Hotel-focused real estate company, Hospitality Property Fund, has started to turn the corner. The company saw its B shares rise about 11% on Monday, after it announced that it expected its distributions to have grown steadily in the six months to June.
The group’s A shares rose 3% upon the news of boosts in distributions. Hospitality has struggled to earn profits during the years following the 2010 Soccer World Cup’s hotel boom. But the first half of 2016 has seen an improvement in the group’s fortunes. Income has been boosted by growth in tourism, especially in Cape Town, owing to a weak rand.
Hospitality uses an A and B share ownership structure. Investors who own A shares are paid dividends first — capped at the consumer price index or 5%, whichever is lower. B shareholders receive the balance.
Hospitality said on Monday the combined A and B share distribution for the six months to June was expected to be 21.8%22.9% higher than the previous corresponding period, or between 96.15c and 96.96c.
“The A share distribution for the six months to June will be in accordance with the company’s distribution policy, at 78.62c per A share, and the B share distribution is accordingly expected to be between 335% and 355% higher than the previous corresponding period or between 17.53c and 18.34c per share,” the company announced.
In the near future, the A and B structure will fall away, following corporate action involving Tsogo Sun’s takeover of the group.
The group’s A and B structure has been controversial. When the company performs well and earns a lot of income, both A and B share holders benefit. But in recent lean times, the A shareholders have taken most of the income, leaving the B shareholders with disappointing returns.
A deal where Tsogo Sun will take over Hospitality is being finalised. Tsogo wants to inject 10 hotels valued at about R1.8bn into Hospitality in exchange for more than 50% of Hospitality’s ordinary shares, on condition it adopts a single-share structure. Hospitality would then become the hotel arm of Tsogo Sun.
source: Business Day
