X-Fund exits Jamaican hotel operations

X-Fund exits Jamaican hotel operations

Sunday, November 22, 2020

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After selling the Hilton Rose Hall Resort and Spa in 2018 as part of a deal with Playa Hotels and Resorts, Sagicor Real Estate X-Fund exited its direct ownership of the Jewel Grand Montego Bay Resort and Spa (JGM) in the third quarter as the coronavirus pandemic continues to weigh down the tourism-reliant holding company.

The JGM was acquired in June 2016 as part of a consortium of Sagicor entities in a US$53-million deal from the Palmyra properties which had gone into receivership from 2011 with over US$110 million worth of debt. X-Fund Properties Limited held 25 per cent of the joint operation while Sagicor's Sigma Real Estate Global Fund (SGF) and Sagicor's Pooled Mortgage and Real Estate Fund (SPM) held 35 per cent and 40 per cent, respectively. Playa owns 88 rooms on the property and managed the hotel in a 10-year property management agreement.

JGM had generated US $25.5 million ($3.7 billion) in revenue and US $1 million ($145 million) for 2019 on 67 per cent occupancy. The hotel had just completed major expansions and was on track to complete another solid year on improved operations.

However, since COVID-19, the hotel has recorded a loss of $430 million year to date with the third quarter showing a loss of $480 million.

Due to Playa's losses climbing higher during the 2019 financial year and Playa being accounted for as an associate, X-Fund ended up failing to meet several debt covenants for its mortgage notes and US dollar loans which resulted in the non-current portion of some loans being reclassified to current in the new financial year. As a result of these reclassifications, $2.4 billion of the loans were considered current liabilities for the X-Fund Group and $2.9 billion for the company.

X-Fund sold its interest in JGM to SPM on September 22, which generated $1.6 billion in cash for the group but resulted in a $388.4 million loss on a lower property valuation which was impacted by the pandemic. The proceeds from this sale went back to paying down about $1.65 billion of the group's current debt. This left SPM as the 65 per cent owner of the JGM while X-Fund retained indirect exposure to Jamaica through its Jamziv Montego Bay subsidiary, which controls the 14.8 per cent stake in Playa through 20 million shares. SGF is the other major owner in Jamziv whose stake was valued at $4.6 billion. SGF's net asset value is down by 13 per cent in 2020 compared to a positive increased in 2019.

X-Fund's remaining hotel is the DoubleTree Orlando in Florida which has record a $580-million loss for the year due to the lower occupancy caused by COVID-19. X-Fund also recorded a $120-million loss for the quarter due to lower valuation of their three per cent stake in SGF. For the overall nine months, X-Fund recorded a consolidated net loss of $10.4 billion and a net loss attributable to shareholders of $6.9 billion. The majority of these losses are due to the $5.2-billion impairment provision related to Playa which has contributed a $3.4 billion share of loss to X-Fund's income statement and $388.2-million dilution loss from their US $20 million equity issuance earlier this year. X-Fund currently has $901.9 million in cash at the end of September 30 with 56 per cent of their assets invested in their associate stake of Playa.

Playa's loss for the overall nine months stands at US $188.62 million ($27.61 billion) which has been impacted by the impact of various measures implemented by the various countries they operate in along with the decline in international travel. Playa sold the Jewel's Runaway Bay and Dunn's River resorts for US $60 million to Sandals Resorts after gaining the properties less than two years before in the original deal with the Sagicor entities. Apart from issuing US $200 million in debt, Playa has also filed a US $500-million shelf offering with the US Securities and Exchange Commission for the sale of securities to help bolster their balance sheet further.

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