Keswick: $24M impairment before sale

One month before Richmond’s Riverstone Group began negotiations to purchase the Keswick Corporation and its acclaimed Keswick Hall resort, previous owners Orient-Express Hotels told investors that the properties carried roughly $24 million in impairment charges. While neither side will disclose the sale price, the impairment—and Orient-Express’ pressing $68.4 million debts—might have expedited the transaction.

Robert Hardie, son-in-law of Riverstone Group founder William Goodwin, Jr., and a member of the UVA Board of Visitors, will also serve as chairman of Historic Hotels of Albemarle, a limited liability company owned by Riverstone. According to Hardie, Riverstone was contacted about Keswick by a resort industry representative in December, one month after Orient-Express disclosed the impairment on the properties.

“We contacted Orient and, lo and behold, there was interest [in selling],” Hardie told C-VILLE. “We moved as quickly as we could towards acquiring the property.”

This year, Conde Nast Traveler named Keswick Hall its “top small resort” for the second consecutive year; the hall, according to Conde Nast, “conjures up a Tuscan villa.” However, dozens of residential lots purchased by Historic Hotels may have created the impairment for its previous owners.

Martin O’Grady, Chief Financial Officer for Orient-Express Hotels , did not respond to a request for comment. Communications director Vicky Legg told C-VILLE, “I’m afraid we have no comment to make beyond the information which is currently available in our company filings.”

During a November conference call with investors, O’Grady noted that Orient-Express Hotels “recorded an impairment charge of $65 million this quarter.” Companies list impairment charges when the market value of a property drops below the recorded value. Impairment charges are essentially noted as additional expenses, to be written down by the company. Orient-Express also disclosed $68.4 million in “debt repayments due within 12 months” in its third quarter financial report.

For Orient-Express Hotels, Keswick carried a significant portion of the quarter’s impairment charges. O’Grady revealed to investors that Orient-Express “recorded impairments of $24 million at Keswick Hall” —a number that represents 37 percent of the company’s total impairments. Keswick finished behind Porto Cupecoy in St. Maarten, which was impaired to the tune of $39 million. At the time, O’Grady told investors that Orient-Express was “revising our expectation of the timings and the amounts of future sales proceeds.

“Because of the current backdrop of record low house prices and excess inventories of second homes, we’ve taken a more conservative stance, and the net book volume now sits at $30 million,” he said of Porto Cupecoy.

When it purchased the Keswick Corporation, Historic Hotels of Albemarle got a number of properties—the club and Keswick Hall, yes, but also 39 home sites in Keswick Estates, according to Hardie. County assessment records show a decline in value for many of those properties since 2007 and 2008. The Keswick Club, currently assessed at $10.4 million, was valued at $13.5 million in 2007. One three-acre residential lot, undeveloped, carried a value of $401,000 in 2008; now, it is assessed at $275,800. Orient-Express Hotels did not respond to a question about whether the impairment was due to declining residential values.

Nor did Hardie.

“I’m not sure why they recorded that impairment. I guess it would probably have to do with however they were valuing Keswick and what they thought current value might be,” he said. Hardie added that his company believes Keswick “is a gem. It’s a treasure.”

Hardie also said that “almost all” of the 20 employees reportedly terminated following the Keswick sale were rehired*. “We’re looking forward to working with them and continuing to deliver a high level of service to our guests,” said Hardie. He added that Historic Hotels did not anticipate further staffing changes.

*CLARIFICATION: Asked about the 20-some employees not rehired, Hardie told C-VILLE that "almost all" of the employees were rehired. However, according to a statement he provided to C-VILLE, his comment referred to all Keswick employees. Here is his clarifying statement: "We have rehired more than 90 percent of the entire staff that worked at Keswick Hall and Keswick Club prior to our acquisition. We’re looking forward to working with them and continuing to deliver a high level of service to our guests." The subheadline has been changed to reflect this clarification.