The Don to become a cash shell

The embattled Don Group will become a cash shell once the sale of its prime properties takes place.

The group announced last week that it had sold the remaining five of its nine properties following the economic downturn and the slump in the hospitality industry after the 2010 Soccer World Cup. CEO, Thabiso Tlelai, told Moneyweb: “It will be a cash shell and the directors will decide on whether or not to pay shareholders or to entertain other initiatives”, next year.

The group first announced its intention to sell the properties in October 2011. The four properties sold earlier included the prestigious Don Suites in a prime location in Sandton and another in Illovo north of Johannesburg. The latest batch to be sold included two properties in Arcadia, Pretoria, another in Rosebank north of Johannesburg and the other in Isando and Eastgate on the east rand.

Tlelai said he was disappointed that the remaining five properties, which were sold for R120.5m, had not fetched what the group had expected. In a radio interview with Moneyweb in July 2012 Tlelai said the group had six properties to sell at the time for which the company was hoping to get “a bit above R240m”. Asked if this was for the entire portfolio or what was left, Tlelai replied: “For the total.” It was calculated at the time that the group expected around R170m for the six properties.

“…we fell short but I think we achieved a reasonably good price. The first batch was in prime business locations. The second was heavily weighted towards residential locations. Altogether, taken in aggregate, I think in this market, we’ve done well.”

Earlier this year Tlelai told Moneyweb  the Don was planning to sell three to five of its properties to settle its IDC (Industrial Development Corporation) debt and the R33m it spent to convert its hotels into residential entities. Tlelai explains that the appetite for its residential sites was lacking whereas the business orientated ones fetched better prices. He said while he did not want to get shareholders’ hopes up there was a good chance they could expect some payback: “The chances of paying shareholders is highly likely. I think it’s about time. The shareholders of the Don have been waiting a long time.”

He added the priority now was to “get cash in the bank” and to finalise all the transactions. An announcement on the future of the company was expected sometime in the first half of 2013.

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