Who financed Cresta’s property buying spree?

01 Jul 2019

BY BONNIE MODIAKGOTLA

If you have been wondering who might have landed the hand to hotelier - Cresta Marakanelo Limited to acquire multi-million pula property across the country the answer is Barclays Bank Botswana.

The hospitality group has made it public that Barclays Bank Botswana is the financier to its recent multi-million pula property acquisitions.

Last year, Cresta made a move to acquire properties owned by Letlole La Larona (LLR) and Botswana Hotel Development Company (BHDC) in inter-party related transactions that have since been approved by shareholders and regulators.

The inter-party transactions is down to the Botswana Development Corporation (BDC) which wholly owns BHDC, and also a significant 66 percent stake in LLR, as well as a 27 percent shareholding in Cresta Marakanelo, the owners of Cresta hotels.

The deal was made public in December 2018, with a detailed statement released to shareholders, announcing that Cresta intends on acquiring a plot in Maun owned by BHDC. The plot is currently being leased to Cresta Riley’s Hotel, one of the 12 hotels owned by Cresta.

Moreover, Cresta will also acquire some properties owned by LLR which have been housing some Cresta outlets: Cresta Lodge, Cresta Thapama, Cresta President and Cresta Bosele.

The hotel chain company at the time said it will fund these transactions through debt financing, and added it will have no bearing on the net asset value. “The interest expense in the first year will be less that then current rental expense, therefore the transaction will have significant positive effect on the net profit of the company,” Cresta said in a circular sent to shareholders.

Now the leisure focused company has announced that it is at the tail end of concluding the transactions to acquire the five properties currently being leased from LLR and BHDC. The hotel chain says this is part of their ‘Asset Right Strategy’, a deliberate departure from the usual ‘Asset Light Strategy’, according to the annual report.

The hotel chain then revealed that the credit committees and the board of Barclays Botswana has approved a loan facility of P300 million in favour of Cresta for the acquisitions, pegged at P260m and the remainder to go towards refurbishments.

“These acquisitions are transformational for Cresta Marakanelo Limited. The properties will not only show growth in the balance sheet of CML and immediate EBITDA uplift, but they will also ensure that we can proactively reposition the properties to be competitive and also enhance Cresta’s branding aspirations,” the company said.