The Fund declared a distribution per A-linked unit of 49.63c in line with the prospectus forecast while its distribution per B-linked unit of 68.72c exceeded the prospectus forecast by 15,9%.

Hospitality’s dual linked unit structure provides a differentiated risk / return profile for investors.  The ‘A’ linked units, being the more secure have a preferential claim to distributions but with growth fixed at 5% per annum.  The ‘B’ linked unit, being the more volatile, receive the balance of the distribution and in a growth market are likely to outperform the ‘A’s.

Gerald Nelson, CEO of Hospitality Property Fund, attributes the positive performance predominantly to an increase in rental income received from the variable rental structures.

“The current trading climate in the hospitality industry is buoyant and is characterised by a substantial growth in demand for hotel rooms. This, coupled with the continued focus on improving operating efficiencies within the hotel portfolio contributed to the strong performance,” says Nelson.

Nelson notes that Hospitality will continue to assess potential acquisitions and implement development and refurbishment opportunities within the existing portfolio.
 
“Given the continued favourable trading climate in the hospitality and property industries and the resulting growth in rental income, we are confident that the distributable earnings will be as forecast for A-linked units and between 15% and 20% ahead of forecast per B-linked unit can be expected for the year ending 30 June 2007,” says Nelson.
 
Hospitality’s portfolio comprises interests in 16 hotel and resort properties. Throughout the trading period all properties in the portfolio were fully let. The average lease period is eight-and-a-half years, with the first lease expiring within two years.

Hospitality’s acquisitions of Protea Victoria Junction Hotel, Richards Hotel, Bayshore Inn and Imperial Hotel were concluded during the period for a total purchase consideration of R204 million at an estimated combined forward yield of 12,2%. The Protea Victoria Junction Hotel, Richards Hotel and the Bayshore Inn were transferred during February 2007, whilst the transfer of the Imperial Hotel is expected during March 2007.

The aforementioned acquisitions will result in a 21,2% increase in Hospitality’s current number of rooms across the portfolio from 2 131 to 2 583 and in a 21,07% increase in its market capitalisation to Rbn1,2.

The units issued in respect of the acquisitions were renounced in favour of Nobuntu Investments II (Pty) Ltd, a majority black-owned company. Following the conclusion of the transaction, Hospitality's BEE ownership will equate to 30,4% of units in issue.

“Hospitality subscribes to the provisions of the Property Sector Transformation

Charter and these acquisitions formed part of the implementation of Hospitality's overall BEE initiative and its objective of introducing meaningful participation of historically disadvantaged South Africans to the listed property sector,” explains Nelson.

Hospitality’s weighted average cost of debt for the period was 9,2% and the effective gearing ratio was 25,2%. The Fund currently has approved facilities R192 million available for future investment opportunities.

Distributions will be paid to linked unitholders on Monday 19 March 2007.