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Acquisition Of The Radisson Blu Gautrain Hotel (“Rbgh”)
Hospitality Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
Share code for A-linked units: HPA
ISIN for A-linked units: ZAE000076790
Share code for B-linked units: HPB
ISIN for B-linked units: ZAE000076808
(“Hospitality” or “the company” or “the Fund”)
ACQUISITION OF THE RADISSON BLU GAUTRAIN HOTEL (“RBGH”)
1. INTRODUCTION
Linked unitholders are advised that HPF Properties (Pty) Ltd
(“Propco”) a wholly owned subsidiary of Hospitality Property
Fund Limited (“HPF”), has entered into a Sale Agreement dated
14 December 2012 (“Sale Agreement”) with Savana Property (Pty)
Ltd (“Savana” or “the seller”) for the purchase of the
majority interest in RBGH (“the acquisition” or “the
transaction”). RBGH comprises various sections of the
sectional title scheme known as Sandton Eye (“the scheme”).
2. RATIONALE FOR THE TRANSACTION
The RBGH is a 5-star hotel located on the corner of Rivonia
Road and West Street, adjacent to the Sandton Gautrain station
and meets the Fund’s investment criteria of being in a
strategic location within a major metropolitan area with a
strong brand and diverse source markets. The hotel is managed
by Rezidor Hotel Group South Africa (Pty) Ltd (“Rezidor”)
under its luxury Radisson Blu brand. The acquisition of this
property will further enhance the quality of the Fund’s
portfolio and will expose it to the 5-star hotel market in
Sandton.
Based on its anticipated trading performance and cost of
funding, the property is expected to be both earnings and
growth enhancing for HPF. The property is expected to yield
approximately 8.3% growth in rental in year one with growth in
rental for year two expected to reach approximately 15%. This
growth is underpinned by a limited rental guarantee from the
seller, for the first two years of trading following
registration of transfer.
3. SALIENT TERMS OF THE TRANSACTION
RBGH consists of 216 rooms, 8 conference facilities, the
Central One Restaurant and Bar, an outdoor bar and swimming
pool, as well as a fitness centre. HPF will acquire 78.2% of
the hotel portion and 53 parking bays within the scheme for a
combined purchase consideration of R346,745 million (three
hundred and forty six million, seven hundred and forty five
thousand rand). The remaining 21.8% of the hotel portion will
be retained by Savana.
It is expected that registration of transfer of the property
will take place during March 2013 (“the effective date”),
subject to the fulfillment of the conditions precedent below.
Savana is the developer of RBGH and will remain a co-owner
within the scheme. HPF and Savana will enter into a fixed and
variable lease (“F & V lease”) (comprising approximately 50%
fixed rental, the balance variable and dependent on the
underlying operational performance of RBGH) with Ash Brook
Investments 72 (Pty) Ltd (“Ash Brook”), the existing tenant of
the property. Rezidor will continue to manage the property and
business on behalf of Ash Brook in terms of the current
International Management Agreement (“IMA”) between the
parties.
The purchase consideration is payable in cash on the effective
date.
HPF is currently in the process of establishing a Domestic
Medium Term Note Programme (“DMTNP”) and intends issuing a
combination of secured and unsecured notes in order to raise
the required funding for the acquisition.
The pro forma financial effects of the acquisition on HPF
earnings per linked unit, headline earnings per linked unit,
net asset value per linked unit and net tangible asset value
per linked unit for the year ended 30 June 2012 are not
significant (less than 3%) and have therefore not been
disclosed.
4. CONDITIONS PRECEDENT
The implementation of the acquisition is subject to the
fulfillment of the following conditions precedent on or before
the effective date:
- the acquisition being unconditionally approved by the
Competition Authorities, alternatively approved by the
Competition Authorities subject to such conditions as are
acceptable to Propco and the Seller;
- raising of the required funding for the acquisition through
the DMTNP on terms acceptable to HPF;
- conclusion of the necessary shareholder and lease
agreements; and
- approval of the transaction by the shareholders of the
seller.
5. PROPERTY SPECIFIC INFORMATION
Details of RBGH, including property description, property
address, region, sector, number of rooms, purchase price and
the valuation, effective as at 1 December 2012, attributed to
RBGH by Gensec Property Service Limited (trading as JHI) (who
are independent valuers registered as professional associate
valuers in terms of the Property Valuers Profession Act, No.
47 of 2000), are as follows:
Property address: Corner of Rivonia Road
and West Street, Sandton
2196 Johannesburg, South
Africa
Region: Gauteng
Sector: Hospitality
Number of rooms: 216
Purchase price (R’000): 346,745
Valuation (R’000): 345,000
Estimated transfer costs(R’000): 850*
*includes valuation, legal and transfer costs
Johannesburg
18 December 2012
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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