Cumberland Lorne Resort $3.1 million resort write-down blamed on Victorian coastal market woes

ASX-listed property investor and funder manager Trinity Group has blamed the poorly performing Victorian coastal leisure market for a $3.1 million write-down in the value of its investment in the Cumberland Lorne Resort on the Great Ocean Road.

The group, which has been selling assets in its $95 million property investment portfolio to reduce debt levels in order to secure a debt facility extension with NAB, said the Lorne resort write-down was the “primary driver” for a steep earnings downgrade to interim results to December 31.

Trinity Group is forecasting an interim net loss of between $3.6 million and $3.9 million, having earlier advised shareholders of a $700,000 net profit.

“The primary driver of the group’s 2013 half year loss result and decrease in net tangible assets per security is a $3.1 million write-down in the value of the group’s property investment at the Cumberland Lorne Resort in Lorne, Victoria.

“This write-down reflects the poor market conditions, and the resulting impact on property values, that is being experienced by the coastal leisure property sector.

“The write-down has also been influenced by the result of the recent marketing campaign that has occurred for the Cumberland Lorne Resort,” said Trinity Group in a statement.

Trinity acquired 51 freehold apartments, the conference centre and the management rights to the Cumberland Lorne Resort in 2009 for around $20 million.

The 2012 annual report values the investment as being worth $17.7 million.

Lorne is a seaside town and popular holiday destination along the Great Ocean Road, a two-hour drive south of Melbourne.

The Cumberland Lorne Resort is situated on Lorne’s main street at 150 Mountjoy Parade and has 102 one, two-bedroom and penthouse self-catering apartments with private balconies offering ocean views.

It currently offers a two-night package special of $386 per room.

The resort was put up for sale in September last year after Trinity undertook a $500,000 “soft” refurbishment of the conference centre and apartments.

The resort is being sold along with the 5,900 square metre Compark Circuit business park in Mulgrave, which is listed as having a book value of $15 million.

An expression of interest campaign closed on December 19 for both properties, with Trinity in discussions with potential buyers.

The 2012 annual report notes that Trinity undertook 2011-12 summer sales campaign to sell the apartments at the Cumberland Lorne Resort “during difficult market conditions in Victoria”.

“As a result of the campaign, one apartment was sold with the sale price exceeding book value. Another apartment settled during the year as a result of the previous summer’s sales campaign.

The annual results record the sales generated revenue of $960,000.

As of June 30, Trinity Group owned 40 apartments, the conference centre, management rights and a manager’s apartment at the resort.

A recent survey by Roy Morgan lists the Great Ocean Road as the fifth most popular tourist destination for young Australians aged under 30 with 12% of 22,000 people surveyed saying they planned to take a holiday along the famous stretch of Victorian coast over the next two years.

Trinity Group reported an after tax profit of $18.7 million for the year ending June 30.

The report discloses that during the financial year, Trinity Group reduced its debt facilities with National Australia Bank (NAB) from $69.9 million to $46.1 million following the sale of an investment property at Richlands, Queensland, together with the disposal of the remaining 50% investment in the Trinity Funds Management business and the disposal of units in Trinity Property Trust.

These sales allowed it to reduce its debt by $23.8 million and reduce its loan to value ratio of 47.6% with NAB provided Trinity Group with an extension of its debt facilities by 14 months to October 31 2014.

A covenant of the debt arrangement with NAB requires that Trinity’s loan to value ratio not exceed 50%.

Trinity’s prized asset is The Chambers, a heritage-listed office building at 308 Queens Street in the Brisbane CBD, valued at $33.1 million.

Trinity Group shares are currently trading at 28¢.

Half-year results will be released at the end of February.