Hospitality Property Fund’s A-linked unit rallies on forecasts being met

Posted On Thursday, 21 February 2013 21:19 Published by eProp@News
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Hotel-focused property loan stock company Hospitality Property Fund’s A-linked unit price rallied 6.06% to close at R17.50 after the fund reported it had met its forecasts for the six months ended December, with A-linked unit distribution growth of 5% to 66.51c, and B-linked unit distributions increasing 16.2% to 9.19c.

The fund’s turnaround from previous distribution declines was due to the continued recovery of the hospitality sector, an improved portfolio, and the fund having overcome its "critical" debt-refinancing issues, CEO Gerald Nelson said.

"The underlying portfolio is in good shape — we’ve got some good assets, and that coupled with the fact that we’re seeing a general improvement in the market, particularly in terms of occupancies climbing, is starting to drive the business," Mr Nelson said.

Hospitality has a dual unit structure with its A-and B-linked units offering different levels of risk and return. Rental income for the period rose 8.3% to R174m, underpinned by improving occupancies and average room rates.

For the year ended June last year, Hospitality reported a decline in distributable earnings per combined linked unit of 33.2% due to the expiry of its debt facilities with Absa of R1.35bn, and the related "material" refinancing costs — as well as low occupancies — which have been gradually improving industry-wide since late 2011.

"Looking at forward bookings and trends, there is certainly a sense that the trend should continue, certainly for the remainder of the financial year," said Mr Nelson.

He said while the fund would pursue attractive acquisition opportunities that presented themselves, such as its recent acquisition of the Radisson Blu Gautrain Hotel in Sandton, it was not aggressively pursuing new acquisitions.

Deputy CEO Andrew Rogers said "there are a couple of assets within South Africa that we would find attractive — the major centres remain our focus areas, including Johannesburg and Cape Town, and Umhlanga would be an attractive area ultimately".

The value of Hospitality’s portfolio was R3.9bn, and Mr Rogers said a "comfortable target" was between R4bn and R4.5bn.

Hospitality’s B-linked units fell 4.35% to R4.40 before the release of the results and closed at that price.

Last modified on Friday, 22 February 2013 07:26

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