The property company –- Dawn Properties –– through its subsidiaries Gold Coast Properties and Laclede Investments has lease agreements for eight hotel premises with the hotelier. The properties are Hwange Safari Lodge in Hwange, Holiday Inn Mutare, Carribea Bay Sun in Kariba, Elephant Hills Hotel in Victoria Falls, Crowne Plaza Monomotapa Hotel in Harare, Express Holiday Inn in Beitbridge and Troutbeck Hotel in Nyanga.
Seven of the eight properties are under Gold Cost Properties while the remaining hotel, Great Zimbabwe Hotel is under Laclede.
According to court papers filed at the High Court under case number HC 3014/2012, Dawn alleges that African Sun breached the lease agreements by failing to pay rent timeously and within the time limits provided for in the lease agreements at the end of October 2009.
However, Dawn had agreed –– following representations by African Sun –– to give them a relaxation subject to the condition that the hotel group was to comply with the terms and conditions of the agreement. Dawn alleges that African Sun failed to fulfill the conditions.
At the end of June last year, Dawn says that African Sun again failed to pay rentals within the agreed periods. A 30-day notice was issued calling on the group to rectify its failure to maintain the interior and exterior of the properties together with the plant and equipment, fixtures and fitting in good repair and condition in breach of the lease agreements between the parties.
“On or about the 30th of June 2011, the plaintiffs determined, in their reasonable opinion, that the defendant’s business as conducted from the hotel premises was being conducted and managed in a manner which precluded realistic and sustainable achievement of the turnover rentals which gave the plaintiffs the expected commercial return on their investment in the properties,” the court record reads.
This was because the hotel business was diminishing and according to the group “was likely to diminish the good commercial standing and reputation of the properties.”
A six month and 30-day notice were subsequently given for African Sun to rectify the breaches.
Dawn also brings up the 2010 mortgage bond issue, where the group –– without authority from the board of directors –– registered a mortgage bond of about US$12 million on the Crown Plaza Monomotapa Hotel property. The mortgage bond was, however, cancelled.
African Sun, through its lawyers –– Dube, Manikai & Hwacha –– gave notice to defend on March 20 after the summons were served on March 16.
African Sun is said to have proposed the renegotiations of leases on four of the properties.
The group wanted to exercise its right of first refusal over two hotels and proceed with the termination of the leases on Hwange Safari Lodge and Elephant Hills Hotel.
However, there was a dispute over the valuation of soft furnishings in the two entities where the leases were to be terminated.
Dawn CEO, Mike Manyika, said he could not comment on issues which were before the courts.
The two groups are expected to issue a cautionary statement pending the outcome of the court case.
Dawn owns 10 hotels, which were spun out of the African Sun group, then Zimbabwe Sun group, in 2003. African Sun CEO, Shingi Munyeza, owns 16% of the group.
Meanwhile, there was drama at African Sun’s annual general meeting after a shareholder, Old Mutual, and the chairman of the group, Tim Chiganze, moved a motion that the re-election of directors David Birch, Vernon Lapham and Elizabeth Chitiga be conducted by way of a poll.
However, there were objections by some shareholders who questioned the preparedness of the meeting to hold such a poll. Chiganze said that notice had been given and as such if certain members wished to exercise their rights, in this case to vote by way of poll, then it should go ahead as “the chairman directs”.
At the end of the vote, the directors were all re-elected.