Letlole expects half a million rental income from new lease agreement
Letlole will lease to Western a portion of Lot 22047 for the purposes of undertaking a development. Western shall, in turn, undertake the development of 7004 square meters on the said Lot 22047, the property that was previously acquired by Letlole from Western in July 2020.
Letlole La Rona Limited announced that it has entered into a Memorandum of Agreement of Lease with Botswana Development Corporation (BDC) and Western Industrial Estates (Proprietary) Limited (WIE) for the leasing and development of Lots 22048 and 22047 Gaborone respectively. The transaction envisaged is categorised as a related party transaction as BDC is a material shareholder of Letlole, holding 40 percent of LLR shareholding, and Western is a wholly owned subsidiary of BDC.
Letlole is a variable rate loan stock company listed on the Botswana Stock Exchange (BSE) and primarily engages in the investment in real estate and real estate instruments to earn rental income and for capital appreciation. Western, as a subsidiary of BDC, is a property development company.
According to an announcement by Letlole, the terms of the Agreement are that Letlole will lease to Western a portion of Lot 22047 for the purposes of undertaking a development. Western shall, in turn, undertake the development of 7004 square meters on the said Lot 22047, the property that was previously acquired by Letlole from Western in July 2020. Letlole says it will have the option to acquire the development immediately upon completion at a net yield of 8 percent, or to acquire the property at the prevailing market value in future. “The Transaction shall result in additional rental revenue for the Company and, in the event that LLR elects to acquire the development after completion, it will enhance LLR’s property portfolio,” Letlole says.
Letlole says it has received a valuation report that the Market Value of the leasehold interest in the vacant stand currently to Lot 22047 is P 8,362,776. Lot 22047 shall be leased by Letlole to Western for a period of 25 years at a monthly rental of P42 000 per month, with an annual escalation of 5 percent after the initial 12-month period of the lease period. “The annual rental of P 504,000 will therefore not have a material effect on the headline earnings of LLR,” Letlole says.