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IOLProperty - South African Property For Sale
Friday Sep 07, 2012

KZN Casino wants to expand Golden Horse site

Tsogo Sun has offered to buy the property on which its Golden Horse Casino in Pietermaritzburg is situated for R42.5 million from the Msunduzi municipality, so that it can pump more money into expanding and renovating the premises.

The company pitched its offer to the council's executive committee during a presentation yesterday.

However, a decision has not yet been made on whether the 50-hectare property would be sold, as councillors still needed to discuss the proposal among themselves.

Steven de Klerk of Tsogo Sun said that Akani Msunduzi, a wholly owned subsidiary of Tsogo Sun Holdings, developed the Golden Horse Casino in 2001. The landlord is the municipality, and the head lease is held by the Turf Club, with Akani sub-leasing the property.

"Akani is essentially buying a lease locked for 24 years at the current rental of R439 351 a year," he said.

The offer of R42.5 million to buy the property was far greater than its current market value of R26 million.

De Klerk said the Golden Horse Casino employed about 500 full-time staff and was a significant tourist and local attraction. The casino was an important contributor to the city's rates base and had longterm potential to grow.

"The threat and limitation to the future of the development of the property is leasehold tenure," he said.

While the casino had been recently refurbished, Akani needed to secure freehold title before considering further development, and the Tsogo group policy was to own properties, he said.

In general, hospitals, hotels and casinos needed to be recycled every eight to 10 years to maintain market share. Without the certainty of freehold title, the life of the property was indefinite and would naturally be left to decline towards the end of the lease period.

The advantages of a sale were that it would stimulate development, ensure continued reinvestment by Akani in the city, enhance tourism, create more employment and increase the rates value on the entire property.

It would also free the municipality from holding any interest in a major gambling establishment.

De Klerk added that, if there was no sale agreement, then the converse would apply, and the asset would decline towards the termination of the lease.

DA councillor Mergen Chetty told The Mercury afterwards that he was of the view that it would be a good decision to sell the property if the figures presented were correct.

"Indirectly, from a business point of view, the Turf Club makes more money out of sub-leasing the property to Akani than we do as council," he said.

In any business venture, it made sense that if you had secured ownership, you would invest more, which would increase the value of the property, he said.

The Mercury

 
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