Operating profit for Shelbourne Hotel company despite €155m writedown

THE five-star Shelbourne Hotel in Dublin made a pre-tax loss of €156 million in 2008 after the value of the property was written down by €155m.

In spite of the writedown, the company that owns and operates the hotel, Shelbourne Hotel Holdings Ltd (SHHL), made an operating profit in 2008 and the directors state that the company continued to be profitable in 2009 and 2010.

The figures show that the company recorded an operating profit of €3m following an operating loss of €6m in 2007 after revenues increased by 30% from €23.3m to €30.4m to the end of December 2008.

However, the writedown of €155m resulted in the €156.2m pre-tax loss and this followed a €12m pre-tax loss in 2007.

Accounts just filed with the Companies Office show that the hotel’s value was written down by €155m from €239m to €84m during 2008.

The company’s accumulated losses at the end of 2008 stood at €203.9m. The filings show that the company had bank loans totalling €130m and interest payments in 2008 totalled €5.4m.

The hotel on Dublin’s St Stephen’s Green was purchased by some of Ireland’s best-known businessmen Bernard McNamara, Jerry O’Reilly, John Sweeney, David Courtney and Bernard Doyle, for €140m in 2004.

SHHL closed the hotel for one year due to refurbishment, increasing the number of rooms to 265, and it reopened in March 2007.

In relation to the company’s 2008 performance, the directors state that they are “disappointed with the company’s results for the year”.

The directors state that the carrying value of the hotel property is €90m and they believe “this represents the current value of the asset” and that “no further adjustment is required in this regard”.

In relation to the writedown, the directors state that “the general worldwide economic uncertainty, coupled with particular uncertainty in the Irish property and banking sectors, the establishment of NAMA, the actual and intended transfer of loans from Irish financial institutions to NAMA and the absence of any substantial transactions in the property market have made it difficult to establish any meaningful or appropriate independent valuations for property-related assets in the current market”.

The hotel’s owners have been in dispute with the company retained to operate the hotel, Marriott International subsidiary Torriam Hotel Operating Company Ltd (THOCL) over TOHCL’s performance in the 20-year management agreement. In total, SHHL’s debts at the end of 2008 were €284m, with €130m owed in bank loans, €104m owed to group undertakings and €42m owed to its shareholders.

The accounts reveal that arbitration proceedings between the two sides were settled in November 2010 and SHHL received net proceeds of €2.2m from the settlement.

The directors state: “The hotel operators have reported improved operating profits in 2009 despite a fall in turnover for that period.

“The hotel’s trading performance continues to be profitable and key performance indicators have continued to improve throughout 2009 and 2010. The directors are optimistic that the profitability of the hotel will continue despite the poor economic conditions that prevail.”

In a note, the directors state: “The company, in line with many other companies involved in the hospitality and property sectors, is trading through extremely difficult conditions but continues to work proactively with its shareholders and its lending institutions.

“The company’s loan facility letter expired in December 2009. However, the directors are in discussions with the group’s financial institutions and have not been made aware of any cessation in the existing facilities.”

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