PPHE Hotel Group Limited, which owns, leases, develops, operates and franchises full service upscale and lifestyle hotels in major gateway cities and regional centres, has announced that – following the completion of its acquisition of a prime site located near Waterloo London (“Hercules House”) in June 2013 – it has nowobtained planning permission for the redevelopment of the site into a hotel. It has also secured funding of up to £80 million from Banque Hapoalim (Luxembourg) S.A. to fund the redevelopment.
The planning permission and funding is for a hotel of 438 rooms which may, subject to further planning approval, be extended to 490 rooms. Additional facilities of the Hotel will include a swimming pool, spa, restaurant and bar.
Hercules House is owned by the Company’s wholly-owned subsidiary, Hercules House Holding B.V. The funding will be used by Hercules to refinance the outstanding amounts owed to the Bank under the existing acquisition facility entered into on 23 April 2013; and fund the demolition, clearance operations and other construction and infrastructure work for the development of the Hotel.
Construction under way
Hercules has also entered into a building contract with WW Gear Construction Limited for the design and construction of the Hotel on a “turn-key” basis. The basic contract price payable to Gear is £63.47 million for 438 rooms or, alternatively, £70.48 million if the Hotel is extended to 490 rooms. In addition, an early completion bonus is payable to Gear calculated as £75,000 (for 438 rooms) or £150,000 (for 490 rooms) multiplied by the number of months prior to September 2016 that the Hotel is completed.
Gear is a wholly owned subsidiary of Red Sea Group Limited which owns 44.67% of the issued share capital of PPHE. Red Sea is controlled by Euro Plaza Holdings B.V. which is owned by family trusts of Mr Eli Papouchado, the Chairman of PPHE.
Under the relationship agreement entered into between Euro Plaza (the principal shareholder of the Company (in whose shares Mr Eli Papouchado and certain members of his family are also interested)) and the Company, transactions between the Company and Euro Plaza (and its associates, which include Gear) are required to be on arm’s length terms. The non-executive Directors of PPHE had Gear’s tender for the construction of the Hotel independently reviewed to ensure that it was competitive. The Directors consider that the building contract has been entered into on arm’s length terms and is in the interests of the Company’s shareholders as a whole.
In deciding to appoint Gear, the Directors had regard to Gear’s strong track record having been responsible for the successful construction and refurbishment of many of the Company’s hotels including Park Plaza Westminster Bridge London, Park Plaza Riverbank London and art’otel amsterdam.
Construction of the Hotel commenced in April 2014.
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