Does Tsogo Sun plan to beef up HPF portfolio?
Tsogo Sun has become a leading player in SA’s hotel industry, owning some of the most sought-after hospitality assets in the country. It recently bought a stake in SA’s only hotel Real Estate Investment Trust (Reit), the Hospitality Property Fund (HPF). The question is how does Tsogo plan to make its investment in HPF a success?
Tsogo has already made substantial investments in hotel management companies and has now established its dominance with the investment in HPF. The investment of about R1.8bn — 10 hotel properties — gave it the controlling interest.
In doing so, Tsogo required HPF to collapse its dual share ownership structure. Under the old structure, A shareholders were first in line for dividends capped at the inflation rate, or 5%, whichever is lower. Only then did B shareholders receive an income, which meant they often got nothing, especially when HPF fares poorly.
On Friday, Tsogo said it would shift more assets into HPF in a deal worth about R3.3bn to give the company greater scale of economy. It did name the assets, which has led analysts to speculate that Tsogo may be about to place a premium property into HPF.
HTI Consulting CEO Wayne Troughton agrees. “In the first round, they injected mainly secondary hotels in secondary locations. There were various competition-related conditions placed on the deal. They are meeting those conditions and I think it would make sense for Tsogo really to beef up the HPF portfolio with one of their premium Sandton or Cape Town assets,” he says.
HPF owns 24 hotels and resorts in SA valued at R7.8bn.
Mining companies often have themselves to blame for the scepticism with which their activities in the communities and beyond the scope of production are regarded.
Many firms engage in a lot of work behind their public façade, generate income for their employees and governments and make a difference in communities. There are obviously those that don’t do as much as they can or are able to and the social upheaval that erupts around their operations is a clear indication that something is wrong.
But a lot of work is unheralded, which doesn’t help the industry that is already an easy whipping boy for politicians looking for a platform and labour unions looking to score points among mining communities neglected by their governments. This is particularly so in SA, where the government views the industry through the lens of apartheid history.
To tackle the issue, Sibanye Gold CEO Neal Froneman has called for a form of truth and reconciliation commission. His idea is to air this past, speak about it and attempt to cleanse the industry of a dismal record.
Presumably, such a forum would exorcise the deep sense of mistrust between the government, labour and mining companies, allowing all interested parties to work together to keep the embattled industry sustainable for decades more.
Clearly, the sooner this happens, the better for hundreds of thousands of people depending on the sector for a living.
The deepening tension, particularly between the state and the industry, is damaging and serves no purpose except to curtail investment, reduce jobs and discourage growth.