Hospitality places its chips on Tsogo’s casinos


Hospitality places its chips on Tsogo’s casinos


Published Date: 2018-07-10 | Source: Stephen Gunnion | Author: Stephen Gunnion

Hospitality places its chips on Tsogo’s casinos

Tsogo ultimately plans to unbundle its stake in Hospitality Property Fund to shareholders

Tsogo Sun has followed through with the R23 billion sale of seven casino precincts to Hospitality Property Fund in a deal that will give Hospitality scale in the hotels and casino industries and broaden its earnings base. Tsogo says the deal is in line with its strategy to restructure into three separate operating divisions: property, gaming and hotel management. This, it says, will unlock value and give shareholders a greater investment choice.

Once the deal has been completed, Hospitality will own investment properties worth about R36 million. Togo will hold about 87% of the shares in Hospitality.

The casinos include Montecasino, Gold Reef City Casino, Silverstar, Suncoast, Blackrock, Emnotweni and The Ridge. They'll be subject to an effective 20-year triple net lease, which Hospitality says will provide a stable, escalating and predictable income stream and distribution for its shareholders. It says this will reduce the impact of the volatility of existing hotel rental income. Its increased scale will also help lower the cost of funding.

Related article: Tsogo places its chips on an economic recovery

Just over a year ago, Tsogo sold 29 hotels to Hospitality for R3.6 billion in cash and shares to reduce its direct exposure to the hotels industry and focus on entertainment and gambling.

Hospitality said its loan-to-value of 28% following the transaction will still leave it with the capacity to make further acquisitions.

Its shares ended trade 11% up at R10 in a single deal yesterday while Tsogo rose 1.3% to R20.92. The announcement was made after the close of trade.


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