Qawra Palace plc is offering investors the chance to take part in a €25 million bond issue that will partly be used to finalise a major expansion project that will see it add 178 rooms to the hospitality landmark.

The bonds bear a 5.25 per cent coupon rate and mature on 27th February 2033.

They will be secured via a second-ranking hypothec over the Qawra Palace property.

Qawra Palace plc is the owner of the Qawra Palace Hotel property, which includes facilities underlying the Qawra Coast Road which link the main complex of the hotel to those on the foreshore.

The property covers an area of around 8,200 square metres and is held via an emphyteutical concession expiring in 2128.

Qawra Palace is a non-trading company and finance vehicle, with the property sub-leased to Mallard Co Ltd, owned by the same Vella family.

The funds raised will be used to repay an outstanding €16.4 million loan from BOV and to part-finance the extension project by on-lending €6.7 million to Mallard.

The other €1.5 million will be used for general corporate funding purposes.

The bonds will be made available for subscription to all categories of investors through an Intermediaries’ Offer, with a minimum offer of €2,000 and in multiples of €100 thereafter.

The bond issue is conditional on a minimum subscription of €20 million.

Qawra Palace’s lease agreement with Mallard includes an annual rent of €2.4 million that will begin from 1st April 2023, subject to an annual increment of 2%. Qawra Palace also acts as a finance vehicle for Mallard and charges an interest rate on amounts lent.

The Vella family, which owns both companies, has been involved in the management of the Qawra Palace Hotel since it opened in 1985 and have also been involved in the establishment and management of various other businesses within the hospitality, leisure, and real estate sectors

The prospectus indicates that the Qawra Palace Hotel was originally geared towards the UK tourist market which generated over 70 per cent of its business over the years.

“Management holds a good relationship with a wide network of tour operators that are the main driver for its occupancy levels. Indeed, hotel occupancy typically generates over 60 per cent of revenue, while other income is generated from its food and beverage outlets and ancillary services,” the prospectus reads.

Since 2019, the Qawra Palace Hotel has been undergoing a major upgrade and extension which is expected to be completed by April 2023 for a total investment of €40.6 million. The hotel extension included an additional 57 rooms on the overlying airspace of the hotel, which have been built and finished, and a further 121 rooms which have been built on an adjacent plot owned by Qawra Palace and are currently in shell form. As such, the room stock will increase to a total of 572 rooms.

To complete the ongoing hotel refurbishment, Mallard is estimated to require €6.0 million to finish and furnish the newly built rooms; €11.8 million for additional ancillary facilities; €6.8 million to refurbish the original hotel property including façade upgrade, refurbishment of an existing restaurant and guestrooms, new restaurant, gym, spa, and parking facilities.

Management intends to re-position the hotel with the top performing 4-star hotels in the north of Malta by shifting its business strategy to cater for the luxury all-inclusive sector, which is expected to attract a new niche of travellers and build a group of brand loyal clientele.