Business tycoon Harry Jayawardena has decided to build a brand new, bigger and upper star class resort in the Browns Beach property with an investment of Rs. 3.5 billion.
To finance the equity part for the new hotel, the Board of Browns Beach Hotel has resolved to go for a Rights Issue to raise Rs. 2.1 billion.
From 31 March, 2011, the 140-room hotel will cease operations making way to build a new 200 room resort within two years.
Originally built in the 1970s, Browns Beach is by far the oldest popular hotel in Negombo and was one of the country’s best. However since then the three-star classed hotel has aged considerably and had faced many infrastructural issues.
Browns Beach Hotel is 44% owned by Stassen Exports, 28.7% by Aitken Spence and 3.5% by Distilleries, all of which are controlled by Jayawardena.
The Company will raise funds via the issuance of 33.6 million new shares at Rs. 65 each with the Rights proportion being seven new shares for every two held. This will be equity capital for the construction of new resort. Its current stated capital is Rs. 199.4 million comprising 9.6 million ordinary shares.
Post rights issue, Browns Beach will go for a sub division on the basis of three shares for every one share.
Subsequent to these moves, both of which are subject to regulatory and shareholder approval, the number of shares issued will increase to 43.2 million and to 129.6 million shares.
Despite its old age, given the influx of tourists post-war, Browns Beach had enjoyed good occupancy.
In the first half of 2010/11 financial year, turnover had increased by 39% to Rs. 142 million and net profit by 893% to Rs. 25 million in comparison to the corresponding period of last financial year.
Industry sources welcomed the demolition of the old structure to build a modern luxury star class resort. “This will further boost the fast modernising profile of the traditionally strong Negombo coast tourism,” they said. Browns Beach is said to be bestowed with one of the best beaches in the area.
Longstanding operator in Negombo, Jetwing Group is fast nearing completion of its upgrade and expansion with modern and newer properties whilst Dhammika Perera’s Vallibel One is also planning to build a 380 mega and luxury hotel in Negombo with opening slated for 2013.
Tourist arrivals rose by 39% in October whilst Sri Lanka is already on course for a record figure of 500,000 this year.
Browns Beach Hotel yesterday peaked to a high of Rs. 100 before closing at Rs. 94.50, down by Rs. 2.40.
source - www.ft.lk
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