"Based on its anticipated trading performance and cost of funding‚ the property is expected to increase profits for HPF‚" the group said.
This follows the cancellation of the 14 December sale agreement in which Propco said it would buy a 78.2% share of Radisson Blu Gautrain for R346.745m from Savana.
HPF has been actively looking for opportunities to buy large hotel properties in major metropolitan areas with diverse source markets and strong brands while disposing of non-core properties in its portfolio that do not fit this profile.
The property is projected to yield about 8.15% in year one with growth in rentals for year two expected to be about 15%. This growth is underpinned by a limited rental guarantee from the seller for the first two years of trading following registration of transfer.
Radisson Blu Gautrain comprises various parts of a sectional title scheme known as Sandton Eye and has 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 purchase have all been fulfilled and registration of the property is expected in May.
The total purchase price will be funded by a R275m vendor consideration placement‚ the issuance of R150m secured notes and the private placement of R18.4m unsecured notes.
In February‚ Hospitality Property Fund said the A-linked unit distribution amount for the six months to December last year grew by 5% to 66.51c‚ in line with the fund's distribution structure‚ while the distribution on the B-linked unit showed an increase of 16.2% to 9.19c compared with the previous period.
The fund said industry statistics had confirmed the recovery trend in the hospitality market that had 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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