Hospitality Property Fund said Tuesday that its subsidiary HPF Properties is to acquire the Protea Hotel Edward from Protea Hospitality Group and its subsidiary Swanvest 258 for R110.4 million.

The 4 star hotel is located at 149 O.R. Tambo Parade, approximately 50 metres from Durban's main beach and one kilometre from Durban's city centre.

The acquisition is in line with HPF's objective of growing its investment portfolio in a controlled manner through the addition of quality assets which will further diversify the portfolio and which have the potential to enhance unitholder returns, it said.

The hotel will be acquired as a going concern and the consideration will be settled either by debt financing or by a vendor placing of the Fund's units in terms of the specific authority granted by shareholders at the Fund's AGM last year, whereby a number of unissued "A" and "B" shared were placed under the control of the directors to allot and issue.

The acquisition will be effective from transfer of the hotel to the purchaser which is expected to be during May 2010, subject to fulfilment of certain conditions.

An independent valuation of the Hotel was conducted by JHI Real Estate, who attributed a value of R114 million to the hotel.

The consideration represents a 3% discount to the open market value.

Protea will continue to operate the hotel in terms of a lease agreement which has been entered into with Protea comprising an approximately 50% fixed lease rental with the remaining 50% being a variable rental dependent on operational performance.

The fixed lease portion is set to escalate annually at CPI.

The financial effects of the acquisition are not significant, the company said.

Source: I-Net Bridge