Rezidor Exits Six Leased Hotel Contracts In The Uk And Capitalizes Previously Unrecognized Tax Losses
The Rezidor Hotel Group will strategically exit six hotel contracts under Full Repairing and Insuring lease in the UK in 2017. The hotels are located in regional markets and have been unprofitable for Rezidor due primarily to above-market rental level of the leases. As part of the exit, Rezidor has agreed to a surrender premium payment of £15M (ca. €18M) in 2016 to the landlords.
Wolfgang M. Neumann, President & CEO of The Rezidor Hotel Group, commented: "These exits are part of Rezidor's long-term asset management strategy that involves exiting from unprofitable contracts and renegotiating of terms including renovations across EMEA. In 2016, we have successfully completed 15 such transactions. Over the past 5 years, our asset management initiatives targeting a continuous portfolio optimization have yielded €17M EBITDA contribution and 1.8 percent uplift in EBITDA margin."
"The exits will positively impact Rezidor's annual EBITDA by ca. £1.5M (ca. €1.8M) and EBIT by a higher amount, as well as avoid capital investments for Rezidor in future years," added Knut Kleiven, Deputy President & Chief Financial Officer of Rezidor. The properties will remain in the group's lease portfolio for maximum one more year.
Despite this exit, Rezidor will remain a major international hotel player in the UK with 28 hotels and 6,000 rooms in operation.
"In addition to the asset management progress made and other initiatives to improve profitability, we have also adopted our transfer pricing model to reflect recent tax law changes initiated by OECD and EU and as a result we were also able to capitalize previously unrecognized tax losses carried forward in several jurisdictions. This will result in a substantial income tax benefit for the financial year ending December 31, 2016. The total amount of tax losses recognized amounts to EUR 23.8 million. Going forward this should lead to a more normalized tax rate for the group." added Knut Kleiven.