Mar 2017 Financial News

Sagicor X fund signs new franchise agreement with Hilton. Palmyra to begin operations in 2017

Mar 03, 2017

Sagicor Real Estate X Fund Ltd, which acquired a 15 per cent interest in a joint acquisition with other Sagicor funds of Palmyra Resort and Spa in Montego Bay, St James, indicates that the property is now undergoing renovation and expects to start generating income in 2017.

As indicated in notes attached to the Fund’s financials for the year ended December 31, 2016, the group’s share of the operating expenses for the acquisition was $16.79 million.The cost of acquisition, upgrade and management arrangements were not shared.

In October 2016, Sagicor, on behalf of the Fund and other managed funds, completed the purchase of 217 of the 277 residential units in Palmyra and an adjoining power plant owned by Caribbean Green Power Systems Ltd.

The joint owners are working with the remaining unit holders to reestablish the property. Other properties in which the real estate fund has an investment are operated by franchise or management agreement.

As of December 31, 2016, the hotels, DoubleTree and Hilton Rose Hall Resorts & Spa, are operated under franchise agreements with Hilton Worldwide and its affiliates and are licensed as Doubletree and Hilton respectively.

The Group is obligated to pay Hilton royalty fees of between four per cent and five per cent of gross room revenue, and fees for marketing, reservations and other related activities of four per cent of gross room revenue.

The financials indicate that DoubleTree franchise costs incurred under the franchise agreements were US$2.26 million for 2016. The franchise agreement terminates on September 30, 2025.

The notes indicate that under the franchise agreements, Sagicor is periodically required to make capital improvements to the hotels in order for them to meet the franchisors’ brand standards. The Group is also obligated to fund two per cent of gross income from operations for the ongoing replacement or refurbishment of furniture, fixtures and equipment at the hotel.

For Hilton Rose Hall Resort & Spa, the Group is obligated to pay Hilton monthly royalty fees of US$100,000, and monthly programme fees of US$50,000. The franchise agreement terminates on January 21, 2033.

The purchase of DoubleTree was finalised on September 15, 2015, for US$75 million. Sagicor notes that the acquired business contributed revenues of $985 million and profits of $8.83 million for the year ended 31 December 2015.

Hilton Rose Hall Resort & Spa was acquired in January 2015 for US$85 million. The business contributed post-acquisition revenues of $4.6 billion and profits of $501.11 million for the year ended 31 December 2015.

At year-end 2016, the Fund made total revenue of $10.25 billion up from $6.61 billion in 2015. Hotel revenue accounted for $8.46 billion, up from $ 5.57billion in 2015.

Net profit was $1.69 billion compared to $1.3 billion in 2015. Total comprehensive income, including gains on property value, was $4.57 billion for 2016, relative to 1.38 billion the year before. Earnings per stock remained flat at 75 cents year over year.

Sagicor Real Estate X Fund Ltd is 52.16 per cent owned by the Sagicor Pooled Investment Fund Ltd, which is administered by the Sagicor Group, through one of its subsidiaries, Sagicor Life Jamaica Ltd.

The company’s investment in units is one of the 16 portfolios managed by Sagicor Sigma Global Unit Trust, the Sagicor Sigma Global - Real Estate Portfolio and hotels operated by the X Fund Group.

The X fund had total assets of $44 billion at year end 2016, up from $33 billion the year before.

Source:
AVIA COLLINDER
collindera@jamaicaobserver.com
Business reporter
Jamaica Observer
Friday March 3, 2017

http://www.jamaicaobserver.com/business/Sagicor-X-fund-signs-new-franchise-agreement-with-Hilton_91273