AFRICA Sun Limited (ASL) is exiting Kingdom Hotel in the resort town of Victoria Falls, on notice, after failing to agree fresh lease terms with the owners of the property, First Capital Bank (FCB).
While ASL won the tender earlier this year to lease the 294-roomed property owned by Makasa Sun in line with the tender requirements, the country’s largest hotel group has failed to reach an agreement with FCB on the tenure of the lease.
FCB owns 50 percent of Makasa Sun while the remainder is owned by Barclays Pension Fund.
The bank insisted on a two-year lease term as a way of rebuilding the trust “in our business relationship” while ASL wanted 10 years “sufficient to return” its investment.”
Some of the tender requirements included bringing in an international hotel brand and making substantial investment in rebranding. ASL, which held the leasehold and operated the hotel since 1997, had partnered InterContinental Hotels Group (IHG) as its international brand partner and intended to invest US$6,5 million towards rebranding over a period of 10 years.
“ASL won the tender, which was adjudicated by Ernst and Young because it had fulfilled all the tender requirements, including securing an international hotel brand and investing towards rebranding,” said one source privy to the development.
ASL chairman Dr Emmanuel Fundira told the firm’s annual general meeting (AGM) yesterday that there had not been consensus on tenure of the lease with FCB, which was offering a tenure of two years against the “tenure in our bid of at least 10 years, which we deemed sufficient to return our envisaged investment into the hotel.”
“The Zimbabwe Stock Exchange was notified of the ongoing discussions with the landlord (FCB) and had agreed to conditionally dispense with the need to issue a cautionary (statements) until the conditions had been concluded,” said Dr Fundira.
“We can now report that these discussions have been concluded without consensus being reached on the tenure. Resultantly, the board has had to make the very difficult but necessary decision to exit the hotel. A formal announcement in this regard will be made in line with ZSE listing requirements,” he added.
Earlier, Ms Emily Nemapare, the head of marketing and communication at FCB, had however said the terms and conditions of the tender, upon which ASL had won the right to continue occupation of the hotel property “have not been altered.”
“As part of the Makasa Sun lease renewal process, a tender was conducted, the terms and tenure of which were open to negotiations.
“Engagement between relevant parties on the renewal terms are still ongoing and therefore we are unable to comment on any submissions due to the confidential nature of the transaction, “she said.
An undated letter from FCB managing director Mr Ciaran McSharry to African Sun Limited chief executive officer Mr Peter Saungweme indicates that the banking group was unwilling to enter any further concessions outside the two-year lease term it desired.
The letter also suggested that African Sun was prepared to “surrender” the lease if no agreement was reached with FCB.
“In our meeting on the 14th of June, we discussed the two year-lease that First Capital Bank had proposed as a method to rebuild the trust in our business relationship,” wrote Mr Ciaran to the ASL chief executive.
“You were clear that a 10-year lease was not on offer, you had come to the meeting as a courtesy to inform us of African Sun’s intention to surrender the lease and that you would write that week (a) letter to confirm this position.
Mr Ciaran said he noted in a letter from Mr Saungweme the request for a 10-year lease, in which the latter indicated that if “unacceptable, we may have no alternative but to consider withdrawing from the leased premises upon giving you a relevant notice”.
“As discussed over the last number of months, the 10-year lease is not on offer…and it is with this in mind I request that you as per your proposal, on the 14th June, and commitment to write to us to confirm the surrender of the lease, that you now hournor that commitment as the bank is not prepared to offer a lease to African Sun at this stage.”
Phone calls seeking comment from Mr Saungweme were not answered.