Prem Group in talks with its landlords over five lease deals
PADDY Kelly's one-time hotel venture Prem Group is in advanced negotiations with landlords after admitting it can't pay "the full lease obligations" on five Dublin sites.
The negotiations are revealed in accounts just filed for 'Premier Hotels Ltd' which trades as Prem Group and operates a portfolio of 42 hotels and serviced apartments across Ireland and Europe.
Mr Kelly, a developer, was the majority shareholder in the venture until last summer when his stake was taken over by Prem's management and founders.
"We started talking to our landlords 18 months ago when the hotel sector started to deteriorate," Prem managing director Jim Murphy confirmed yesterday.
"It's a normal thing for anyone who signed leases in recent years to be doing."
The Companies' Office filings show Prem is unable to pay the full lease obligations of its hotels and serviced apartments at Park West, Santry Cross, Sandyford, Harcourt Terrace and Leeson Street.
"The directors are discussing new arrangements with the respective landlords whereby the operating profits on respective properties would be paid as rent for a period, until the relevant performance improves and new agreed rents can be paid," the note adds.
Mr Murphy said Prem had "done deals" with "some" landlords, had surrendered "some leases" and was "still in the middle of discussions with one or two (landlords)".
"We've had very good engagement with our landlords, we've been very open with them, given them full access to the books," he said, adding that he was "optimistic" about resolving the situation in the near future.
The leases for the five properties were signed in recent years and were due to run for "20 or 25 years". Mr Murphy stressed that all five properties were "covering their costs", despite the recession. He declined to identify the landlords involved beyond describing them as a mixture of institutions and individuals.
The lease issues come as Prem's Irish portfolio -- which includes its own five properties and management contracts for 12 hotels -- continues to endure challenging market conditions.
Mr Murphy said revenue from the 17 Irish properties was "slightly down" for the first four months of the year, as the volcanic ash and "extreme weather" hit rates.
In contrast, the UK market is "up one or two per cent" for the first four months, while Prem's managed hotels in Belgium and France have posted "single-digit growth" for the start of 2010.
Despite the challenging markets, Mr Murphy said Prem would "absolutely" add to its portfolio in 2010. "We'd expect to add another five hotels this year," he said, pinpointing Ireland, France, the Netherlands, Belgium and Poland as possible locations.
"They'll mostly be existing hotels," he added.