Propco buys Radisson Blu Gautrain hotel

HOTEL-focused property loan stock firm Hospitality Property Fund said on Wednesday its wholly-owned subsidiary HPF Properties (Propco) had entered into a new agreement with Savana Property to acquire 100% of the Radisson Blu Gautrain hotel in Sandton for R443.385m.

"Based on its anticipated trading performance and cost of funding, the property is expected to be earnings enhancing for HPF," it said.

This follows the cancellation of the December 14 sale agreement in which Propco said it would acquire a 78.2% share of Radisson Blu Gautrain, and 53 parking bays, for R346.745m from Savana Property. The company’s focus has evolved towards enhancing the quality of its assets.

The property is projected to yield about 8.15% in year one, with growth in rental for year two expected to be about 15%. This is underpinned by a limited rental guarantee from the seller for the first two years of trading after registration of transfer.

Radisson Blu is made up of various sections of the sectional title scheme known as Sandton Eye and comprises 216 rooms, eight conference facilities, the Central One Restaurant and Bar, an outdoor bar and swimming pool, and a fitness centre.

Subject to the necessary bank guarantees being issued, the conditions precedent to the revised acquisition have all been fulfilled and registration of the property is expected next month. The total purchase consideration will be funded by a R275m vendor consideration placement, the issuance of R150m secured notes and the private placement of R18.4m in unsecured notes.

In February, Hospitality Property Fund said statistics had confirmed the recovery trend in the hospitality market that started about 12 months ago, with growth in occupancies and room rates matching levels last seen prior to the global downturn in 2008.

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