The Apex City Quay Hotel in Dundee has been sold in a multi-million-pound deal but will continue to operate under the terms of a 150-year long lease.
The property was offloaded by the Scottish independent hotels group along with the Apex European in Edinburgh’s Haymarket in a deal with an unnamed buyer worth £6.8m.
The terms of the deal gives Apex the “uninterrupted rights” to operate the hotels for the duration of the lease period through to 2163, at which point the company has the option to repurchase the buildings for a peppercorn payment of £1.
Both the City Quay and European properties have been leased back on initial annual rents of £250,000, a figure subject to annual increases in line with retail price inflation.
The sale of City and the European follow similar transactions earlier in the year for the company’s Waterloo Place and City of London hotels which garnered £28.2m.
In all four instances, cash freed up by the sales has been used to reduce bank borrowings.
Details of the disposals emerged as Apex Hotels Limited published its annual accounts for the year to April 30.
The returns also noted a £250,000 interest-free loan to Apex by Dundee City Council.
The accounts do not state when the loan was extended or to what purpose it was made but Dundee City Council papers from March 2001 refer to “financial assistance” by way of an interest-free loan to be granted “upon completion of the project and subject to confirmation of the evaluation, construction costs and site purchase price.”
The first tranche of the loan repayment, a sum of £25,000, was due in June as long as the market value of the hotel was greater than £13.7m.
Apex confirmed that the loan has been repaid in full following the 2013 accounting year end.
Group-wide, Apex saw turnover increase from £41.9m in 2012 to £50.5m in the year to April 30, while pre-tax profits before exceptional items came in at £7.01m, up from £5.56m the year previous.
After exceptional items and tax, profits for the year were £3.1m, down from the £3.8m posted in 2012.
Total rooms sold across the company’s eight hotel portfolio grew by almost 50,000 to 340,013 following the addition of its flagship Temple Court property in London.
Room occupancy rates improved by 1% to 81.4% in the year, the average room rate increased in the period by more than £6 to £115.45 and revenue per available room climbed from £87.49 to £93.93.
Post year-end, the accounts state the firm secured new banking facilities with RBS which includes £69m of senior term debt plus a revolving credit facility of £10m.
The term debt is to be repaid in £1.5m quarterly instalments from July 2015, with a final payment due in October 2018.
Managing director Angela Vickers said Apex had demonstrated solid growth in turnover and profitability despite the unpredictable nature of the hotels sector.
“We are continuing to experience strong growth in occupancy and increased demand for the Apex brand,” she said.
“The completion of the ground rent lease transactions, together with the debt refinancing, have strengthened our financial position, and we remain focused upon a programme of ongoing investment in the current portfolio, together with the pursuit of additional growth opportunities”.
Kevin Havelock of RBS said the bank was delighted to be working with Apex.
He said: “The management team at Apex has delivered an excellent performance for the year, with a clear focus on the future growth and ongoing success of the business.”