Holne Investments Limited is a private company limited by shares incorporated in England and Wales. The registered office is Acre House, 11-15 William Road, London, United Kingdom, NW1 3ER. On 7 October 2022, the company re-registered from a public to a private limited company.
The financial statements are prepared in United States dollars ($), which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
There are considerable complexities in the control, ownership and financing of the underlying investment structure along with inherent uncertainties attaching to its business operations. As such, the nature, timing and quantum of any future returns, profits, losses and distributions flowing to the company are not guaranteed.
The company made a loss in the year of $21,667,346, which includes an unrealised gain of $9,130,395, has significant net liabilities of $77,536,691 as a result of the accumulation of losses borne by certain of the US Partnerships within the Cain International LP, Cain International II LP investments and ACZ Investments LP investments, in which it has participating interests. The negative position is predominantly the result of the significant underlying borrowing costs, borne by these partnerships along with unrealised losses on underlying investments. The measurement in the financial statements of these associate investments is at initial investment cost less accumulated profits and losses from certain of the US partnerships and impairment losses. The directors believe that the company’s investments will generate returns significantly in excess of the initial investment and of their carrying value as at 31 December 2023.
Notwithstanding this view, significant financial and economic market uncertainty has arisen from geo-political events, adverse inflationary pressures and rising interest rates. The directors consider that those events are likely to continue to cause material uncertainty over the short term. Equally the long-term impact on the underlying value of the investments of the company, its ability to recover its original investment and to repay the loans will depend upon market conditions nearer the time of maturity. The loans are due for repayment in June 2027. The Directors are of the opinion that the management of the associate investments has the necessary skills and resources to effectively address the financing and operational challenges being faced and are taking all necessary steps to ensure that the investment strategies and financial commitments can be met, through re-financing and re-structuring opportunities where appropriate.
At the time of approving the financial statements the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the next 12 months, based on the continuing support of J Goldstein, who has confirmed that he intends to provide financial support to meet ongoing operational costs, namely administrative expenses, for the next 12 months and during that period will not seek repayment of the amounts owing to him or his related company until the company has sufficient funds.
The interest in Oasis BH LLC is for a minority holding of shares and as such is held as an other investment. The company does not consider that in its individual capacity it has significant influence over the economic activity of the Oasis group as such it does not meet the criteria for the investment to be recognised as an associate.
Other investments are initially measured at transaction price excluding transaction costs and are subsequently measured at fair value at each reporting date. Changes in fair value are recognised through the profit and loss.
Basic financial assets, which include cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors and loans, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Share capital represents the nominal value of equity shares that have been issued.
Profit and loss reserves represent all current and prior period retained profit and losses.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The accounting policy for the company's investments in Cain International LP, Cain International II LP and ACZ Investments LP are all unincorporated US partnerships, is set out in note 1.3.
FRS 102 provides limited guidance as to how a company should recognise and measure investments in unincorporated entities and thus the directors have applied judgement in determining the accounting policy for these investments.
Other investments relates to a minority holding in shares in Oasis BH LLC. Under FRS 102, if an investment can be measured reliably then measurement at fair value through profit and loss account can be adopted as the accounting policy.
There is no quoted price in an active market to measure the other investment. The directors have relied upon a third party valuation expert which they consider to be a reliable measurement, and so have applied judgment in determining the accounting policy for the other investment.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:
Fixed asset investments in associates are held at cost adjusted for the company's share of the results of underlying unincorporated partnerships.
Fixed asset investments are assessed for impairment at the reporting date.
The recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. In considering the impairment, the carrying value is reviewed against other impairment indicators such as partner share of capital as presented in the investment entities' accounts and external expert valuation reports. Where there is an indicator present of impairment, impairment is considered with reference to third party valuations of the investments held or considered against the underlying trading value, Trading value is determined by utilising a market based approach. AUM's and net profit are the key metric drivers under this approach. The total impairment of the investments are restricted to the cost of the investments.
The fair value of other investments has been determined by a third party valuation expert and reflects the market value of the other investments.
The fair value of the other investment as at 31 December 2023 was $43,200,000 (2022: $34,069,605). This is a Level 3 estimate.
The fair value of other investments was calculated in two stages; an asset valuation and equity valuation.
The asset valuation is calculated by reference to two valuation techniques; a land residual value analysis and a DCF analysis.
Significant observable inputs: The discount rates applied in the DCF analysis were 10.50% (2022: 7.75%) and 8.00% (2022: 6.00%) with terminal rates of 4.50% (2022: 5.25%) and 4.0% (2022: 4.50%) .
The aggregate of the asset valuation is adjusted for the project debt to determine the equity valuation.
The estimated fair value would be impacted as follows if the estimates were adjusted:
If the above rates were sensitised +/- 25bps for the assets, the resulting valuations would change +$5.4M/-$4.9M (2022: +/- c $5M).
There were no employees during the year or in the previous year.
The company has estimated net unused tax losses of $69,018,420 (2022: $58,973,718) available to carry forward against future taxable profits. resulting in a deferred tax asset (at 25%) of $17,254,605 (2022: $14,743,429 at 19%).
The revaluation of the Other Investment of $9,130,395 (2022: $22,743,270), necessitates a provision for a deferred tax liability of $6,377,166 (2022: $5,685,817), however due to the existence of a deferred tax losses and revaluation losses within the associates, a deferred tax asset has been offset against this amount reducing the deferred tax liability to $3,188,583 (2022: $1,208,950) for recognition in the financial statements.
The balance of the deferred tax asset after the offset is $14,066,022 (2022: $11,972,658); this asset has not been recognised in the financial statements as there is uncertainty in connection with their recoverability against profits in future periods. Deferred tax assets and liabilities have been calculated at 25% aligned to the rate for which the assets and liabilities are expected to be realised at.
Details of the company's associates at 31 December 2023 are as follows:
Cain International LP, Cain International II LP and ACZ Investments LP are all Delaware Limited Partnerships. The registered office of these partnerships is: Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808.
The nature of business of Cain International LP is to acquire and dispose of global real estate investments. As at 31 December 2023, Partners' Capital of the entity totalled $688,342,000 and total comprehensive losses recognised for the year totalled $400,612,000.
The nature of business of Cain International II LP is to capitalise and/or otherwise fund its subsidiaries as required in order to enable the group to create a regulated investment and asset management business managing capital for both affiliated entities and independent third parties. As at 31 December 2023, Partners' Capital of the entity totalled $197,822,000 and total comprehensive loss recognised for the year totalled $5,975,000.
The nature of business of ACZ Investments LP is to acquire and dispose of global real estate investments. As at 31 December
2023, Partners' Capital of the entity totalled $28,113,000 and total comprehensive losses recognised for the year totalled
$100,279,000.
As at 31 December 2021, $63,706,916 of loan notes, together with the associated interest of $9,393,106 were secured by fixed and floating charges over all the property or undertaking of the company. These borrowings were from Ellicott Limited, an entity indirectly owned by Cain International LP, a US partnership in which the company has a 25% interest. Interest of 5.25% is charged on the loan notes on an annual basis. The loan notes were due for repayment by 6 January 2024.
On 9 June 2022, the company entered into a new loan agreement with Eldridge HI Funding LLCs, for a total of $106,030,718 for the purpose of repaying the Ellicott loan notes in the sum of $74,780,718 and investing in ACZ Investments LP, in the sum of $31,250,000. Interest of 8% is charged on the loan notes on an annual basis and rolled up into the liability. The loan notes are due for repayment by 6 June 2027 and are secured by fixed and floating charges over all the property or undertaking of the company. Eldridge HI Funding LLC is a related entity of Eldridge Industries LLC, which indirectly, owns a controlling interest in the company’s investment entities.
Repayment of the loan notes can be triggered by events outside the control of the company; if prior to the maturity date of 6 June 2027 the company receives either (i) an Applicable Distribution as determined by the loan agreement from Cain International LP, Cain International II LP, ACZ Investments LP or Oasis BH LLC or (ii) any proceeds upon the sale of any of those investments, the company shall immediately apply such relevant amounts received to repaying the loan notes. The loan notes are therefore shown as due in less than one year.
Other loans of $4,764,788 (2022: $5,084,869) comprise $2,088,266 (2022: $2,087,600) from J Goldstein, a director and majority shareholder, and $2,676,522 (2022: $2,997,209 from JSG Investments Limited, a company controlled by J Goldstein. These are unsecured, interest free and repayable on demand.
Other loans are subordinated to the loan notes.
The Ordinary shares and Ordinary A shares both have full voting, dividend and capital distribution (including on winding up) rights. They do not confer any rights of redemption.
The rights of the Ordinary shares and Ordinary A shares are equal in all respects.
On 11 March 2022, a restructuring of the underlying investment structure of Oasis BH LLC was agreed with the JV partners.
Phase I of this restructure resulted in Holne's interest in Oasis BH LLC reducing from 2.53% to 2.36%. As at the year ended 31 December 2023, the Oasis BH LLC structure incorporates the development land and both the Beverly Hilton and Waldorf Astoria hotels.
Phase II of the restructure was completed on 11 March 2024 and impacted the beneficial and legal holdings of the company’s investment in Oasis BH LLC. Upon completion of Phase II, the company's legal shareholding in the Oasis BH LLC increased to 3.666%. In addition, a new JV was be incorporated, Waldorf JV (Delaware) LLC, to which the Waldorf Astoria was property distributed, and in which Holne now has a 0.05% shareholding.
Included within other creditors is $449,694 (2022: $255,070) due to J Goldstein, a director of the company. The movement in the director’s current account relates mainly to amounts paid by the director to the company and on behalf of the company to pay on-going costs. This balance is unsecured, interest free and repayable on demand.
Other loans of $5,263,958 (2022: $5,084,869) comprise $2,087,660 (2022: $2,087,660) from J Goldstein, a director and majority shareholder, and $3,176,298 (2022: $2,997,209) from JSG Investments Limited, a company controlled by J Goldstein. These are unsecured, interest free and repayable on demand.