| Thu 24 Jul 2008, 15:23 | | HPA/HPB - Hospitality Property Fund Limited - Announcement regarding the |
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HPA HPB
HPA
HPA/HPB - Hospitality Property Fund Limited - Announcement regarding the
proposed acquisition of the Holiday Inn Sandton
HOSPITALITY PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/014211/06)
JSE Code for A-Linked units: HPA & ISIN: ZAE000076790
JSE Code for B-Linked units: HPB & ISIN: ZAE000076808
("Hospitality" or "the Fund")
ANNOUNCEMENT REGARDING THE PROPOSED ACQUISITION OF THE HOLIDAY INN SANDTON
1. INTRODUCTION
Linked unitholders are advised that HPF Properties (Pty) Ltd, a wholly
owned subsidiary of Hospitality has entered into an agreement dated 23 July
2008 ("the agreement") to acquire the 4-star hotel known as the "Holiday
Inn Sandton - Rivonia Road" ("the Hotel") adjacent to the Village Walk
Shopping Centre from Central Plaza Investments 28 (Pty) Ltd ("the Seller")
for a total purchase consideration of R400 million ("the consideration")
(collectively "the acquisition"). The 301-key Hotel is currently under
construction and is expected to be completed by September 2008 and the Fund
will acquire the Hotel once it is operational.
The acquisition is a Category 2 transaction for the purposes of the Listing
Requirements of the JSE Limited ("the JSE Listing Requirements") and this
announcement is published in accordance with such requirements.
2. THE ACQUISITION
2.1 Rationale
The purchase of this high quality new hotel, located on one of the prime
hospitality sites in the country, is in line with the Fund`s objective of
growing its investment portfolio in a controlled manner through the
addition of quality assets which will further diversify the portfolio and
which have the potential to enhance unitholder returns.
2.2 Terms of the acquisition
The Fund is acquiring the Hotel as a going concern. The consideration is
likely to be settled through the utilisation of Hospitality`s existing debt
facilities.
The acquisition will be effective from the date of transfer of the property
which is expected to be during September 2008, subject to the Conditions
Precedent referred to in paragraph 3.
2.3 Valuation
An independent valuation was conducted by JHI Real Estate (who are
registered as professional associate valuers in terms of the Property
Valuers Profession Act, No. 47 of 2000), who attributed a value of R470
million to the Hotel as at 1 August 2008. The consideration represents a
14,9% discount to the open market value.
2.4 Pro forma financial effects of the acquisition
Table 1 sets out the unaudited pro forma financial effects of the
acquisition on earnings, headline earnings, net asset value ("NAV"), net
tangible asset value ("NTAV") and distribution per linked unit based on the
unaudited interim results of the Fund for the six-month period ended 31
December 2007.
The unaudited pro forma financial effects are the responsibility of the
directors and have been prepared for illustrative purposes only to provide
information about how the acquisition may have impacted unitholders for the
relevant reporting period and because of its nature may not give a fair
reflection of the Fund`s financial position, changes in equity, results of
operations or cashflows after implementation of the acquisition or of the
Fund`s future earnings.
Table 1: Pro-forma Financial Effects of the acquisition
Before the After the Change
acquisition( acquisition(2,
1) 3,4)
(cents) (cents)
Earnings per linked
unit
A Linked Unit 79,58 76,90 -3,4%
B Linked Unit 79,58 76,90 -3,4%
Headline Earnings per
linked unit
A Linked Unit 81,19 78,50 -3,3%
B Linked Unit 81,19 78,50 -3,3%
NAV per linked unit
A Linked Unit 13,81 14,11 2,2%
B Linked Unit 13,81 14,11 2,2%
NTAV per linked unit
A Linked Unit 13,81 14,11 2,2%
B Linked Unit 13,81 14,11 2,2%
Distribution per linked
unit
A Linked Unit 52,11 52,11 0,0%
B Linked Unit 81,15 76,64 -5,6%
Number of Units
A Linked Unit 61 591 087 61 591 087 0,0%
B Linked Unit 61 591 087 61 591 087 0,0%
Weighted average number
of units
A Linked Unit 51 737 923 51 737 923 0,0%
B Linked Unit 51 737 923 51 737 923 0,0%
Notes:
1. Extracted from the published unaudited interim results for the six-month
period ended 31 December 2007.
2. For the purpose of calculating the earnings, headline earnings and
distribution per linked unit it was assumed that the acquisition was
effective on 1 July 2007.
3. For the purpose of calculating the net asset value and net tangible asset
value per linked unit it was assumed that the acquisition was effective on
31 December 2007.
4. It has been assumed that if the acquisition was funded on 1 July 2007
through Hospitality`s existing debt facilities that the weighted average
funding rate would have been 7,7%.
The aforementioned financial effects are based on statutory reporting
requirements and indicate that the acquisition would likely have resulted
in an impairment in earnings in the prior six-month reporting period ended
31 December 2007. Through aligning debt obligations with the Hotel`s
anticipated rental income profile, the potential impairment in growth of
future distributable earnings for the B-linked units can be minimised and
should be growth enhancing in the long term.
3. CONDITIONS PRECEDENT
The implementation of the agreement is subject to the fulfilment of the
following conditions precedent:
- the acquisition being unconditionally approved, alternatively approved
subject to conditions acceptable in terms of the Competition Act, 1989
of 1998, by the Competition Authorities of South Africa;
- the execution of a reciprocal servitude of parking and access with a
neighbouring property; and
- the conclusion of a lease agreement between the Seller and Majormatic
194 (Pty) Ltd ("Lease Agreement").
4. PROPERTY DETAILS
Details regarding the property are set out below:
Property Location Sector Gross Single Vacancy
Lettable or Multi by
Area m2 Tenanted rentable
area
Holiday 123 Hospitality 18 561 Single 0%
Inn Rivonia
Sandton Road,
- Sandown,
Rivonia Sandton,
Road Gauteng
The Lease Agreement is of the Fund`s C-Corp type and is for a period of 10
years. C-Corp lease agreements comprise approximately 50% fixed lease rental
with the remainder being a variable rental equivalent to 90% of the hotel`s
EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) after
deducting the fixed lease portion. The fixed lease portion is set to escalate at
CPIX.
Johannesburg
24 July 2008
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 24/07/2008 15:23:01 Produced by the JSE SENS Department.
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