Johannesburg - Property investment company Redefine International, soon to be listed on the JSE, has just bought five Holiday Inn hotels in London for R1.3bn.
The acquisition is expected to give investors good exposure to the lucrative London hotel market.
The hotels, with a total of 616 rooms, will be operated by Redefine International Hotels with Helder Pereira, former Southern Sun Group MD, as chief executive.
Redefine International is a global property investment company whose majority shareholder is the South African-listed property group Redefine Properties.
At the end of August Redefine International will list on the JSE, offering South African investors the opportunity to gain exposure to favourable foreign property markets.
In London last week Pereira told Sake24 that the London hotel market was unique compared with that in the rest of England.
He said London attracted the largest number of tourists in Europe. The lowest hotel occupancy rate in London over the past five years has consistently been above 80%.
He said it was difficult to get approval for new hotels. Banks were also hesitant to finance them, which was good news for existing hotels.
The advantage of the acquisitions is that these enterprises have well-established cash flows, and the prices of hotel rooms are based on demand and supply – the perfect economic model, he said.
The hotels are the Royal Docks Holiday Inn Express, the Limehouse Holiday Inn Express, the Southwark Holiday Inn Express, the Park Royal Holiday Inn Express and the Brentford Lock Holiday Inn.
The portfolio's average occupancy rate is 88%, and that of the four-star Brentford Lock hotel with its 134 rooms is currently above 85%.
This hotel, about 9.7km west of central London, targets the corporate sector during the week and the leisure market over weekends. Rooms cost between £149 (about R1 704) and £189 (about R2 162) a night.
Redefine International CEO Mike Watters said the group is planning to expand its hotel portfolio.
He added that the hotel component could become too big for Redefine International, and in five years or so could be listed as a separate entity.
The hotel portfolio is expected to yield 11% in 2011, 12% in 2012 and 13.6% in 2013.
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