TSOGO Sun is set to enter a deal
with Hospitality Property Fund
(HPF) that will give the group
expanded exposure to the hotel market
in South Africa.
As part of the deal, HPF will buy a
portfolio of ten hotels from Tsogo Sun
in exchange for shares. The result will
be a majority shareholding by Tsogo
Sun in HPF of just over 50%. The ten
Tsogo Sun owned and operated hotels
that will be added to HPF’s portfolio
are: Southern Sun Bloemfontein;
Southern Sun Newlands; Garden Court
OR Tambo; Garden Court South Beach;
Garden Court Polokwane; Garden Court
Milpark; Garden Court Kimberley;
SunSquare Cape Town; StayEasy
Century City; and StayEasy Rustenburg.
Tsogo has also acquired Majormatic
and Extrabold, taking over the Holiday
Inn Sandton and Crowne Plaza
Rosebank leases, which are HPF-owned
hotels.
Marcel von Aulock, ceo of
Tsogo Sun, told TNW: “Tsogo was
considering creating its own hotel
and entertainment-focused property
company. We decided that HPF would
make the ideal entity to inject our
hotel assets into and entered into
the current deal to take control of
HPF rather than form a new propco.
This deal is a win for both parties
as it stabilises HPF, introduces new
assets into the company and provides
a pipeline of additional potential deals
for HPF.
“From a Tsogo viewpoint, it allows us
to get exposure to some great hotel
assets operated by good operators
such as Radisson, Starwood and
Marriott. Tsogo’s hotel portfolio
expands to a multi-managed, multibranded
one, expanding on the
assets we already had under the
InterContinental brands.”
Marcel adds: “The non-Tsogo related
hotels – Radisson, Westin and Protea
– continue to be leased and managed
by the relevant operators in terms of
their leases, while Tsogo will continue
to lease and manage the Southern
Sun, Garden Court, SunSquare and
StayEasy branded hotels as well as
the Holiday Inn Sandton and Crowne
Plaza Rosebank.”
Gerald Nelson, non-executive
director of HPF, says there will
be no change in the current
relationship (including existing
negotiated commissions and
discounts) between the travel
trade and the hotels in HPF’s
expanded portfolio. “HPF’s
existing portfolio is multibranded
and the agreements
currently in place with the
various tenants/operators
as well as HPF’s own code
of ethics preclude disclosure
of confidential or strategic
information to competitors.
The common ownership
structure does not in any way
influence or impair competition
between the various brands at
the operational level.”
Gerald says responses
from the other hotel groups
to the deal have largely been
positive. He explains that
HPF’s properties are leased to
tenants who generally contract
with various managers, who
in turn operate the properties
under their respective brands.
The Tsogo Sun properties
have similar leases and
management structure, and
HPF will assume an asset
management role for the
additional ten hotels.
Marcel sums up: “The
exciting part will hopefully
come in the future as the fund
is now able to expand and
grow more successfully with a
stable shareholder in Tsogo.”
The transaction is subject to
regulatory approval from the
competition authorities and
is expected to take effect on
November 1.
