More losses as HRL’s properties remain on market

The Government-owned Hotels and Resorts Limited (HRL) is reporting uncertainty surrounding the sale of its two properties as it reports financial losses for the year ending March 31, 2022.

HRL, which manages the 93-room multi-building Savannah Hotel, currently under a lease arrangement and the 67-room Blue Horizon Hotel, have so far failed to secure a buyer despite being on the market for several years.

“The Company may not be able to dispose of the hotels in a timely manner or on favourable terms, which could adversely affect its financial condition, operating results, and cash flows,” HRL said in its annual report for the period April 1, 2021 to March 31, 2022.

HRL said it continued work towards its divestment objectives during the review period, but progress was “constrained” by market and other conditions as they continued to seek the best outcome for shareholders.

The chairman’s report noted that the operating performance for HRL for the financial year ending March 31, 2022, was one of mixed challenges, as it pointed to the threats associated with the COVID-19 pandemic and the ash fall from the La Soufriere volcano in St Vincent and the Grenadines which affected the island in April 2021.

HRL Chairman Oliver Jordan said notwithstanding the challenges, Blue Horizon Hotel continued operations under the Gems of Barbados Hotel brand and the Savannah Hotel resumed operations under a temporary lease arrangement.

The group recorded gross operating income of $2.55 million and a net loss of $1.036 million during the year under review. This follows a total net loss of $2.53 million the previous year.

“With the long-awaited global reopening of countries, there is still the need to tread cautiously with respect to COVID-19, climate change and other local, regional and international issues which could further setback the tourism industry in Barbados,” said Jordan.

“While continuing to optimise its existing operations, in accordance with Government policy, [HRL] remains focused on successfully executing the divestment of the two remaining hotels,” he added.

According to the annual report, in the midst of the continued depressed local economy, the real estate market and the shareholder’s desire to divest of the hotels, HRL obtained valuations for both the Savannah and Blue Horizon hotels in the previous years.

“As at March 31, 2022 accumulated impairment for The Savannah and Blue Horizon amounts to $26,474,823 and $8,451,381, respectively,” it said.

HRL is owned by three shareholders – government (95.1 per cent), Sintjon Ltd (3.6 per cent) and Worthing Court Apartment Hotel Ltd (1.3 per cent).

In relation to the Savanna Hotel, HRL reported that a concessionary arrangement was entered for its reopening in January 2021 after it was closed for nine months of the 2020/21 year.

It reported a “moderate recovery” in the performance of the operating lease with a $358,000 or 41 per cent reduction in the net operating loss from $880,000 in the prior year, to $522,000.

The report noted that: “The performance of the leased operation remains substantially below pre-pandemic levels. In 2021/22 cash of $62,000 was generated from the lease, representing a 91 per cent shortfall from the $683,000 generated in 2020”.

This comes as HRL reported that it was still facing a multi-million dollar out-of-court settlement with a former management company.

According to HRL, its former hotel manager, Commonwealth Hospitality Ltd. (CHL) has made a claim for an aggregate sum of US$13,583,521 which is the subject of arbitration proceedings.

“The sum claimed includes US$11,415,104 for liquidated damages for wrongful termination of the Management Agreement between the [HRL] and CHL. The company is contending that it was entitled to terminate the Management Agreement and is therefore not liable to pay CHL the amount claimed or any other amount by way of liquidated damages,” said HRL.

It noted that the sum claimed also includes US$595,377 as Management Incentive Fees and US$171,920 as a Termination Fee.

However, HRL is contending that it is not liable to pay CHL any amount in respect of either Management Incentive Fees or Termination Fee.

“It is not possible to predict the outcome of these proceedings. An accrual equivalent to US$1,091,450 has been made against the remainder of the CHL claim as was determined at December 31, 2001. The accrued amount is included as part of accounts payable and accrued liabilities,” said HRL, while noting that “various other claims” have been made against the company.

It noted that CHL had not pursued the matter for several years, “likely as the result of numerous changes in the ownership structure and management of that company over the years”.

marlonmadden@barbadostoday.bb