Johannesburg - Hospitality Property Fund anticipates that the acquisition of 10 hotels valued at R1.7 billion from Southern Sun Hotels, a wholly owned subsidiary of Tsogo Sun Holdings, will provide it with exciting future growth prospects and an attractive pipeline of acquisitions in the medium term.
Vincent Joyner, the chief executive of the listed fund, said yesterday that it was expected Hospitality would provide the platform for Tsogo Sun’s strategy of growing a hospitality-focused real estate investment trust (Reit).
Joyner said the initial discussions with Tsogo Sun were about the 10 hotels the fund had acquired and thereafter they would look at other hotels. Tsogo Sun had a large number of properties, but they had not decided how many could possibly be acquired.
“All hotels are of interest to Hospitality. We are looking for diversification of brand, operator, location, grading and clientele segmentation. In a year or three, Hospitality with be the bellwether for hotels in South Africa,” he said.
The acquisition will be achieved by Hospitality acquiring 100 percent of the shares in a newly formed Southern Sun Hotels subsidiary, resulting in Southern Sun Hotels increasing its shareholding in Hospitality from 27.1 percent to about 51 percent.
Asset base
The purchase consideration will be settled through the issue of 145 million Hospitality shares in a transaction that was expected to be finalised on September 1.
Joyner said Hospitality’s asset base would increase from R5.3bn to R7.1bn following the acquisition, and they would “then have to see and look at the rest”. He said the asset base of Hospitality could increase by 50 percent or even 100 percent over the next year or two, but this would have to be negotiated.
Hospitality is facing a court challenge related to its restructuring from a linked unit capital structure to a Reit and simple all share structure, despite receiving approval for the restructuring at a special general meeting in August last year. Joyner said shareholders representing 2.8 percent of the total shares in issue or 8.32 million Hospitality B shares demanded fair value for their shares.
Rental income increased 9.3 percent to R474.6m from R434.1m, despite the disposal of seven non-core properties in the year and the fund’s 50 percent interest in the Courtyard portfolio in the prior year.
Occupancy levels increased year on year by 3.2 percent to 64.6 percent, the average daily rates by 8 percent to R1 133 and revenue per available room by 11.4 percent to R733.
Overall expenses increased 10.3 percent to R44.9m from R40.7m.
Shares in Hospitality rose 1.21 percent yesterday to close at R13.41.
BUSINESS REPORT