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Letlole Ra Rona disposes its four hotels to Cresta

Publishing Date : 21 October, 2019


Real estate development and management company, Letlole La Rona, has managed to dispose four hotels under its portfolio to Cresta Marakanelo Limited as part of its diversification strategy, the Botswana Stock Exchange-listed company has announced.

Letlole Ra Rona, a subsidiary of Botswana Development Corporation Limited (BDC) said the four hotels it disposed were; Bosele Hotel, President Hotel, Cresta Lodge and Thapama Lodge, leaving it with 13 industrial properties under its portfolio; as well as Moedi House, a commercial property, Shoppers, a retail property and Red Square, a residential property. However, Letlole Ra Rona chairperson, Boitumelo Mogopa said the sale of the four hospitality properties led to a book loss for the company of P27 million.  But, the sell, she said, was in line with the blue-chip company’s diversification strategy of divesting from the hospitality sector, which led to the disposal of all its hotel interests through a sale to a sitting tenant – Cresta Marakanelo.

“Letlole Ra Rona’s deliberate strategic shift to sale of the four hotels led to a book loss of P27m on this disposal while there were two additions of properties in Gaborone’s key industrial nodes at the business consolidated its lead in this sought-after sector of the market,” the chairperson said. She said the disposal of the hotels had reduced Letlole Ra Rona’s risk profile, removed exposure to a single tenant who occupied a third of its portfolio while at the same time unlocking capital to carry out its restructuring and growth path.

“The sale of the hospitality assets has seen the investment properties’ value decline from P970m to P780m.  However, the company maintains a very healthy pipeline locally and regionally and shall be deploying the sale proceeds during the course of the coming financial year,” said Mogopa. She said her company was enthusiastic about the opportunities available in Botswana and beyond the country’s borders.

“It remains focused on its vision of becoming the premier real estate company with a significant presence in selected regional markets and a well-diversified portfolio underpinned by high occupancies and quality tenant covenant.  With its current healthy pipeline and property management expertise, the company is in a prime position to deliver this strategy. “Going forward, the company will be looking to grow its distribution pay-out at a rate comfortably higher than Botswana’s inflation,” said Mogopa, adding Letlole Ra Rona’s strong performance above expectation continued despite the current subdued economic environment.

“A well-diversified, growing portfolio has secured the business’ cash generation ability against macro headwinds with the company consistently delivering solid financial and operational results.  In addition, a well-structured balance sheet and funding strategy has afforded Letlole Ra Rona flexibility to swiftly seize opportunities as they arise.
“Testimony to this is the fact that over, the two years, Letlole Ra Rona has been involved in four of the five largest property transactions in Botswana.  As a result, operating property increased 22 percent net cash while operating activities grew by 16 percent.  With tighter working capital, management and improved cash collections resulted in core cash resources ending the year at P44.6m, significantly higher than the P34.5m at the end of the previous financial year,” said Mogopa.

She said the total revenue for the company for the year-ending 30 June 2019 reflected a 28 percent growth from the prior year figure of P82m. “The increase was underpinned by a full year contribution of Watershed Mall (now accounting circa 12 percent of total revenues).  This asset came into the portfolio at the tail-end of the 2018 financial year.  Annual rental escalations averaging 7.5 percent underscore the quality of portfolio which was enhanced by the purchase of newly developed, fully tenanted warehouses in Gaborone’s Block 3,” said Mogopa. Letlole Ra Rona is owned in majority by the government investment arm, BDC with a stake of 65.8 percent followed by Botswana Public Officers Pension Fund (BPOPF) with a 6.71 percent shareholding.