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Pphe Hotel Share Discussion Threads
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|Good to see a share price increase ahead of the full year trading update...
I was in the area and so had a look at Westminster Bridge Park Plaza and County Hall Park Plaza from the outside. I also saw an estate agent selling was selling a buy to let hotel room in the former for £300k. From what I recall Westminster Bridge used outside room investors to get the hotel off the ground. A number defaulted and as such the company kept their deposits.
General thoughts on the hotels were that they are a grade above say a Premier Inn or a Travelodge. For example, some of the Park Plaza's have swimming pools. The new Park Plaza at Waterloo seems to have fairly high hotel room rates so should be a success. However, the Royal Oak hotel doesn't appear to have opened by the end of 2016 as planned.
What was particularly notable from my quick look at the hotels is that they are very well located for the tourist trade around Westminster and the South Bank.|
1. Its only at one hotel as far as I know, on the South Bank. A year ago I was offered a couple on a re-sale by an estate agent. It didn't look too great an investment, imo, so that means PPH were on the favourable side of the investment.
They report on an "owned rooms" basis so the asset will be excluded but they charge management fees to the room asset holder. If I recall the gross yield on the ones I was offered was about 5.5%.
There's a financial liability of £134m in the balance sheet for this "financing".
Here's the Note to the accounts from the 2015 Annual Report:
4. Financial liability in respect of Income Units sold to private investors:
In 2010, the construction of Park Plaza Westminster Bridge London was completed and the hotel opened to paying customers. Out of 1,019 rooms, 535 rooms (‘Income Units’) were sold to private investors under a 999-year lease. The sales transactions are accounted for as an investment scheme in which the investors, in return for the upfront consideration paid for the Income Units, receive 999 years of net income from a specific revenue- generating portion of an asset (contractual right to a stream of future cash flows). The amounts received upfront are accounted for as a floating-rate financial liability and are being recognised as income over the term of the lease (i.e. 999 years). Changes in future estimated cash flows from the Income Units are recognised in the period in which they occur.
On completion of each sale, the Company, through a wholly owned subsidiary, Marlbray Limited (‘MarlbrayR17;), entered into income swap agreements for five years with the private investors. The income swap agreements included an obligation of the investors to assign the right to receive the net income derived from the rooms to Marlbray and an undertaking by Marlbray to pay to the investors an annual rent guarantee of approximately 6% of the purchase price for a five-year period commencing from the date of the completion of the sale. The income swap has been accounted for as a derivative. In 2014 and 2015, Malbray entered into 56 income swap agreements for a further 5 years from the expiry date.
The entire hotel is accounted for at cost less accumulated depreciation.
The replacement costs for the sold rooms are fully reimbursed by the investors. An amount of 4% of revenues is paid by the investors on an annual basis (‘FF&E reserves’) and is accounted for in profit and loss. The difference between the actual depreciation cost and the FF&E reserve is a timing difference which is recorded on the statement of financial position as a receivable or liability to the investor in each respective year.
2. Sterling refinance last year was at 3.248% Fixed for 10 years.
Euro financing, for Dutch Hotels, was at 2.165% Fixed also for 10 years.
There were also a 10 year (Park Plaza £87m Fixed at 3.41%) and a 12 year (Westminster Bridge of £182m; £172m Fixed at 3.785%) refinancings.
These fixed portion refinancings total about £560m (GBP150m + Euro182m + £87 + £172m) and, by my calcs, are therefore about 78% of the outstanding long term debt.|
|to holders here..I am thinking to invest in PPH having only come across it recently. I wondered if anyone could share thoughts on a couple of things:
1. what is the significance of the company having sold some of its hotel rooms to outside investors around the time of the GFC? I believe only at Westminster? but possibly other sites? I read in a hardman note that these are income units in the balance sheet?
I presume the company owns a majority of the rooms at Westminster, but private investors hold some of them?
And the adjusted NAV that makes this stock look cheap on asset basis crucially EXCLUDES the rooms sold to private investors
2. With the balance sheet heavily indebted (over 500m debt at H1) what is the sensitivity of earnings and the valuation to potentially rising interest rates? It seems like they refinanced much of their debt in 2016 and achieved Long term fixed rates of around 3.5%..so rising rates would not have much of a direct impact?
thanks for any thoughts in advance!|
|Looks like they're spending time structuring and re-structuring the Arenaturist entity to hold all continental Europe Assets. I expect this costs money so I hope it will be a profitable exercise ... in the long run. A vehicle to sell down in Croatia?
Otherwise I'm befuddled by what the aim of all this is.
BTW last "year's" trading update was on 25 January 2016 so not expecting anything til the new year.|
|Catsick - well we shall see. In my view, the special dividend was mistake and they should have reduced debt instead. Final quarter is strongest for trading typically so will be interesting to see how PPHE fares.|
|Just got back from a week in London at short notice, all the hotels were full with ramped up rates , trading is definitely very good at all levels, it seems the weak pound has really boosted occupancy, I was paying 50 pct more than usual. Edison have just put out a bullish report on pph, they think nav is 18.5 with upside after the new openings are done, next move is going to be higher ...|
|Sogoesit - not sure what to make of Arenaturist deal. It is quite a chunky figure to spend.
Should be a trading update soon. I have called this wrong so far as I thought the shares offered good value at this level. However, delayed openings of the two London hotels and weak trading in the first half have hit sentiment. A recent update also said that there was oversupply of London hotels.|
|Park Royal only available from March 1 2017.
London "Waterloo" is on other side of the tracks to the river; open, but pricing cheaper than the River "side" hotels at £185/night/standard room vs £205-£233 for next weekend.
Seems Arenaturist is now becoming an asset holder focus.|
|yes hotel opening were delayed. Hence the earnings downgrade for 2016 by analysts. Both hotels are due to open this year with Waterloo now open and Park Royal not appearing to be open yet.|
|Will do some research. If I recall they said Autumn.|
|Indeed, gross revenue for 9 months up 28%.
Still fair amount of "dynamics" in hotel assets and Arenaturist... Will it ever settle down?
Overall much better than last quarter's update.|
|At first glance this looks like a reasonable update to me.... like-for-like RevPar up strongly in the third quarter. Looks like a bounce back from the weak first half..all in all should be well placed going forward..|
|Thanks Sogoesit.. looks like reasonably strong demand... I imagine they will do very well in the Xmas holiday season given two new London hotels open and the demand for people to have Xmas and New Year's in London given the weak pound... however, Park Plaza Waterloo only looks set to open 1 January when I tried to make a booking.... so that may be delayed even further as I thought it was meant to open later this year..|
|Yep, PP Riverbank appears to be a bit of an odd ball on that side of the river between Vauxhall & Westminster bridges. However they do price accordingly:
Booking today for 3 nights (27/10-30/10) for 2 people standard rates per night as follows:
Westminster Bridge: £414(was an hour ago; now sold out)
County Hall: £312.32
Plaza on the River (next to Riverbank also at 18 Albert Embankment): £279
Sherlock Holmes: 169.87
Riverbank has 73%+ Very Good or Excellent on TripAdvisor with 9% Poor or Terrible.|
|Sogoesit - I think you are broadly right. PPHE's hotel near Baker Street and the one at Victoria in London are both ideal for middle-market tourism. The Westminster one would also be great for tourists. Not sure about Park Plaza Riverbank as that appears to mainly be for business and isn't close to a tube station. However, the new hotel set to be opened at Waterloo should be well placed for tourists.
As far as I cant tell the Park Plaza hotels aren't exorbitantly priced for London hotels and offer fairly decent rooms and facilities.
Anyone interested in the scuttlebutt approach could ring all their London hotels to see how trading is going... but we should find out with the next trading update in early November in any event..|
|I think PPH is more "upper mid-market" positioned.
There was a guy from the Ritz Hotel on a news channel yesterday who was saying that sales in their restaurants and teas at the Ritz were "booming". Asked about the hotel itself he didn't wish to be drawn just saying "Anyone who can afford our room prices would not be concerned by a (20%) change in the currency". Lol
I interpret that to mean PPH should be a beneficiary both in the UK (higher occupancy) due to GBP/EUR/USD and Europe with accounts in GBP.
We shall see... there should be a trading update or management statement sometime early November as trytotakeiteasy says.|
|Burberry benefiting from stronger UK tourism...not sure if PPHE has the high-end hotels that will benefit from more luxury shopping though..
|Will be interesting to hear how they are doing, last update was lukewarm, further falls in the pound should have the hotels bursting at the seams ...I think we have to wait another 12 months to see how the weak pound plays out and new hotel openings add to the bottom line, this has been a great run the past 4 years , it has almost paid back the purchase price in divs over that time ...|
|Will be interesting to see how November's trading update reads. I would of thought that the fall in the pound would have boosted London tourism:
|Couple of recent research notes (free if you register):
|well the reality is that this isn't valued as a property company and on the basis of assets. I think when the London/UK side does well then the shares will do well... maybe we will see a pickup in H2 but who knows... certainly H1 was weak|
|Indeed tryto; agree the liquidation value concept.
(I don't know what the intangibles are in the balance sheet but "Goodwill" can have value. In PPH's case I can think of the Carlson relationship as an intangible with value. A hotel buyer would value that imv.).
Owners of property, as we can see in London, have an underlying problem getting yield (going concern returns) from high capital value areas. And less popular areas, like Leeds, probably earn better yields. For those kinds of investors we hope to see capital growth realised but only in a sale; difficult in illiquid property. Unfortunately, we don't see the capital growth reflected, yet, with PPH. The low reflection of value may also have something to do with the 47% "lock-up" shareholding of the owners/management albeit they treat shareholders well imv.|
|Sogoesit - Yes I think the principal is what would you get if you liquidated the business now. So you cut out goodwill as no one will give you anything for that.
Of course if you did liquidate the business there would be hefty capital gains taxes. But the task is just to get an idea of what the assets are worth in the market and what the tangible equity book value is for the business (i.e. taking off debt).
One thing I haven't looked into is that if the equity market book value is so high why are profits so low relative to the figure. Maybe cost of developing new hotels etc. Or could just signal that this is a low return on capital business.|