Registered number:
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
COMPANY INFORMATION
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GCUK OWNER LTD
CONTENTS
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GCUK OWNER LTD
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their strategic report of the Group and Company for the year ended 31 December 2021.
Business Review: The Group’s principal activity is the operation of the Graduate Cambridge Hotel in Cambridge. The Company’s principal activity is the holding of debt and other financial instruments for the Group. The hotel reopened in August 2021 following its refurbishment which commenced October 2020. The refurbishment had a significant negative impact on the number of available and occupied rooms until reopening. The loss for the year after taxation amounted to £5,405,700 (2020: £8,598,046 loss). Principal risks and uncertainties: Some risks are excluded because management considers them not to be material to the Group. Additionally, there may be risks and uncertainties not presently known to the management team or which are deemed immaterial to the Group. Market and hotel industry risks: The Group’s operations and its results are subject to a number of factors which could affect the business, many of which are common to the hotel industry and beyond the Group’s control, such as a potential global economic downturn; changes in travel patterns in the structure of the travel industry; and the potential increase in acts of terrorism. The impact of any of these factors (or a combination of them) may adversely affect sustained levels of occupancy, room rates and/or hotel values. Management recognises that Brexit and COVID-19 add an element of uncertainty to the outlook of both the U.K. hospitality industry and the greater U.K. economy which could impact future trade. Although management seeks to identify risks at the earliest opportunity, many of these risks are beyond the control of the Group. The Group has recovery plans in place to enable it to respond to major incidents or crises and takes steps to minimise these exposures to the greatest extent possible. Borrowings: As with all loan financing, there is a risk that the Group may be at risk of default under the financing arrangements. To mitigate against this risk, the management team meet regularly to review the performance of the hotel. The covenant ratios within the financing agreement are applied to the hotel and monitored on an ongoing basis. Fixed operating expenses: The Group incurs operating expenses such as personnel costs, operating leases, information technology and telecommunications which are to a large extent fixed. As such, operating results may be vulnerable to short-term changes in revenues.
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GCUK OWNER LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group has appropriate management systems in place such as staff outsourcing designed to create flexibility in operating cost base so as to optimise operating profits in volatile trading conditions. Key senior personnel and management: The success of the Group is partially attributable to the efforts and abilities of its senior managers. Failure to retain its senior management teams or other key personnel may threaten the success of the Group’s operations. The Group has appropriate systems in place for recruitment, reward and compensation, and performance management. Development and maintenance of the Group’s culture also plays a leading role in minimising risk. The key senior management in the hotels is provided by Schulte Hospitality Group UK Ltd and therefore there is a pool of staff available should key personnel leave. Pricing: Pricing is established using a bottom-up segmentation analysis of occupancy rates and average daily rates (“ADR”). Baseline assumptions are derived from a variety of third-party sources including Smith Travel Research (“STR”) reports, operating budgets provided by the Group’s third-party management platform, and historical performance. The Group utilizes this information in conjunction with trends observed at other properties with similar market dynamics. Cash flow: The ability to generate cash flow to pay staff, vendors, debt service and all other third parties is crucial for the longevity of the Group. The Group closely monitors all available sources of capital via hotel revenue and reserves to ensure the ability to make payments when due.
Gross operating profit is the primary financial key performance indicator (“KPI”) utilized by the Group to monitor the operations of the hotel being defined as revenue less cost of sales. The Group views this metric as its most significant financial KPI as it reflects how effectively it is able to generate profit from hotel operations. This is noted as being £1,629,169 (2020: £1,871,052) for the year. Due to the effects of COVID-19 resulting in the closure of the hotel and prolonged refurbishment period, the Group did not meet its expectations for the year.
The three other KPI's relevant to the Group and overall hospitality industry are average daily rate (“ADR”), occupancy, and revenue per available room (“RevPAR”). ADR measures the average rental revenue per occupied room and is calculated as total room revenue divided by the number of rooms sold. Occupancy rate is measured by dividing the number of occupied rooms by the number of available rooms. RevPAR measures the amount of revenue generated by a single room and is calculated as room revenue divided by the total number of available rooms. These KPI's are used to monitor success in that the figures reflect the ability to generate guest stays and maximize the amount of associated revenue. As noted above, the Group did not meet its expectations for the year with respect to these performance measures.
The directors expect the business to continue operating for the foreseeable future. The property has since reopened under the Graduate Hotels brand and the gradual withdrawal of lockdown restrictions has led to improved trade and results for this reporting period.
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GCUK OWNER LTD
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
This report was approved by the board and signed on its behalf.
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GCUK OWNER LTD
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their report and the financial statements for the year ended 31 December 2021.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £5,405,700 (2020 - loss £8,598,046).
The dividends voted for the year amounted to £NIL (2020: £NIL).
The directors who served during the year were:
Future developments of the Company and Group are discussed in the strategic report.
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GCUK OWNER LTD
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
Each of the persons who are the directors at the time when this Directors' Report approved has confirmed that:
• So far as the director is aware, there is no relevant audit information of which the Company and the Group’s auditors are unaware and • The director has taken all the steps that ought to have been taken as director in order to be aware of any relevant audit information and to establish that the Company and the Group’s auditors are aware of that information.
Post-balance sheet events of the Company and Group have been discussed in note 25 in the financial statements.
Qualifying third party indemnity provision subsists for the benefit of the Director and was in place throughout the
financial year.
Following a rebranding exercise on 15 May 2023 the trading name of the company's independent auditor changed from MHA MacIntyre Hudson to MHA. A resolution to appoint MHA as independent auditor will be proposed at the next Annual General Meeting.
This report was approved by the board and signed on its behalf.
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GCUK OWNER LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF GCUK OWNER LTD
We have audited the financial statements of GCUK Owner Ltd (the 'parent Company') and its subsidiary (the 'Group') for the year ended 31 December 2021, which comprise the Group Statement of Comprehensive Income, the Group and Company Balance Sheets, the Group Statement of Cash Flows, the Group and Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's or the parent Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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GCUK OWNER LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF GCUK OWNER LTD (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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GCUK OWNER LTD
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF GCUK OWNER LTD (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Group financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• enquiry of management and those charged with governance around actual and potential litigation and claims; • performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias; • reviewing minutes of meetings of those charged with governance; • reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Statutory Auditors
London, United Kingdom
Date: MHA is the trading name of MacIntyre Hudson LLP, a limited liability partnership in England and Wales (registered number OC312313).
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GCUK OWNER LTD
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
REGISTERED NUMBER: 11970895
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
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GCUK OWNER LTD
REGISTERED NUMBER: 11970895
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 20 to 38 form part of these financial statements.
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GCUK OWNER LTD
REGISTERED NUMBER: 11970895
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 20 to 38 form part of these financial statements.
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GCUK OWNER LTD
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2020
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GCUK OWNER LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2020
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GCUK OWNER LTD
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
GCUK Owner Limited, company number 11970895, is a private company limited by shares, registered
and incorporated in England and Wales within the United Kingdom. The registered office address is 54 Portland Place, London, United Kingdom, W1B 1DY. The principal activity of the Company is to act as a holding entity for a hotel and hospitality company. The Group's functional and presentational currency is GBP rounded to the nearest £1.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The parent Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
In preparing the separate financial statements of the parent Company, advantage has been taken of the FSR102 exemption to not disclose a Statement of Cash Flows for the parent Company.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The directors confirm that, having reviewed the Group’s and Company’s cash requirements for the next 12 months from the date of signing the financial statements, they have formed a judgement that the Group and Company have reasonable expectations that adequate resources will be available to continue operations for the foreseeable future. The Group has also received confirmation of support from its parent, for at least 12 months after the signing of the audit report, which provides additional security on the resources available (with the exception of the Deutsche Bank loan highlighted below) to continue as a going concern. Therefore, these financial statements have been prepared on the going concern basis. In forming this judgement, the directors have reviewed forecasts for 2024-25, cash flow projections from the date of the approval of these financial statements, contingency planning and the sufficiency of banking facilities. The Company is reliant on the continued trading performance of the Group, which is in a net assets position. The directors are comfortable that the Group will generate sufficient value to continue to settle liabilities as they fall due.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Goodwill
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
At each reporting date the Group assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Fair values are determined from market based evidence normally undertaken by professionally qualified valuers.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Group becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The property is held at fair value based on the directors' conclusions having assessed the valuations completed by independent valuers who hold recognised and relevant professional qualifications. Where an external valuation cannot be obtained, a director's valuation will be used instead. The exception to this is when purchases are part of a recognised refurbishment period; these are held at cost until they reach a stage of operation. The Group has a policy of capitalising all costs it deems necessary to operate the hotel for its intended purpose. Pre-opening expenditure relates to costs directly attributable to operational activities and has been depreciated over a period of 1 year and 1 day. The directors have also made a judgement in relation to the valuation of the OTC call option in debtors. The option is held at fair value based on the directors' conclusions having assessed the valuations completed by independent valuers who hold recognised and relevant professional qualifications.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
11.Taxation (continued)
The Chancellor confirmed that the main corporation tax rate would increase to 25% as enacted on 11th March in the Finance Act 2021. This has come into effect in April 2023.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The fair value of the hotel was determined by the directors via a discounted future cashflow on an open
market for existing use basis.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
13.Tangible fixed assets (continued)
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The other loan is provided by Deutsche Bank AG and is secured on the Graduate Hotel, Cambridge, CB2 1RT. The facility has a drawdown limit of £40,000,000. Interest is charged at 3.4% per annum plus LIBOR. This loan is due for repayment on 14 October 2022.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group operates a defined contributions pension scheme. The assets of the scheme are held
separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £38,425 (2020: £6,281). Contributions totalling £4,606 (2020: £2,714) were payable to the fund at the balance sheet date.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group underwent a legal reorganisation effective 31 December 2022 whereby GCUK Operator Ltd was renamed GCUK PropCo Ltd and entered into a business transfer agreement to sell the business and assets associated with the hotel operations to GCUK OpCo Ltd, a newly-formed entity. GCUK PropCo continues to hold the real estate interests of the hotel property. Both entities share common ownership and consolidate into GCUK Owner Ltd. The Deutsche Bank loan due for repayment on 14 October 2022 was extended through February 2023. In conjunction with the extension, the Company entered into a new credit facility agreement with ENIV totaling £44.5m at an interest rate of 4.50% per annum plus six-month forecast compounded SONIA. A portion of the proceeds were used to fully payoff the £40.0m existing loan with Deutsche Bank. The events noted above are considered non-adjusting post-balance sheet events.
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GCUK OWNER LTD
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors consider that the ultimate controlling party and ultimate parent undertaking of the Company
is Graduate Hotels Real Estate Fund III LP (Delaware), headquartered in the United States. This is the largest group to draw up consolidated financial statements, which are available at the company’s address: 133 North Jefferson Street, 4th Floor, Chicago, Illinois, 60661.
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