resort was a planned luxury resort that we envisioned and secured unanimous approvals to develop just before the 2008...
Terrano Resort was a planned luxury resort that we envisioned and secured unanimous approvals to develop just before the 2008 global financial crisis. Years later in 2021 it opened as the Four Seasons Napa Valley and sold for US record breaking price over $2 million per key.

Size of property

25 acres

Acquisition Cost

$250,000 Option to acquire site for $17 million plus $8 million to design and secure building permits for luxury resort.

Keys

130 keys configured as 40 private residence club units with a winery, tasting room on Silverado Trail, and premium vineyard.

What we accomplished

We identified this location, which housed a family-operated Bed & Breakfast, as a prime site for a luxury resort in...
We identified this location, which housed a family-operated Bed & Breakfast, as a prime site for a luxury resort in Napa Valley. We foresaw Calistoga to become the luxury resort area of Napa Valley a decade ahead of the trend now manifest. Because the 25 acres were just inside the Calistoga town limits, we realized it could be permitted by vote of City Council, rather than the impossible process of a county-wide public referendum. We overcame the initial city concerns about luxury resort development with for sale fractional interests, and secured unanimous approval from the City Planning Commission and City Council within 15 months – a record time in Napa Valley - and the first luxury resort permitted in nearly a decade. Comparable resorts took 7 to 20 years to obtain approval from the City. Additionally, we obtained a $30 million equity commitment from a Wall Street private equity fund prior to securing development permits, which is highly unusual.

In December 2007, we secured unanimous approval just as our joint venture partner, a major Wall Street firm, faced billions in losses and had to abandon all its real estate investments. They asked us to find a replacement capital partner and we did so within a month. However, by March 2008 the replacement private equity fund also could not proceed due to the collapse of major Wall Street firms.
We arranged $100 million of equity and debt capital for the proposed development which we got permitted, but we could not proceed due to the 2008 global financial crisis. We successfully wound up the venture, honoring commitments to the City, paying vendors ourselves and mitigating costs because we structured the initial acquisition as an option to purchase the site after securing permits. If we had purchased the site upfront, the losses would have been significant. Instead, the losses were limited to the costs of designs and permitting.

To protect the landowners, we negotiated an extension of the mortgage loans they previously had on their property, and thus saved them from foreclosure during the financial crisis. Nearly fifteen years later the site opened as the Four Seasons Resort Napa Valley and was sold in 2022 at a US hotel record price of over $175 million for the 85 key resort. We identified this opportunity years ahead of other developers and the Four Seasons Resort and sale validated our judgment.

Challenges

We worked with the landowners, a family who were not experienced with large resort development projects and contracts, and it...
We worked with the landowners, a family who were not experienced with large resort development projects and contracts, and it took time to earn their confidence. This large-scale development had to be structured in a sophisticated manner as it had an investment budget over $100 million and in an unproven area with high barriers to entry. We also gained the confidence of City officials who were initially wary of any development plans on the site, but we eventually gained unanimous approvals for our development from both the Planning Commission and City Council.

ROI

Extraordinary conditions of the global financial crisis intervened in what was on track to be a highly successful venture. We mitigated the project costs and artfully wound up the project, honoring commitments. The developer who acquired the site several years later, took five years to secure permitting and faced major public opposition, taking 12 years to develop and open the resort.