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Sagicor will keep its largest hotel under Playa deal

Published:Tuesday | February 27, 2018 | 12:00 AMAvia Collinder/Business Reporter
Richard Byles, Chairman of Sagicor Group Jamaica Limited.
Christopher Zacca, CEO of Sagicor Group Jamaica

Chairman of Sagicor Group Jamaica Limited, Richard Byles, said the corporation will be holding on to its largest property, a 724-room Hilton DoubleTree (HDT) in Orlando, Florida, following the announcement of a deal in which the group is combining most of its resort holdings with Nasdaq-listed hotel group, Playa Hotels & Resorts.

Byles told the Financial Gleaner that the Hilton Double Tree will continue to be owned by Sagicor X Fund, and managed by Aimbridge Manage-ment Company, adding that the property was excluded from the deal as "Playa is an all-inclusive hotel company and the HDT has a different business model."

The Hilton Doubletree, which was purchased for US$75 million in 2015, operated under franchise agreements with Hilton Worldwide and its affiliates.

Byles said the Playa deal is set for closing on or before May 31. "It has not yet been decided which properties will retain the Jewel brand," he said.

In a joint release on the transaction, Sagicor said it would contribute its portfolio of all-inclusive resorts and developable land sites in Jamaica, including the Hilton Rose Hall, Jewel Runaway Bay, Jewel Dunn's River and Jewel Paradise Cove, and the 88-room hotel tower and spa which forms part of Jewel Grande.

Byles said that all Jewel properties were included in the deal.

In exchange, the group will receive 20 million Playa shares and US$100 million in cash. Sagicor Group Chief Executive Officer Christopher Zacca said the financial conglomerate's holdings in Playa would be "approximately 15 per cent, making us the second-largest shareholder in the company."

On Monday, Playa traded at on the NASDAQ at US$9.30 per stock unit, valuing the deal at US$286 million (J$35.5 billion).

Playa Hotels & Resorts is an owner, operator and developer of 15 all-inclusive resorts with a current total of 6,314 rooms. The group owns and manages the Hyatt Zilara and Hyatt Ziva resorts in Jamaica.

Sagicor said that through the deal it expects to "benefit from an expanded presence in resort markets in Mexico and the Dominican Republic where, along with Jamaica Playa now operates, as well as being invested in a listed entity on the Nasdaq Stock Exchange".

Sagicor entities and Playa will enter into a residential management contract to operate the Jamaican company's holdings in the remaining two towers and villas at the Jewel Grande, while Sagicor will also have the right to representation on the Playa Hotels & Resorts board.

Byles said compensation to Hilton for flag and management fees would be 'minimal'.

For Hilton Rose Hall Resort & Spa in St James, as set out in its 2016 annual report, the group was contracted to pay Hilton monthly royalty fees of US$100,000 and monthly programme fees of US$50,000. The franchise agreement was originally set to terminate on January 21, 2033.

Byles said the proceeds of the transaction will be used to pay down debt owed by Sagicor X Fund, and that the Fund will own the majority of the Playa shares which the corporation will receive.

The hotel properties under the deal were shared with Sigma Fund, another Sagicor investment vehicle.

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

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.

For the year ended December 2016, Sagicor X Fund saw revenues of $10.2 billion, a 55 per cent increase over the $6 billion recorded the year before. Net earnings were $1.6 billion, up from $1.2 billion the year before.

Assets rose 31 per cent to $44.36 billion, up from $33.86 billion in 2015.

In relation to staffing, Byles said "it is expected that the vast majority of the Jewel team will join Playa."

Zacca was quoted in the release as saying that "this combination of assets will ultimately see tremendous expansion in Jamaica's tourism industry as well as stimulate job creation." He added that "Playa is expected to invest over US$200 million to build 760 additional rooms in Jamaica over the next three years."

Byles said those 760 rooms will be constructed at various existing properties. "The extra rooms will be built at various sites which were a part of the deal," he said.