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Hotel Property Investments (ASX:HPI) avoids COVID-19 impacts as profits rise

Market News, Real Estate
ASX:HPI      MCAP $626.5M
17 August 2021 15:40 (AEST)

Source: Hotel Property Investments

Hotel Property Investments (HPI) has managed to escape COVID-19 relatively unfazed, reporting a statutory profit of $84.7 million and declaring a final payout of 9.7 cents per stapled investment for FY 21.

HPI said COVID-19 had minimal financial impacts, with $100,000 in rent abated while $3.7 million in rents were deferred, with the company not accessing JobKeeper grants.

HPI owns 54 pub and hotel establishments, 42 of which are leased to Queensland Venue Company and seven of which are leased to Australian Venue Company.

Total revenue increased by 11.0 per cent to $60.1 million from $54.1 million in 2020. Across the pub portfolio, annual rent increases averaged 2.5 per cent, and HPI purchased 11 assets in FY20 and FY21.

These increases were somewhat mitigated by a $3 million per year rent decrease announced in January 2020 for eight pubs. This decrease went into effect on July 1, 2020.

Adjusted funds from operations (AFFO) increased by 7.3 per cent to $32.5 million, with HPI’s property portfolio valued at $95.2 million reflecting an average cap rate of 5.9 per cent.

HPI acquired nine assets in the financial year, the aggregate acquisition price was $96 million excluding costs, representing a passing yield of 6.9 per cent.

The company has invested $12.4 million in FY21 towards pub refurbishments, with seven further projects in planning or currently underway.

Rental income from investment properties totalled $54.2 million, property cost recoveries totalled $6.0 million, property outgoing expenditures were $9.5 million, management fees and other trust costs totalled $4.4 million, and financing costs totalled $12.5 million in operating revenues and expenses.

HPI’s distributable earnings were $33.8 million after accounting for fair value adjustments, non-cash finance expenses, and other minor factors.

HPI refinanced one of its credit facilities in August 2021 by issuing a new $80 million bond in the US Private Placement (USPP) market.

The new notes have two maturities; $40 million in August 2028 and $40 million in August 2033. As of August 2021, the weighted average debt tenor has grown from 3.9 to 5.7 years.

Shares in Hotel Property Investments are unchanged at the conclusion of the trading day, finishing at $3.33.

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