Murano Global Investments PLC — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report rather than a quarterly report; the supplied “2023 Q4” period corresponds to the year-end reporting period. Financial statements are combined financial statements of the Murano Group, presented in Mexican pesos under IFRS. Murano PLC itself had no material assets, liabilities, or operations at December 31, 2023 because the Business Combination closed on March 20, 2024.
Business context
- Murano is a Mexico-focused real estate development and hospitality group with properties in Mexico City, Cancun, and planned projects in Baja California and Ensenada.
- The operational Mexico City portfolio comprised the 217-room Andaz Hotel and 183-room Mondrian Hotel, both operating since the first quarter of 2023.
- The 400-room Vivid Hotel in Cancun commenced operations on April 1, 2024, after the reporting date. The 616-room Dreams Hotel was expected to open in the third quarter of 2024.
- The planned GIC II Hotel in Cancun is expected to contain 2,000 rooms, but financing has not yet been secured. The filing also describes a proposed 371-room Baja resort and the Baja Park development project.
- On March 20, 2024, Murano completed its Business Combination with HCM Acquisition Corp. Its ordinary shares and warrants began trading on Nasdaq on March 21, 2024 under MRNO and MRNOW.
Financial performance and key metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | Ps.$286.7 million | Ps.$6.4 million | Up 4,357.3% |
| Direct, selling, general and administrative expenses | Ps.$608.1 million | Ps.$250.6 million | Up 142.6% |
| Profit before income taxes | Ps.$5.7 million | Ps.$475.1 million | Down substantially |
| Net profit | Ps.$57.8 million | Ps.$244.4 million | Down 76.4% |
| EBITDA | Ps.$444.9 million | Ps.$563.4 million | Down 21.0% |
| Adjusted EBITDA | Ps.$500.9 million | Ps.$563.8 million | Down 11.2% |
| Cash flow from operating activities | Ps.$165.2 million | Used Ps.$275.5 million | Improved Ps.$440.7 million |
| Cash flow used in investing activities | Ps.$1,697.6 million | Ps.$1,437.5 million | Outflow increased 18.1% |
| Cash flow from financing activities | Ps.$1,438.0 million | Ps.$1,770.4 million | Down 18.8% |
Net profit margin was approximately 20.2%, but reported earnings were heavily influenced by non-operating items, including Ps.$768.7 million of net foreign-exchange income, a Ps.$86.6 million loss on investment-property revaluation, Ps.$75.9 million of derivative valuation losses, and Ps.$303.7 million of interest expense. EBITDA and Adjusted EBITDA are non-IFRS measures and should not be treated as available cash.
- Room and hotel-related revenue was Ps.$284.9 million; administrative services to related parties contributed Ps.$1.8 million.
- Andaz revenue was Ps.$177.2 million and Mondrian revenue was Ps.$107.6 million.
- 2023 operating statistics were: Andaz RevPAR Ps.$1,380, ADR Ps.$3,758, and occupancy 36.7%; Mondrian RevPAR Ps.$1,003, ADR Ps.$3,547, and occupancy 28.3%.
- Capital expenditures were approximately Ps.$1.719 billion, primarily for the GIC I Hotel and related construction. Construction commitments at year-end were approximately U.S.$23.6 million.
Financial position, debt, and liquidity
| Balance-sheet metric | December 31, 2023 | December 31, 2022 |
|---|---|---|
| Total assets | Ps.$19.473 billion | Ps.$18.803 billion |
| Current assets | Ps.$597.4 million | Ps.$519.7 million |
| Total liabilities | Ps.$11.639 billion | Ps.$10.404 billion |
| Current liabilities | Ps.$2.628 billion | Ps.$4.069 billion |
| Total debt | Ps.$6.903 billion, including accrued interest | Not clearly presented on the same basis |
| Cash, cash equivalents, and restricted cash | Ps.$146.4 million | Ps.$240.8 million |
| Total net assets | Ps.$7.834 billion | Ps.$8.399 billion |
- Debt with third parties was Ps.$6.683 billion and debt with related parties was Ps.$220.3 million at year-end.
- Current debt installments were Ps.$2.039 billion; long-term debt excluding current installments was Ps.$4.643 billion.
- The principal facilities included the GIC I syndicated secured mortgage loan of Ps.$3.882 billion, the Insurgentes Loan of Ps.$1.688 billion, the Beach Club Loan of Ps.$337.9 million, and other Exitus, Finamo, leaseback, VAT, and revolving facilities.
- Approximately Ps.$17.408 billion of property, construction in process, and equipment was pledged as security for borrowings.
- Current liabilities exceeded current assets by approximately Ps.$2.030 billion, producing a current ratio of approximately 0.23x. Management and the auditor disclosed substantial doubt regarding the ability of certain group entities to continue as a going concern.
Material changes versus the prior period
- Revenue increased sharply as the Andaz and Mondrian hotels operated for substantially all of 2023, compared with limited hotel activity in 2022.
- Expenses increased with hotel operations, including employee benefits, food and beverage costs, depreciation, utilities, insurance, cleaning, and operator fees.
- Net profit declined despite higher revenue because of higher interest expense, depreciation, a loss on investment-property revaluation, and derivative valuation losses. The 2022 results benefited from a Ps.$298.1 million investment-property revaluation gain and a Ps.$200.7 million derivative valuation gain.
- Operating cash flow improved to positive Ps.$165.2 million, but substantial construction spending caused investing cash outflows of Ps.$1.698 billion and year-end cash declined by Ps.$94.4 million.
- Total debt increased to approximately Ps.$6.903 billion from the prior year, reflecting additional project and working-capital financing.
- The filing corrects immaterial prior-period errors relating to cash-flow classification and deferred tax liabilities.
Outlook, commentary, risks, and unusual items
- Management expects additional capital will be required to complete the existing development pipeline. Remaining development and construction costs for projects to be completed were preliminarily estimated at approximately U.S.$620 million, including approximately U.S.$500 million for GIC II and U.S.$120 million for the Baja resort.
- The filing does not provide formal revenue, EBITDA, occupancy, or earnings guidance.
- Management expects the Vivid Hotel and Dreams Hotel openings to expand Cancun operations, but the 2023 results are not considered indicative of future operating performance because the Cancun hotels were not operational during the reporting year.
- A covenant breach affecting the GIC I debt-service reserve was waived in December 2023 and again temporarily in March 2024. The Insurgentes Loan reserve-account default was waived and amended on April 4, 2024. Future covenant breaches could permit lenders to accelerate debt, including through cross-default provisions.
- Subsequent financing included a U.S.$26 million Finamo loan, a Ps.$100 million Finamo loan at 22% maturing in October 2024, additional Santander availability, and other post-year-end borrowings and amendments.
- Key risks include insufficient liquidity, high leverage and floating interest rates, foreign-exchange exposure, dependence on Hyatt and Accor, construction delays and cost overruns, reliance on additional financing, Mexican regulatory and political conditions, environmental and climate risks, hurricanes and water scarcity, tourism cyclicality, competition, and cybersecurity.
- Internal control over financial reporting and disclosure controls were ineffective at December 31, 2023 because of material weaknesses involving management review of unusual transactions, technical accounting personnel, and technology infrastructure.
- The filing identifies a Ps.$86.6 million unrealized investment-property revaluation loss in 2023. Property and construction valuations rely substantially on Level 3, unobservable inputs and may be volatile.
- The filing contains an inconsistency in its EBITDA reconciliation: one table presents 2023 net profit as Ps.$82.7 million, while the audited combined income statement reports Ps.$57.8 million. This difference should be verified against the filed financial statements and XBRL data.
Facts investors should verify
- Reconcile the reported Ps.$57.8 million net profit with the Ps.$82.7 million amount used in the EBITDA reconciliation.
- Confirm the exact composition, maturities, interest rates, collateral, covenant status, and post-year-end amendments for the approximately Ps.$6.903 billion debt balance.
- Assess the going-concern disclosure, available unrestricted cash, debt-service reserves, near-term maturities, and the feasibility and terms of additional financing.
- Verify opening dates, ramp-up assumptions, occupancy, ADR, RevPAR, and cash generation for the Vivid and Dreams hotels.
- Review the U.S.$620 million development estimate, outstanding construction commitments, permitting status, and projected sources of funding.
- Evaluate the sensitivity of property valuations, deferred taxes, covenant compliance, and earnings to peso-dollar exchange rates, interest rates, occupancy, and construction costs.
- Review the disclosed material weaknesses and remediation progress before relying on future financial reporting.
- Consider ownership concentration: Elias Sacal Cababie held approximately 87.2% of ordinary shares after the Business Combination, while directors and executive officers collectively held approximately 98.2%.