Commenting on the news, Sunil Chatrani, CEO of Elegant Hotels, said: “We are delighted to be acquiring such an attractive asset in one of the most desirable locations in Barbados. We see enormous potential for Waves, and are excited about the prospect of creating a family-friendly resort that will complement our existing portfolio and meet the exacting standards that our guests have come to expect from Elegant Hotels.
“As we said at the time of our IPO last year, acquiring new assets both in Barbados and the wider Caribbean is a key part of our long-term growth strategy, and we continue to target a number of other opportunities of this kind.”
Elegant Hotels Group plc the owner and operator of five upscale freehold hotels and a beachfront restaurant on the island of Barbados, has told DirectorsTalk that through its subsidiary Elegant Hotels (Barbados) Management Ltd, it has entered into a conditional agreement to acquire the entire issued share capital of Swiss International Ltd in Barbados, the owner of the property trading as Waves Hotel and Spa for a total consideration of US$18.0 million.
Waves is a 4-star, 70-bedroom all-inclusive resort located at Prospect Bay in the parish of St. James in Barbados. It has a prime beachfront location on the popular west coast, or “Platinum Coast”, of the island and is close to a number of popular tourist destinations including the areas of Holetown and Bridgetown. The hotel occupies approximately 1.8 acres of freehold land, and its facilities include a restaurant, bar, gym and destination spa with18 treatment-rooms.
The agreement to acquire Waves is subject to the completion of a credit agreement with the Group’s bankers, The Bank of Nova Scotia, as well as the approval of the Central Bank of Barbados. The conditions are expected to be completed before the end of February 2016.
US$5.46 million of the consideration will be paid to Swiss International’s holding company, Beach Holdings SA in cash, and Elegant Hotels will assume Swiss International’s existing debt of US$12.19 million. A further US$0.35 million will be paid to Paynes Bay Ltd (“Paynes Bay”) for the business and fixed assets of Waves. Paynes Bay is owned by the current shareholders of Beach Holdings SA and carries out the day-to-day operations of Waves.
Following the completion of the transaction, in order to fulfil existing customer bookings, the property and business will be leased back to Paynes Bay until 15 April 2016 when the business will revert to Swiss International, together with the employment contracts of the staff engaged in the operation of the hotel. Shortly after that date the property will be closed for renovation. The hotel will be refurbished, repositioned and ultimately repriced before being rebranded as ‘Waves by Elegant Hotels’, and it is expected to re-open for business in the middle of July 2016.
The expected cost of the renovation and other expenditure related to the transaction is US$4.0 million. The total acquisition and renovation costs of US$22.0 million will be funded through additional credit facilities of US$18.5 million as an extension to the Group’s existing credit agreement with The Bank of Nova Scotia, an interest-free vendor loan of US$2.0 million repayable over four years, and US$1.5 million of the Group’s existing cash resources.
For the year ended 30 June 2015, the combined revenue and EBITDA of Beach Holdings SA (which includes all of the operating income and costs of Waves recharged by Paynes Bay) and Swiss International were reported as US$6.4 million and US$3.1 million respectively. However, having thoroughly evaluated the operating conditions of the hotel, which in recent years has been run with short-term objectives, in particular under-investing in ongoing repairs and maintenance and operating with limited senior management resources, the Directors of Elegant Hotels believe that the adjusted underlying EBITDA for the period would, if the above factors were taken into consideration, equate to approximately US$2.1 million.
The Directors expect this transaction to be earnings enhancing for the Group for the year ending 30 September 2017.
