Significant acquisitions

2017 Acquisitions

Cap Juluca

On May 26, 2017, Belmond acquired 100% ownership of Cap Juluca, 96-key luxury resort on the Caribbean island of Anguilla, British West Indies for a total transaction value of $84,791,000, including an aggregate cash purchase price of $68,652,000, acquisition-related costs of $14,032,000 and excluding a working capital credit of $2,107,000. On the same date, the Company assumed management of the resort, which had been independently managed, and began marketing the property under the name Belmond Cap Juluca. As one of the most recognized resorts in the Caribbean, Cap Juluca is a natural fit for the Belmond portfolio and enhances Belmond's positioning in the global luxury resort market.

The following table summarizes the consideration paid for the hotel and the allocation of the purchase price to the estimated fair value of assets acquired and liabilities assumed at the acquisition date. The acquisition has been accounted for in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, using the acquisition method of accounting whereby the total purchase price has been allocated to the acquired assets and liabilities as at May 26, 2017. The estimated fair values are final and no further adjustments will be made to the identified assets and liabilities.



	Fair value on May 26, 2017
	$'000
Consideration:

Agreed cash consideration	70,759
Less: Working capital adjustment	(2,107	)
Total purchase price	68,652

Assets acquired and liabilities assumed:

Cash and cash equivalents	20
Accounts receivable	112
Prepaid expenses and other	45
Inventories	108
Property, plant and equipment	59,159
Other intangible assets	6,100
Accounts payable	(595	)
Accrued liabilities	(360	)
Deferred revenue	(1,437	)
Goodwill	5,500
Net assets acquired	68,652

The purchase price of $68,652,000 was funded from existing cash reserves and $45,000,000 of borrowings under the Company’s prior revolving credit facility, which was repaid following the amendment and restatement to the credit agreement on July 3, 2017. See Note 11.

Acquisition-related costs which are included within selling, general and administrative expenses in the statements of condensed consolidated operations for the year ended December 31, 2017 were $14,032,000, related to professional fees incurred in preliminary design and planning, structuring, assessment of financing opportunities, legal, tax, accounting and engineering due diligence and the negotiation of the purchase and sale agreements, and other ancillary documents, with the principal owner and leaseholder, together with three owners of villas and separate subleases, as well as a memorandum of understanding and ground lease with the Government of Anguilla.

Other intangible assets of $6,100,000 was assigned to trade names that are not subject to amortization. No other intangible assets were identified and recognized.

Goodwill arising on acquisition of $5,500,000 was assigned to the Owned hotels in North America segment and consists largely of profit growth opportunities the hotel is expected to generate. None of the goodwill recognized is expected to be deductible for income tax purposes. See Note 8 for details of the fixed assets recoverability test and Note 9 for details of goodwill impairment at Belmond Cap Juluca following the impact of Hurricanes Irma and Jose in September 2017.

At the same time, the Company entered into a 125-year ground lease for the property with the Government of Anguilla. The lease has been accounted for as an operating lease in accordance with ASC 840, Leases, with the annual rental expense recognized in selling, general and administrative expenses in the statements of condensed consolidated operations, and future rental payments committed as at December 31, 2017 disclosed in Note 20.

The results of operations of the hotel has been included in the consolidated financial results since the date of acquisition. The following table presents information for Belmond Cap Juluca included in the Company’s statements of condensed consolidated operations from the acquisition date to the period ending December 31, 2017:



	2017
	$'000

Revenue	2,435
Losses from continuing operations	(16,681	)

Belmond is unable to provide pro forma results of operations for the year ended December 31, 2017 and 2016 as if the acquisition had occurred on January 1, 2016 due to the lack of reliable historical financial information.