Macdonald Hotels is selling the Rusacks in St Andrews and the Randolph in Oxford – reducing borrowings “significantly” and embarking on refinancing discussions - with a previously planned blockbuster deal to dispose of 27 properties having been scrapped.
The previously proposed sale of a portfolio of 27 hotels, including the Rusacks and Randolph, to a “major private equity and real estate investor” was revealed by The Herald in June and would have cleared Bathgate-based Macdonald Hotels’ £190 million of debt.
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Asked about the dropping of the previous plan, and the agreement unveiled yesterday to sell the Rusacks and Randolph to Chicago-based AJ Capital Partners, a spokesman for Macdonald Hotels said yesterday: “The group decided not to proceed with the negotiations for the sale of 27 properties, after receiving a major offer for these two hotels. This deal enables us to substantially reduce the group’s borrowings and take forward discussions on a number of very positive refinancing options which are actively under consideration.”
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The Rusacks Hotel employs 79 staff. The Randolph Hotel has 146 employees. All of the employees at the two hotels will transfer to AJ Capital Partners.
It is understood that Macdonald Hotels, the vast majority of which is owned by industry veteran Donald Macdonald and his family, will continue to manage the Rusacks and Randolph during a two-month transition period.
Gordon Fraser, deputy chairman of Macdonald Hotels, said: “This is a superb deal for the business, which allows us to reduce our borrowings significantly while we progress a number of very positive options for the refinancing of the group.”
He added: “The scale of the deal reflects both the long-term performance and enormous potential of these landmark properties, and I am confident they are in very good hands.”
The amount being realised from the sale of Rusacks Hotel and the leasehold interest of the Randolph was not disclosed.
However, given Mr Fraser’s comments about cutting debt “significantly”, the location and scale of the two hotels being sold, and the projection that the previously planned disposal of 27 properties would clear £190m of borrowings, the proceeds would seem likely to run well into tens of millions of pounds.
There is planning permission for a major extension of the Rusacks Hotel, which overlooks the 18th green of the Old Course. AJ Capital Partners is now embarking on this extension, aiming to complete this in time for The Open at St Andrews in 2021.
In June, Mr Fraser flagged planning permission for a project to add 44 luxury suites to the Rusacks. This proposed redevelopment would increase the number of rooms from 70 to 111, he noted then, with three of the existing ones being lost, and also includes a rooftop bar and underground car parking.
Mr Fraser said of the Rusacks opportunity in June: “It will be just such a fantastic property. To develop that out would be north of £8m.”
He noted at that stage that Macdonald Hotels’ total debt had been in excess of £700m more than 10 years ago. And he revealed in June that the group’s ability to invest had been constrained in the wake of the global financial crisis, which got under way in earnest in 2008, as it cut its debt.
Mr Fraser said then: “Since 2008, we have not had a capital expenditure facility from the bank. Any investment we have had in the properties, we have Macdonald Hotels is sells its Rusacks property in St Andrews and the Randolph in Oxford, with a previously planned deal to sell 27 properties no longer going ahead.
The previously proposed sale of 27 properties, including the Rusacks and Randolph Hotels, to a private equity player was revealed by The Herald in May and would have cleared Macdonald Hotels’ £190 million of debt.
Macdonald Hotels, which is majority said today that the sale of the two properties would enable it to reduce debt "significantly" and pursue refinancing options
Macdonald Hotels deputy chairman Gordon Fraser said: “This is a superb deal for the business, which allows us to reduce our borrowings significantly while we progress a number of very positive options for the refinancing of the group.”
He added: “The scale of the deal reflects both the long-term performance and enormous potential of these landmark properties and I am confident they are in very good hands.”
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