CEO’s message – February 2020
The past two years have been quite tumultuous for our group. The Group experienced a “Credit Crunch” which resulted in some drastic decisions and actions taken.
Firstly we needed to refinance our Commercial Property portfolio which was successfully concluded in December 2019. Part of the restructuring included the sale of our headquarters together with The Devonshire Hotel in Braamfontein. A large portion of the net proceeds were applied to reducing debt.
The disposals together with the refinancing activities have reduced our loan to value (LTV) of our commercial properties to around 15% and the GIH Hotel portfolio to 10%. This is commendable given the current market conditions.
Via further disposals and increases in values of certain properties, we plan to reduce our LTV’s even further. The net result will be much-reduced funding costs, more flexibility for additional funding and consequential capital for acquisitions and developments.
Despite representations and pleas to the JSE they elected to remove Orion Real Estate Ltd (Orion)’s REIT status in February 2019 which prompted the search for an alternative solution. After extensive discussions and deliberations by our Board in conjunction with our Corporate Advisors, we chose the route of joining a new stock exchange ZAR-X
Orion delisted from the JSE on 13 December 2019 and is scheduled to list on ZAR-X by the latest middle of March 2020.
With the listing on ZAR-X Orion’s REIT status will be restored.
With the sale of Orion House in Braamfontein, we relocated our head office to 26 Wellington Road Parktown and also consolidated our property management and services division in Parktown. Merging both offices resulted in a number of cost savings and synergies.
Headcounts on both the hotel and property divisions were reduced significantly.
In addition to the closure of The Devonshire Hotel with the sale of the property, we also mothballed The Wartburger Hof Hotel in KZN and Mont Aux Sources Hotel in the Drakensberg. A number of interested buyers have been identified and to this end, an offer to purchase was accepted from a private consortium for the purchase of Mont Aux Sources at a fire sale price of R40 million. We are awaiting guarantees to be issued.
Orion Hotels now manages and operates 6 full-service hotels whilst a 7th hotel is leased to a 3rd party.
The commercial property letting activities underpinned by developing strong broker relationships is seeing our vacancies dropping significantly
Despite the drama and trauma that downscaling and right-sizing brings our staff is in good spirits and we are now poised for growth.
Our smaller businesses like the Bakwena Day Spas, Orion Business Solutions, Star Storage and Stay now Pay Later are all working hard at achieving critical mass.
South Africa currently is not for the faint-hearted. We are facing daily onslaughts from criminal activities, Eskom electricity shortages, huge unemployment figures and health, and education services in disarray. This does not make for a good socio-political story.
Since we are part of this “landscape” it is literally a question of adapt or die. To this end, we have entered into a number of Black Economic Empowerment (BEE) initiatives. We are seeing some successes in this regard. Our hotel division does regular business with government departments and agencies. Property and facility management partnerships and joint ventures are our next horizon.
None of the above would have been possible without the loyal support of Financiers, Shareholders, Service Providers, Suppliers, Contractors and above all loyal and dedicated staff who work tirelessly at our long term vision.
Our collective belief is that 2020 is the year for good results.