LLR poised to lose over P18 million

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  • Letlole at loggerheads with Cresta over leased property
  • Company exits Hotels property
  • Targets retail property
  • Forced to sell property at a loss of P20million


The Botswana Stock Exchange Limited (BSEL) listed property company, Letlole La Rona has announced that profit for the year ended 30 June 2019 will decline significantly by over P18 million, after the company was forced into a corner by hotel chain operator, Cresta Marakanelo to sell its property for P20 million less than the market value.
Cresta has leased out its properties to hospitality outfit Cresta Marakanelo Group, the Thapama Hotel and a portion of Bosele Hotel. It emerges that the leases are set to expire at the end of June 2020 and LLR have concluded that the best option for them, and for their shareholders would be to dispose of the properties before then as the two parties (LLR and Cresta) were failing to come to an amicable agreement in regards to terms of a lease renewal. Those in the know said Cresta was reluctant to pay an increased rental arrangement to Letlole. On the other hand, it appears that Letlole felt that should it not increase value from the leases, it would be benefitting far less than the market rates, translating to decreased earnings. Letlole board, chaired by Boitumelo Mogopa consequently resolved to sell the properties, albeit at a price lower than the market price. Sources say that there are limited players in the hospitality space who could lease the Letlole properties, which gave Cresta the bargaining power to then buy Letlole properties at a ‘give away price’.
The proposed sale consideration of the properties is set at P235million, subject to shareholder approval at the Extraordinary General Meeting to be held on the 12th of February at Cresta Lodge. According to Letlole La Rona, a company owned in majority by Botswana Development Corporation (BDC), the sale of the properties would be below the market value of P254.7million as at 31 December 2018, therefore at a loss of P20million.
Letlole has revealed that they intend for the funds to be used within their ongoing financial year, which is before the end of June 2019 and have forecast that other things equal, they expect a decline in profit of approximately 23 percent to P60.49million, from P78.87million, for the year ended 30 June 2019. For Letole, the objective was to exit the risky hospitality space and go full throttle into the retail property space, which is the money spinner, using the P235 million war chest.
“It is worth noting that the four properties in the concerned transaction make up 28% of the company’s property portfolio,” Letlole revealed. By exiting Leisure (hotels) properties LLR aims at increasing its portfolio in retail property. Last year, the company bought from Jus Posh Investments, Watershed Mall valued at P149 million.
The property includes all land, buildings and improvements comprising of mainly a fully developed retail center known as Watershed in the central district.
Letlole announced during the acquisition that it identified the Property as a potentially favorable investment opportunity to grow its property portfolio and to enhance returns on the Company’s equity.
Currently, retail sector now makes the about 23 percent of Letlole’s overall portfolio from the lows of 5 percent before the acquisition. It has the third largest share from fourth place recorded last year. Leisure now constitute 27 percent of total property portfolio. Exiting the Leisure properties will shift Letlole portfolio into being retail driven. The company’s contractual revenue for the year ended 30 June 2018 increased by 10 percent to P80.8 million compared to the prior year’s 73.3 million, its latest financial statement reveals.
Chief Executive Officer (CEO) Chikuni Shenjere-Mutiswa said the increase in revenue came despite the lower than expected contribution from the recently acquired Watershed Property which was concluded in May 2018.