This article is from the Australian Property Journal archive
ASX-listed pubs landlord Hotel Property Investments has comprehensively knocked back a $710 million acquisition offer from property heavyweight Charter Hall and major super fund Hostplus.
HPI’s portfolio is the only pure-play pub REIT in the S&P/ASX 300 index. Across its 58 assets, 70% are leased to national operator Australian Venue Co (AVC) and its joint venture partner Coles.
In a statement, HPI chairman Giselle Collins said the offer of $3.65 per share “does not compensate HPI securityholders for the value of our portfolio, or the strength and outlook for our business or the stamp duty savings which would accrue to Charter Hall Retail REIT and Hostplus”.
“The offer does not provide any premium to HPI’s net tangible asset value, in contrast to ASX-listed REIT transaction precedents where control has typically passed at a substantial premium to NTA.
“The offer implies a valuation for HPI’s portfolio that reflects a material discount to comparable pub portfolios.”
Charter Hall’s piece of the off-market bid was made through its ASX-listed Charter Hall Retail REIT. Charter Hall is already a key shareholder of HPI.
Collins said the “opportunistic nature” of the offer is demonstrated in the “negligible premium for control and reinforced through the HPI security price trading above the offer price since the announcement of the offer”.
The offer was made at a 4.9% premium to HPI’s trading price the day before the offer was made, on September 6th.
Collins also said the offer “comes at a time when the outlook for REITs is improving, due to a strengthening view that interest rates have peaked and as official interest rate reductions by central banks around the world commence.
“As we enter an environment where interest rates are expected to decline, lower risk property assets such as HPI’s pubs, with long term and attractive lease structures, are expected to perform strongly and deliver steady distributions growth.”
She also noted HPI’s business is “strong and growing”, with a gearing of about 35% at the lower end of our target range.
“Our portfolio is unique, difficult to replicate and has long-term strategic value. Our portfolio is well positioned to benefit from strong ongoing rental growth via our attractive lease terms.”
HPI’s portfolio has a 9.1-year weighted average lease expiry with an average option period of a further 19.3 years.
