Playa to cut Jamaican room count 40% with sale of two Jewels
The sale of two Jewel properties will inject US$60 million into loss-making Playa Resorts while reducing the hotel rooms it operates in Jamaica by more 40 per cent.
Playa announced the sale of Jewel Runaway Bay Beach Resort & Waterpark and Jewel Dunn’s River Beach Resort & Spa to an undisclosed party. The deal was officially announced on May 1 with an expected close after the second half of the year.
“Details related to the referenced third party will be released at a later date,” said Dean Sullivan, vice-president of marketing and communications at Playa Resorts, in response to the Financial Gleaner.
The hotel company declined to say whether it would make a profit or take a hit on the sale, which comes shortly after a rating downgrade, and amid a travel lockdown. It first acquired the properties two years ago from Sagicor Group Jamaica.
“While I cannot comment of the specifics of the sale, it is amicable for all parties involved,” Sullivan said.
Sandals Resorts International, SRI, when contacted would neither confirm nor deny earlier media reports that it was potentially interested in acquiring the hotels.
“Sandals Resorts International does not have a comment at this time,” said Sheryl McGaw-Douse, group manager for communications and public relations at Sandals. Founded and chaired by Jamaican Gordon ‘Butch’ Stewart, Sandals operates 15 resorts in six Caribbean countries, according to its website. It’s been reported that the Sandals chain itself is up for sale – with Bloomberg speculating last September that the resort could fetch US$4.5 billion – but the Stewarts have never confirmed it.
The Jewel hotels to be sold by Playa account for 518 of the 1,238 rooms operated by the Mexican company in Jamaica. In June 2018, Playa acquired five properties and land from Sagicor Group Jamaica and its affiliates, which included the 268-room Jewel Runaway Bay Beach & Golf Resort, the 250-room Jewel Dunn’s River Beach Resort & Spa, the 225-room Jewel Paradise Cove Beach Resort & Spa, and the 217-room Jewel Grande Montego Bay Resort & Spa of which 88 rooms are owned and 129 are managed, as well as the 495-room Hilton Rose Hall Resort & Spa.
Playa Hotels & Resorts owns or manages 23 resorts, comprising 8,690 rooms, in popular vacation destinations in Mexico, Jamaica and the Dominican Republic.
“The sale of these two hotels will enhance our liquidity at a superb cost of capital for our shareholders. The company will continue to maintain a significant presence in Jamaica and we remain committed to being a leader in the Jamaican community as we move beyond this pandemic,” said Chairman and CEO of Playa Bruce Wardinski in a statement announcing the sale of the Jewel properties.
Playa’s debt is estimated at seven times its earnings before interest, taxes, depreciation, and amortisation. In March, rating agency Moody’s downgraded Playa’s corporate rating and revised its outlook from stable to negative.
The resort group’s senior secured term loan due 2024 and its US$100-million revolving credit facility were downgraded from B2 to Caa1. The rating revision followed a downward revision of Playa’s earnings outlook due to concerns around reduced occupancy at its resorts amid the COVID-19 pandemic.
The top shareholders of Playa include Farallon Capital Management, with a 23.1 per cent stake; Sagicor Group Jamaica, 15.1 per cent; and TPG with 6.6 per cent.
Sagicor Group Chairman Peter Melhado and President & CEO Christopher Zacca both hold seats on Playa’s board.