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The end of the Don era

The Don Group of hotels has sat on prime property mostly in Gauteng for years now but is finally putting the last of its hotels up for tender.

They are The Don Eastgate/Bruma east of Johannesburg; The Kempton Don Hotel in Isando near the OR Tambo International airport; The Don Hotel Arcadia east of Pretoria, and the other Don Hotel Arcadia II in the city centre.

Ryan Joffe, the founder and head of Ryan Joffe Properties, says The Don Hotel Group has mandated the agency to take the remaining four hotels in their portfolio to tender.

“The properties will be sold separately with offers being accepted up until midday on October 31 2012,” Joffe told Moneyweb. He added the previous five properties had been sold on an ad hoc basis, with Joffe now being the sole mandate for the transaction.

Asked how the process worked, he explained it was similar to an auction in that interested buyers could put in a private bid over the period of a month, as opposed to a public sale which took place at a certain time on a certain day.

Joffe said his agency’s expectations were high as the properties were all in prime locations, fully furnished and had been well maintained and serviced. He said interest in the properties had been encouraging since the group announced in October 2011 that it intended selling the properties.  
He surmised prospective buyers could include other hotel groups or airlines wanting to accommodate their staff. The Pretoria venues could be converted into student accommodation which is in short supply in Gauteng, as well as in other student hubs across the country.

The Bruma and Isando precincts would be ideal as executive suites for travelling clientele, Joffe said. He added: “Typically in today’s market, buyers have the cash.” The process was no different from the timeline of an auction in terms of a deposit upfront with transfers still taking around three months.

The group began converting its hotels into residential units in 2011 after taking a knock following the 2008 global crisis and the hospitality slump after the 2010 World Cup.

In October 2011 the company said it owed the Industrial Development Corporation (IDC) R70m. The IDC had asked the group to pay back its loan earlier than originally agreed to, due to the business converting from hospitality to residential letting.

Earlier this year Don CEO Thabiso Tlelai told Moneyweb  it was planning to sell three to five of its properties to settle its IDC debt and the R33m it spent to convert its hotels.

Tlelai said at the time the hotels would become the base for its new strategy of becoming a property company, whether it was management, ownership or variable loan stock.

The shift was dictated to by the economic environment, said Tlelai: “Right now hotels are not a good space to be in, (but) residential rentals are – as people are not getting bonds in the speed they’re historically used to,” he said.

The Don Hotel Group could not immediately be reached for comment.

(Moneyweb)


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