What we do
We earn our income through rentals received from our tenants. The hospitality industry is characterised by rental income subject to seasonal variability and a high level of capital expenditure. The potential upside allows Hospitality to leverage the assets for higher potential returns.
Our portfolio caters to a wide-ranging domestic and international market and accommodates various segments including corporate, government, leisure, Group conferencing and event business. Our properties are well diversified in terms of geographic location and class of hotel, thus mitigating some of the inherent risks associated within the cyclical nature of the hospitality industry.
As the property owner, we have a symbiotic relationship with our tenants and the hotel management companies who are typically the representatives of the brands in our portfolio. Our focus is the asset management of our properties and a long-term strategy in acquiring, disposing of and investing in a relevant portfolio to protect and grow shareholder returns. This strategy is delivered through responsible capital expenditure, an evaluation of acquisition opportunities and the optimal source of funding for these investments. Our strategy is to have dynamic and symbiotic relationships with the hotel management companies who focus on managing the hotel operations to maximise the income-generating capability of each hotel.
|We raise equity/capital from shareholders through the issue of Hospitality shares. We pay dividends to our shareholders, complying with the JSE regulatory requirements for a REIT while taking cognisance of prevailing economic conditions and our cash requirements to maintain and improve the portfolio and manage debt levels.|
|We source funding to invest in organic and acquisitive growth opportunities, using debt and/or equity. We restructured our debt portfolio, including our medium-term note programme, normal bank debt and revolving credit facilities, to diversify between lenders, simplify the security structure and reduce the average cost of net debt.|
|We maintain and improve our properties through regular and responsible capital investments. Feasibility studies are conducted to analyse the return potential under prevailing trading conditions. Board approval is required for all capital expenditure projects and once approved, all expansions and major refurbishments are outsourced to third-party development consultants.|
|We measure the consumption of electricity and water and review municipal rates. Energy and water-saving initiatives are encouraged and supported through capital replacement where appropriate.|
|We evaluate acquisition opportunities to deliver on our objective to sustainably grow our assets under management. We review and dispose of certain properties that do not match our investment strategy to enhance the quality of our property portfolio. The proceeds of sales are applied to the reduction of debt or other growth opportunities.|
|We receive rental income from our tenants. The leases for all our hotel properties are fixed and variable leases. Typically, the fixed portion of the lease is 50% of the budgeted EBITDAR, escalating at the consumer price index (‘CPI’) on a varying cycle, of two or three years. The varied portion is between 75% and 98% of actual EBITDAR less the fixed portion.|
|Our tenants have management and licence agreements with reputable hotel management companies. We regularly engage with our tenants and their hotel management companies. We monitor the performance of our properties through monthly and quarterly reports provided by each hotel management company. In addition, we conduct peer group benchmarking, statistical analyses and reviews of economic trends to optimise the performance of the properties.|