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- HPI has entered into agreements to purchase the Edwardes Lake Hotel for $28 million and is nearing completion on a second transaction
- HPI will also make a payment of $38.8 million to Queensland Venue Company to modify leases and standardise lease agreements across its portfolio
- The group will undertake a placement, fully underwritten by JP Morgan and E&P to raise $50 million to partially fund the acquisitions
- HPI will also undertake a non-underwritten security purchase plan for eligible security holders to raise up to an additional $10 million
- Shares in HPI are sitting at $3.54 in a trading halt
Hotel Property Investments (HPI) has entered into agreements to purchase the Edwardes Lake Hotel for $28 million and is nearing completion on a second transaction, which is estimated to cost $7.9 million.
The Edwardes Lake Hotel purchase price represents a five per cent yield and comes with a long-term, triple net lease with fixed rental reviews of 2.5 per cent.
The acquisitions are set to tip the company’s investment portfolio to more than $1 billion in value across 59 properties with the weighted average lease expiry (WALE) increasing to 11.3 years.
HPI will also make a payment of $38.8 million to major tenant Queensland Venue Company to modify leases and standardise lease agreements across its portfolio, in exchange for increased rent.
HPI will gain $1.7 million in incremental rental income as a result of the lease harmonisation.
The group will undertake a placement, fully underwritten by JP Morgan and E&P to raise $50 million to partially fund the acquisitions and transaction costs alongside existing debt facilities.
The placement will be issued at a fixed price of $3.40 per security, a four per cent discount on the last closing price.
New securities issued as part of the placement will have the same ranking as current HPI securities and will be eligible for distribution for the six months ending December 31, 2021.
HPI will also undertake a non-underwritten security purchase plan for eligible security holders to raise up to an additional $10 million, however HPI may raise the amount.
Eligible security holders in Australia and New Zealand will be able to subscribe for up to $30,000 in additional securities at the issue price of $3.40 per security.
HPI CEO Don Smith said Edwardes Lake Hotel is a well-known pub located 12km from the Melbourne CBD on a large site of approximately 49,000sqm.
“The property has a 19.4 year WALE, a triple net lease structure and favourable 2.5% fixed rental reviews which is consistent with our stated strategy of acquiring high quality properties in attractive markets,” he said.
“We are also pleased to have agreed terms with QVC to harmonise lease structures across our portfolio so that HPI retains gaming entitlements upon lease expiry across almost all of the QVC tenanted properties. This seeks to improve the attractiveness of our venues to both existing and new tenants.”
HPI announced an FY22 dividend forecast of 20.5 cents per security, including the impact of the acquisitions and placement, barring any unanticipated occurrences and no substantial change in market circumstances.
The property was sold by JLL’s John Musca, Will Connolly and Stuart Taylor, as well as Cropley Commercial’s Steve Cropley and George Iliopulos.
Shares in HPI are sitting at $3.54 in a trading halt.
