South African owners of Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers, are selling the three hotels to private equity fund Actis for Sh1 billion.
City Lodge Hotel Group put up the three Kenyan hotels and Tanzania’s City Lodge Hotel in Dar es Salaam up for sale in plans to exit East Africa after barely seven years of operation. It plans to sell the Tanzania hotel for Sh7.3 million.
The company says the East Africa units were loss-making to the tune of Sh2 billion as at the end of last year.
“The shares in respect of the Kenya Disposal will be disposed of for an aggregate consideration of ZAR140.9 million which will be settled in cash by Ukarimu and the shares in respect of the Tanzania Disposal will be disposed of for an aggregate consideration of ZAR1 million which will be settled in cash by Faraja,” the firm said.
“The losses attributable to the Kenya Assets and the Tanzania Assets including impairments was ZAR371.1 million for the six months ended 31 December 2020,” the Company said.
The update was shared at the Johannesburg Stock Exchange where the hotel is listed.
Ukarimu Limited and Faraja Limited are real estate funds under Actis. City Lodge Hotel says that occupancy levels have been below expectations at Two Rivers while bookings in the Tanzanian unit have been sluggish, leaving only Fairview with a robust performance.
Fairview Hotel has 127 rooms, while City Lodge Hotel at Two Rivers has 171 and Town Lodge Upper Hill 84. The firm has not however made a direct reference to sluggish business as the reason for selling the hotels which will now leave its operations in South Africa, Botswana, Namibia and Mozambique.
It said the sale was prompted by the need to reduce debt levels and eliminate operating losses.
“The board of directors of City Lodge has previously communicated its desire to dispose of the company’s entire East African hotel portfolio together in order to reduce debt levels within the City Lodge group, increase group liquidity and eliminate ongoing operating losses,” the firm said.
The offer comes at a time Covid-19 has ravaged the hospitality industry mainly through hotel closures and booking cancelations.
Last year it plunged into Sh3.64 billion (R486.6 million) loss—the first in over seven years. “The 2020 financial year was our most challenging operating year in the group’s 35-year history, mainly due to the lockdown protocols implemented by South African, and similar restrictions in the rest of Africa,” said Chairman Bulelani Ngcuka.