Compass wins breathing space with sale

as posted here

5th June 2009, 7:30 WST
Cash-strapped Compass Hotel Group has sold its Gosnells Railway Markets site to an unidentified private investor in a deal which will help it pay down debt and gain breathing space from its bank.

Compass managing director Bryan Northcote said yesterday the company was happy with the $5.68 million sale price in light of property market conditions. It represented an 18.3 per cent discount to book value but a 13.5 per cent premium to valuation.

“Obviously we’d like to sell things above book, but it’s a non-core asset (and) we’re happy with the price we got over valuation in this market,” he said.

The company hopes to use the majority of the cash to pay down debt but has sought permission from financier St George Bank to retain some for working capital. It bought the Gosnells markets site as part of its acquisition of the Gosnells Hotel in 2007.

Mr Northcote said Compass was also pursuing “various options” to strengthen its balance sheet, including the sale of other non-core assets such as the Peninsula Tavern in Maylands which has been earmarked for redevelopment. Once property development markets improved, the group would market that site with a view to a sale and lease-back agreement.

Compass has struggled to match prospectus revenue and profit forecasts after buying a stable of Perth’s best-known watering holes such as the Greenwood Hotel, Carine Glades Tavern and the Albion Hotel in Cottesloe at the height of the property boom.

It revealed in February that it was in breach of its banking covenants at December 28 for the second time in six months. It has since been renegotiating with St George to avoid a further breach at its June year-end.

As at December 28, Compass had total liabilities of $122.6 million, including borrowings of $95.2 million, against total assets of $160 million and $3.1 million in cash.

The stock last traded at 4¢.
RACHEL DONKIN


as posted here