International Hotel, which listed on the AltX on Wednesday, plans to grow net asset value to about £200 million (R4.1 billion) over the next three years.
The Luxembourg Stock Exchange-listed property counter had an opening price of R20.55, boasting a market capitalisation of R308 million.
International Hotel focuses on hotel properties in the UK, where it seeks to invest in established hotels and embark on developments.
The counter is assembled by JSE-listed Redefine International. Redefine has nine hotel properties, largely Holiday Inns in London, which represent 20% of its £1.1 billion (R22.6 billion) overall property portfolio. It won’t be able to raise its hotel holding beyond 20% – paving the way for a separate hotel listing.
Although inward listings typically do not have much liquidity, as seen in the minimal share trading of International Hotel, CEO Helder Pereira says it will take time for share trades to increase, as most investors are looking for an initial yield.
Despite this, Pereira, a former Southern Sun managing director and Tsogo Sun director, says there is an appetite for offshore property investments among SA investors. “Investors will come over time as International Hotel gives them access to a rand hedge and offshore markets,” he says.
International Hotel recently raised R253 million in a private placement, placing 12.3 million shares at an issue price of £1 (R20.55). Pereira says the proceeds of the private placement will be used to acquire more assets. “Our focus will be on the UK and other opportunities are opening up. We are seeing opportunities in mainland UK and we will assess these carefully.”
It will fund its pipeline of hotel investments through a combination of new debt and equity. It also anticipates further capital raisings. International Hotel will target hotels that are let on long leases and acquisitions that can deliver consistent cash returns of circa 7% on equity per annum.
In the long term the company will have 95% of its hotel assets concentrated in the UK. International Hotel currently has three hotel properties in its portfolio worth £18.3 million (R376 million). It also has a greenfield site in the UK where it looks to develop a hotel property to lease to Travelodge.
Pereira says the UK market is buoyant given confidence in the market on the back of improving GDP growth. “London’s hotel market has been stable and is among the most robust hotel markets.” According to PwC’s Growth beds in UK hotels forecast 2015, overall hotels in the region are expected to see a 5.6% gain in RevPAR (revenue per available room) to £67.39 (R1 388), driven by a 4% room rates growth to £86.49 (R1 780). The firm expects a 1.6% increase in room occupancy rates to 78%.
The JSE’s more than R500 billion real estate sector has seen five listings so far. Arrowhead Properties’ pure residential-focused Indluplace Properties, UK-focused Capital & Regional, New Frontier Properties and Lodestone Properties have all listed this year. Two other listings are pending: property developer Balwin Properties and storage fund Stor-Age.
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