Former Qatari Rulers Get Debt Breach Waivers On £725M Of Loans To Pandemic-Hit Luxury Hotels
Two of Qatar’s former rulers have pledged financial support and agreed waivers ahead of potential covenant breaches on more than £700M of loans secured against a trio of the world’s most expensive hotels, Bisnow can reveal.
The Qatari owners of Claridges, The Berkeley and The Connaught in London’s Mayfair have had to provide financial support because of the impact on the properties from closures forced by COVID-19.
Accounts for the companies that own the three hotels filed at Companies House just before Christmas highlight how the owners of luxury hotels with debt secured against them are having to negotiate deals with lenders.
A Qatari-controlled vehicle bought Maybourne Hotel Group, which owned the three hotels, for a reported £1.4B in 2015, after a legal battle relating to their ownership. The hotels were divvied up between two of the members of Qatar’s ruling elite in 2017.
Claridge's, with 203 rooms, is owned by Sheikh Hamad bin Khalifa Al Thani, the former ruling Emir of Qatar and part of the ruling family.
In accounts for the year to December 2019, but which address the impact of COVID-19, Coroin, the vehicle that owns the hotel, said it had agreed with lender Barwa to defer interest and capital payments on a £376M loan secured against the hotel.
It said that a debt service covenant waiver had been agreed until the end of 2020, and that if that waiver was not extended into 2021, it would breach loan covenants. It said it expected the waiver to be extended.
Either way, the company said it is dependent on Khalifa Al Thani to meet operating and capital expenditure, and that he pledged to provide continued support. The loan matures in 2022.
The COVID-afflicted year 2020 is not covered in the financial results filed by the company, but in a note on the pandemic, it said the performance of its hotels had been severely affected.
The company also owns the Montage hotel in Beverly Hills, which it bought for $415M (£320M) in 2019 and renamed the Maybourne. That property has a $200M loan from JP Morgan secured against it, and the results make no mention of loan negotiations relating to that property.
Coroin said its property assets are valued at £1.1B. In 2019, before the coronavirus pandemic, it spent £69M upgrading Claridge's, including an extension that will increase the number of rooms to 233. That year the hotel made a £3.4M operating profit from revenue of £58M. That profit was down from £14M the year before because rooms were closed during the upgrade.
The 121-room Connaught and the 210-room Berkeley are owned by Sheik Hamad bin Jassim bin Jaber Al Thani, the former prime minister of Qatar and former head of its sovereign wealth fund.
In April, he defied the panic besetting financial markets in the first months of the pandemic by refinancing the two hotels. Accounts for The Connaught show it is secured by a £155M loan with a 2.7% interest rate margin. Accounts for The Berkeley show it has a £183M loan secured against it at the same margin. Both loans mature in 2030 and were provided by a consortium led by German property specialist lender Deutsche Pfandbriefbank. The company’s value of the two hotels is stated as £459M.
The vehicles that own those hotels have already had to negotiate covenant waivers with the new lenders, accounts filed in December show. Waivers have been secured on debt-to-earnings before interest, taxes, depreciation and amortization covenants until August 2021, accounts for the hotels show. Again, the owner has said he will step in and support operations and debt payments as necessary.
The accounts show that The Connaught made an £8.5M operating profit in 2019, a profit margin of 15%; and that The Berkeley made an operating profit of £6M, a profit margin of 11%.
