JULIUS BAUMANN

Aviation and Tourism

QUEENSGATE Hotels & Leisure appears to be unravelling quickly after the company announced this week that two directors were forced to sell 94,8-million shares, or 5% of the issued stock, to cover some of the company’s debt.

According to a Sens announcement released late last week, CEO Andrew Hubbard and strategic officer Holger Friedrichsen had pledged the stock to the Hospitality Property Fund (HPF) and Exhibition Building Investments as surety, which was now being called in.

Andrew Rogers, deputy CEO of HPF, said on Friday that the sale of shares related to funds owed by Queensgate on leases at the Inn on the Square and 90 suites in the Radisson Waterfront Hotel in Cape Town. Those leases had been terminated.

A spokesman for the group said on Friday that Hubbard was not able to discuss the issue as Queensgate was trading under a cautionary.

The sale only amounts to about R5,9m as the shares have collapsed to 3c a share from a high of 35c in April last year.

Queensgate is primarily involved in developing new hospitality properties through Queensgate Business Development, as well as hotel management. It also earns fees through property arbitrage by being the middleman between the property owner and hotel managers, as was the case at the Radisson and the Inn on the Square.

The development division performed well but struggled with the hotel management division.

Late last year, Queensgate struck a deal with Three Cities Hotels to manage its properties, but that deal also seems to have come apart.

Mike Lambert, chief operating officer of Three Cities, said on Friday that after protracted discussion following the announcement of the agreement with Queensgate in October last year, the hotel group took over the management of six hotels — including The Alphen, The Inn on the Square and Tinga in the Kruger Park — improving their performance by 16%.

However, Lambert said Three Cities had elected to contract directly with the owners.

The first sign of trouble at Queensgate was an attempt by the company’s directors to raise further capital by winning approval for the issue of a further 1-billion shares at its annual general meeting last month. Shareholders objected to the resolution and it was eventually modified to 300 million new shares.

Queensgate has not performed well of late, announcing that a poor performance from its hotel management division dragged it down in the year to August 31 last year, resulting in an attributable loss of R3,24m, or 21c a share.

It is believed that major shareholders in the group included chairman Colin Human and Mvelaphanda Holdings.

Queensgate said earlier last week in a cautionary “that shareholders are advised that there are circumstances relating to the company, the full impact of which is currently being determined”.

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Source: Business Day