Tuesday, June 2, 2020

Cresta seeks shareholder approval to purchase rented properties

BY KABELO SEITSHIRO

Cresta Marakanelo Limited (CML) seeks shareholders approval to buy multi-million Pula rented properties from the Botswana Hotel Development Corporation (BHDC) – a subsidiary of the Botswana Development Corporation Limited (BDC) and Letlole la Rona Limited (LLR).

The company announced this week the proposed acquisition includes properties housing Cresta President Hotel, Cresta Lodge Hotel, Cresta Thapama Hotel and a portion of Cresta Bosele Hotel.

The cash consideration for the acquisition stands at P235 million. Cresta Marakanelo will also be seeking approval to acquire Cresta Rileys in Maun from the BHDC, a subsidiary of BDC for a cash consideration of P25 million.

Information contained in a circular to Cresta shareholders through the Botswana Stock Exchange Limited (BSEL) is that Cresta will no longer be liable for the 8 percent annual rental escalations, which are adversely affecting the profitability of the company.

Added to this is the rental increase for 2019 amounting to P2.5 million for the properties which will see annual lease rentals reaching P34.1 million.

“All the leases terminate in June 2020. Based on the current rental levels and the 8 percent escalations, the new lease rentals will be at unsustainable levels,” reads the statement.

Cresta in the circular says in the absence of significant rental resets, the hospitality company will not renew most of the leases beyond the current terms. This is expected to result in a decrease in operating hotels and cash generation.

“The board of Cresta is of the opinion that, after the acquisition, and the assumption of debt to finance the same, the working capital of Cresta will be adequate for the company’s foreseeable future requirements,” reads the circular.

When contacted for comment on Friday, Cresta Marakanelo Limited Managing Director, Mokwena Morulane, said the acquisitions will also demonstrate that Cresta is a long term investor and hotel operator in Botswana. He further said Cresta operates 12 hotels and owns only 1.5 of those hotels, being Cresta Mowana Safari Resort and Spa in Kasane and Cresta Marang Gardens in Francistown.

He said the acquisitions of the five properties will ensure the company has a balanced portfolio between leased and owned properties.

“Cresta will no longer be liable for rentals of the properties and the associated 8 percent annual rental escalations, which are adversely affecting the profitability of the company,” he stated.

An extraordinary general meeting of Cresta Shareholders is expected to be held on 14 February 2019.

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