Fri | Nov 16, 2018

Playa expects to recoup part of Jamaican investment in under five years

Published:Wednesday | July 25, 2018 | 12:00 AMSteven Jackson/ Senior Business Reporter
A section of the Jewel Grande Montego Bay, one of five resorts included in the deal between Playa and Sagicor Group.

Playa Hotels & Resorts Limited expects to recoup its investment in the Jewel Grande and Hilton Rose Hall resort properties acquired under a deal with Sagicor Group Jamaica, in less than five years.

The disclosure was limited to those two properties - both based in Montego Bay - and Playa is refusing to say why, citing market rules.

"Unfortunately we are unable to make comments to the press on financial matters due to securities regulations and our own internal policy," Ryan Hymel from Playa in response to Financial Gleaner queries. The resort company is listed on the Nasdaq exchange in New York.

The US$310 million deal with Sagicor and its managed funds covered five properties, including three other Jewel-branded resorts in St Ann.

As part of that deal, Sagicor acquired a minority stake in Playa and has two representatives on the company's board, namely Sagicor Group Chairman Richard Byles and CEO Christopher Zacca.

Byles said when reached for comment that in order to respect protocol, any comment would have to come from Playa executives.

Playa also owns and operates two other properties in Montego Bay not associated with the Sagicor deal - the Hyatt Zilara and Hyatt Ziva.

Playa reported in a market filing to the US Securities & Exchange Commission that it expected to hit the "estimated stabilised year" between 2021 and 2022 for Hilton Rose Hall with an expected rate on investment of 36-40 per cent; and between 2023 to 2024 for Jewel Grande, formerly known as Palmyra Resort & Spa, and the Hyatt properties, with an ROI of 22-24 per cent.

In its disclosures - which dealt with a one-year period ending March, before the deal with Sagicor closed - Playa was expecting to reap benefits of about US$26 million ($3.4 billion) in additional earnings before interest, depreciation, tax and amortisation, or EBITDA, from the inclusion of the Sagicor Jamaica properties in its portfolio. It would have grown overall earnings for Playa from $171 million to US$191 million as at March 2018, the market filings indicate.

Playa's future filings may yield more disclosures on whether its EBITDA projections held.

The acquisition completed in June, increased Playa properties from 15 to 20 all-inclusive resorts spread across Mexico, the Dominican Republic and Jamaica. Its Hyatt properties in Montego Bay operate as one hotel, giving it six resorts in Jamaica, overall.

The deal with Sagicor covered Hilton Rose Hall, Jewel Grande, Jewel Runaway Bay, Jewel Dunn's River and Jewel Paradise Cove. The existing assets were previously managed by an outside third-party operator - American company Aimbridge Hospitality - but Playa assumed management of the assets on the closing of the transaction with Sagicor.

In its March 2018 earnings report, Playa said are approxi-mately 4.5-acres of developable land at Jewel Grande, located adjacent to Playa's Hyatt Ziva & Hyatt Zilara Rose Hall Resort, on which it plans to "potentially" develop a Hyatt Ziva resort of approximately 300-350 rooms. It also plans to build another resort of about 400 rooms on a 13-acre land site adjacent to the Hilton Rose Hall Resort.

The Sagicor property acquisitions increased Playa's total room complement by 1,326 rooms to 7,769 rooms.

The deal formed part of Playa's strategy to grow its earnings before interest tax, depreciation and amortisation by three-quarters to roughly US$300 million by 2021.

In exchange for the properties, the Sagicor Group received 20 million Playa shares and US$100 million in cash. It made Sagicor the second largest shareholder in Playa.

Playa reported net income of US$21.8 million on revenues of US$177 million for the three months ending March 2018, compared to US$27.6 million on revenues of US$174 million in the similar period in 2017.

steven.jackson@gleanerjm.com