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Jewel Runaway Bay, Jamaica. (Photo: Playa Resorts)

Losses spike at Sagicor X Fund with Playa dilution, low occupancy

Jewel Runaway Bay, Jamaica. (Photo: Playa Resorts)

Sagicor Real Estate X Fund Limited (The X Fund) generated net loss attributable to stockholders of $6.89 billion for the nine months ended September 30, compared to $0.064 billion over the corresponding period of the year prior.

Jewel Runaway Bay, Jamaica. (Photo: Playa Resorts)

Management said the outbreak of COVID-19 globally has devastated the tourism industry, resulting in the losses seen.

They explained, “Despite the gradual reopening of an increasing number of destinations during the third quarter, this was short-lived as travel restrictions were re-imposed by a number of countries amid a resurgence of COVID-19 cases.

“Up to mid-September these were not lifted for the most part. While the recovery of international tourism may be sluggish, many countries have turned to domestic tourism to reduce the impact caused by the fallout in international demand.”

Business activities at Jewel Grande Montego Bay (JGM) and Playa Hotels & Resorts N.V. (Playa) were halted during the second quarter of the year while DoubleTree by Hilton (DTO) continued operations, but at reduced occupancy levels.

Jewel Grande resumed full operations on July 1, 2020, while the Playa resorts began re-opening on a phased basis.
Management said, “The reopening of the tourism sector has improved the outlook for our business activities. Likewise, occupancy levels specifically at DTO have shown steady month on month improvements.”

However, the uncertainty surrounding patrons’ confidence in leisure and travel activities, led to the recording of non-cash impairment charge of $5.21 billion during the first half of the year on the Fund’s investment in associated company, Playa.

On June 12, 2020, Playa announced the issue of 4,880,000 ordinary shares priced at U$4.10 per share and additional debt financing of US$204 million.
This transaction led to a 0.56 per cent reduction in X-Fund’s holdings and the Group recorded a loss on dilution of $0.39 billion.

The shareholders of X-Fund Group recorded a $3.41 billion loss in relation to the impairment charge and the dilution of interest.
Effective September 22nd, the Group sold its interest in JGM to Sagicor Pooled Investment Fund Limited (PIF).
Management said the transaction significantly improved X-Fund’s liquidity profile and generated inflows of $1.6 billion that were used to reduce borrowings.

They indicated that the sale price was based on a recent valuation, but amid the COVID-19 pandemic, property values declined significantly over the prior year resulting in a loss of $0.39 billion.

Management said notwithstanding the adverse impact of COVID-19, the Group continues to show a health liquidity position.
 Cash resources at September 2020 stood at $1.63 billion.
Management stated, “We remain confident that our cash resources are sufficient to meet our forecasted needs.”

The book value of X-Fund Group is $8.05 per share compared to a share price of $7.75 at September 2020.
Total revenue was $2.01 billion, down 58 per cent or $2.74 billion compared to the same period last year.

Direct hotel operations segment which comprised DTO and JGM contributed $2.13 billion, 55 per cent below prior year.
Management said hotel expenses of $1.98 billion for the period represent a 44 per cent reduction over the comparative period.
The Group’s indirect hotel and commercial operations comprise investments in Jamziv Mobay Jamaica Portfolio Limited (Jamziv) and units in Sigma Real Estate Portfolio.

This segment reflects the share of profits from associate and fair value movement from Sigma Units in the current year.
The X Fund holds through Jamziv, 60.81 per cent of the 20,000,000 Playa shares, and in the Sigma Real Estate Portfolio holds a 3 per cent interest.
 Jamziv had share of profit from associate of $0.27 billion in prior year versus a share of loss of $3.39 billion for the period.

Current year’s results include realized loss on sale of JGM. Net profit has also been severely impacted and, on the decline, since the worldwide closure of Tourism.
 DTO, Management said, continues to outperform comparable properties in the Orlando market with occupancy levels of 42 per cent on a year-to-date basis.

Hotel revenues for DTO were $1.85 billion (2019: $3.87 billion), with EBITDA of $0.24 billion (2019: $1.06 billion), and net loss for the period of $0.48 billion (2019: profit of $0.19 billion).
The reduction compared to last year is as a result of a significant decline in occupancy levels.

The Group’s total assets were $36.91 billion at September 2020 and $49.22 billion at December 2019.
Stockholders’ equity as at September 2020 was $18.05 billion, down 29 per cent from $25.54 billion as at December 2019.
The reductions were due largely to the impairment of investment in associate.

In conclusion, management said, “The outlook remains highly uncertain as much is still unknown about the pace of tourism recovery in 2020 going into 2021 due to the ongoing pandemic and the possibility of a future vaccine.
“We are carefully monitoring and assessing the overall impact on the Group.”