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Supplementary information on the acquisition
HOSPITALITY PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/014211/06)
JSE share code: HPB
ISIN: ZAE000214656
(Approved as a REIT by the JSE)
(“Hospitality” or “the company”)
SUPPLEMENTARY INFORMATION ON THE ACQUISITION OF VARIOUS ADDITIONAL SECTIONS, XCLUSIVE USE AREAS AND A REAL RIGHT OF EXTENSION IN
THE SANDTON EYE SECTIONAL TITLE SCHEME
1. Introduction
Shareholders are referred to the category 2 announcement released on SENS on Tuesday, 11 April 2017, wherein
shareholders were advised that HPF Properties Proprietary Limited (“HPF”), a wholly owned subsidiary of Hospitality has,
subject to certain conditions precedent, concluded:
1.1 an agreement (the “scheme purchase agreement”) with Savana Property Proprietary Limited (“Savana”) to acquire
various sections and exclusive use areas of the Sandton Eye sectional title scheme (the “scheme”) (the “scheme
acquisition”); and
1.2 an agreement (the “real right purchase agreement”) with Sandton Isle Investments Proprietary Limited to acquire an
existing Real Right of Extension in the scheme (the “real right acquisition”).
2. Supplementary information
2.1 Details of the scheme and real right acquisition
Hospitality currently owns 58.13% of the Sandton Eye sectional title scheme comprising 220 rooms, conference
facilities, the Central One Restaurant and Bar, an outdoor swimming pool and sun deck of the upscale Radisson Blu
Gautrain Hotel.
The scheme acquisition, which will increase Hospitality’s interests in the scheme (“participation quota”) from 58.13%
to 81.54%, comprises the following investments:
Description Gross Lettable Area (m²)
Retail areas 2 824
Offices 192
Other* 3038
Total 6 054
Other
Parking 146 bays
*Conference and entertainment areas, store rooms, external signage and advertising rights
In terms of the real right acquisition HPF will acquire 10 000m² of bulk rights to extend the scheme by an additional 7
floors. The real right acquisition also includes pre-completed works towards the additional development. The weighted
average rental per square metre of the scheme is R287.54/m2 per month.
2.2 Forecast financial information
Set out below are the forecast revenue, net property income, net operating profit, profit before taxation, total profit and
comprehensive income and profit available for distribution of the scheme acquisition and the real right acquisition (“the
forecast”) for the 12 months ending 31 July 2018 (“the forecast period”).
The forecast has been prepared on the assumption that the scheme acquisition and real right acquisition will be
implemented on 1 August 2017 and on the basis that the forecast includes forecast results for the duration of the
forecast period.
The forecast, including the assumptions on which it is based and the financial information from which it has been
prepared, is the responsibility of the directors of Hospitality. The forecast has not been reviewed or reported on by
independent reporting accountants.
The forecast presented in the table below has been prepared in accordance with Hospitality’s accounting policies, which
are in compliance with International Financial Reporting Standards.
Forecast for the
12 months ending
31 July 2018
R’000
Revenue - Rental income 22 447
Retail and office areas 14 649
Parking and other 7 798
Net property income/net operating profit 19 600
Straight-line rental income accrual 1 109
Profit before taxation 2 823
Total profit and comprehensive income 2 823
Profit available for distribution 1 723
The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The net property income relates to the scheme acquisition only. There is no forecast net property income
relating to the real right acquisition as these are development rights only.
2. The forecast is based on information derived from the management accounts, budgets, and rental contracts
provided by Savana.
3. Rental income is derived from the forecasts provided to Hospitality by Savana. Contracted revenue is based
on existing lease agreements including stipulated increases, all of which are valid and enforceable. Leases
expiring during the forecast period have been forecast on a lease-by-lease basis, and have been assumed to
renew at current market rates unless the lessee has indicated its intention to terminate the lease. Of the rental
income of R22 447 000, 57% relates to contracted rental and 43% relates to uncontracted rental. No near
contracted rental income is forecast
4. Property operating expenditure has been forecast by the managing agent of the Body Corporate on a line-by-
line basis based on management’s review of historical expenditure, where available, and discussion with the
property manager.
5. A finance cost has been recognised for the additional interest bearing liabilities raised of R188 181 000 to
fund the cash portion of the purchase consideration relating to the scheme acquisition, based on the current
cost of debt of Hospitality of 9.5%. It is assumed that the finance cost relating to the interest bearing
liabilities raised of R83 214 000 to fund the cash portion of the purchase consideration relating to the real
right acquisition is capitalised in terms of IAS 23 Borrowing Costs.
6. No fair value adjustment is recognised.
7. There will be no unforeseen economic factors that will affect the lessee's ability to meet their commitments
in terms of existing lease agreements.
20 April 2017
Sponsor
Java Capital
Date: 20/04/2017 03:18:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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