Sri Lanka's Hotel Developers, a listed firm which owns the building on which Colombo Hilton is operated said a land sub-leased from a private party had been taken over by the state.
The state land on which the building was put up has been sub-leased from Cornel and Company, a private firm, in 1984 in return for equity, Hotel Developers said in a filing, responding to an inquiry from Colombo Stock Exchange.
Cornel and Company had leased the land from Sri Lanka's Urban Development Authority (UDA), a state agency. The firm was expected to pay the lease to the UDA.Hotel Developers said the UDA had repudiated the lease since rentals had not been paid from 1987 and the land had reverted back to the state.
The firm did not say whether it will have to pay rentals to the state or issue fresh stock or if there are any material effect on the company.
The stock closed at 135.80 rupees, up 5.80 Thursday.
Hilton Hotels and Resorts in a separate statement said they will continue to manage the hotel and are expecting to have talks with the state.
The statements came after Sri Lanka's economic development minister told parliament on Wednesday that that the Hilton property had been fully taken back to the state.Sri Lanka Hilton to hold talks on management deal
Hilton Hotels and Resorts says it will continue to manage Sri Lanka's Colombo Hilton until discussions start with owners following a government move to take over the land on which the hotel is located.
"We have been advised that the Sri Lankan Government has been noted as the new owners of the land and building of the hotel," Hilton Hotels and Resorts said in a statement.
"In due course Hilton representatives will meet with the relevant parties to discuss the change in ownership and in the meantime, Hilton will continue to maintain normal business operations at the hotel."
Hilton said it has a management contract dating back from over 20 years ago with Hotel Developers (Lanka) PLC, a listed firm which owns the building.
On Wednesday economic development minister Basil Rajapaksa was reported to have told parliament that the state had "fully taken over" the property because land lease rentals had not been paid to the government.
Hotel Developers is a majority state controlled firm, which has not filed accounts with the stock exchange for years.
The state-backed project has been embroiled in controversy and litigation with disputes including among promoters and contractors.
This cannot be an issue as far as Hilton Colombo hotel is concerned. Looks like a routine admin matter between the parties concerned and nothing to do with the day to day running of the hotel.
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