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Zimsun faces the sack

Roadwin Chirara

ZIMSUN Leisure Group (Zimsun) risks being booted out of hotel properties it currently occupies, should lessor Dawn Properties Ltd (Dawn) invoke a “profit-linked” clause in the lea

se agreement which allows it to change tenants.


The leisure group’s position on the use of Dawn properties has been undermined by the biting downturn in the tourism sector, which incidentally eats into the property firm’s profits due to low hotel occupancy.


A Zimsun offshoot, Dawn has a performance-related earnings agreement with the fellow Zimbabwe Stock Exchange tourism concern that it maximises profits when tourism is ticking.


With 11 properties countrywide, Dawn reportedly earns about 10% of turnover for each Zimsun hotel. Poor performance at Hwange Safari Lodge, marked by a $700 million loss as at September, impaired its profits. However, rehabilitated Elephant Hills provided a tonic with profits of $450 million in the period under review.


Dawn chief executive Mike Manyika on Tuesday confirmed the tenure clause and said the two companies agreed on the provision prior to his company’s September 2003 listing.


Farai Rwodzi, the Interfin Merchant Bank number two, chairs Dawn properties.


The agreement, Manyika added, was business-related and aimed at protecting the company and shareholder interests despite the fact that Dawn was spun off the hotel group.


“We have an agreement and it’s a market-related agreement. It is aimed at protecting our investment as a company,” Manyika said.


As an independent entity, the clause also seeks to enforce certain standards which sitting tenants have to meet and adhere to.


“It’s a performance-related clause and if the tenants fail to meet our requirements then we have the right to look for someone else,” the Dawn boss emphasised.


Businessdigest also understands that under the current Dawn/Zimsun arrangement, the latter caters for maintenance of hotels as well as insurance.


Due to the tourism slump under which most hotels have been recording occupancy levels of 30%, the “contributory” agreement is now reportedly under threat and Dawn has attempted to wriggle out of the cash clasp by courting potential suitors, and recently short-listed 10 other new merger targets.


Apart from merging with other property investment companies, Dawn has sought expansion of revenue streams by venturing into areas such as property sales. About eight months ago, the Tendeseka office park company opened a real estate wing.


However, it still favours the merger route because it offers free cash and is a source of cheap finance.

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