Friday, 29 July 2011 12:48
African Sun to shed underperformers
AFRICAN Sun Ltd says the group will not continue to hold onto leases of underperforming hotels, CEO Shingi Munyeza has said.
This comes after one of the hotel group’s landlord — Dawn Properties — announced the property company would offer leases to other hotel operators.
Munyeza told businessdigest this week that his group would support Dawn Properties achieve its set targets.
“Based on the Dawn Chairman’s statement published a few weeks ago, the intention for Dawn is to ensure that they diversify the property portfolio and in order to do so they have to raise money from the current portfolio by either selling some of the underperforming hotels or offering the leases to other operators who think they can offer them a better return,” said Munyeza. “This is also in line with African Sun’s strategy of ensuring they do not continue to hold leases where they are underperforming.”
Management says the strategy should however not erode value for both African Sun and Dawn Properties.
“Therefore the process of executing this strategy with Dawn is a mutual one and has to be done in such a way that it does not erode value on both sides,” said Munyeza.
African Sun also announced that the company would wind down its South African operations — The Grace in Rose Bank and the Lakes Hotel and Conference Centre.
The hotel group says it would exit its operating agreement for the Grace in Rosebank by 31 August 2011 and exit Lakes Hotel and Conference Centre end of this month.
“On the question of performance it is important to note that African Sun has been outperforming it’s competitors on the hotels that are underperforming for both Dawn and African Sun, so if there is an operator who can do better it would also be to the advantage of African Sun as this offers them an exit route,” said Munyeza. “It is important to also emphasize that this will be done in line with existing lease agreements.”
But Munyeza says should Dawn decide to sell an asset that his group might want to keep, the lease agreement would continue with the buyer.
“We can also buy the hotel which is part of the current lease agreement,” said Munyeza.
Asked if the group’s Kingdom Hotel lease in Victoria Falls would be affected amid reports Barclays Bank, which owns 50% of the property, were planning to sell the property, Munyeza said Barclays Bank was not selling.
“This is not the case because we have the opposite position in writing from Barclays. In the event that they want to sell we have a preemptive right which we have always told Barclays that we would exercise it since The Kingdom at Victoria Falls is a hotel we would always want to keep based on our growth strategy,” said Munyeza.
Barclays Bank head of corporate affairs Valeta Mthimkhulu would not be drawn to comment on whether the financial institution had put the asset up for sale saying the bank was in a closed period.
She said: “Barclays Bank Zimbabwe is currently in a closed period as we are about to announce our interim results and it is not appropriate to comment on issues with a financial bearing at this time.”
But market sources say the bank had earlier gotten a directive from the central bank to dispose Kingdom Hotel seen by authorities as largely a non core asset.
Munyeza said relations between African Sun and Dawn were cordial.
“It’s business as usual,” Munyeza said. “As you know we have an investor relationship as well as a lease relationship. A healthy tension has always existed from the formation of Dawn and there is no difference now. Every season has brought new challenges which need to be debated with an open mind and outsiders can mistakenly view this as bad relationships. There is no bad blood between Munyeza and the Dawn board chairman.”
Dawn was unbundled from African Sun Ltd in 2003.