Hotel Property Investments pitches EV chargers and fast food to fend off takeover
Hotel Property Investments (HPI) is pitching EV charging stations and embedded electricity networks, hotel accommodation, and fast food outlets to investors to help fend off a takeover offer from property giant Charter Hall.
HPI has also mooted initiatives to exploit the under-utilised land around its $1.3 billion portfolio.
The company has already rejected two take-over offers, including a “best and final” offer of $3.85 per share from Charter Hall’s listed retail fund and industry super fund Hostplus.
The offer valued the company at $757 million.
HPI managing director John White noted only 41 percent of the land across HPI’s portfolio is currently utilised, presenting opportunities for “densification” through a partnership with a “specialist partner.” Among HPI’s assets are notable pubs listed in The Australian Financial Review’s top 50 venues, including Brisbane’s Regatta and Crown hotels, and the Gregory Hills Hotel near Campbelltown in Sydney's west. Most of HPI’s pubs are leased long-term to the Queensland Venue Company, a joint venture between Coles Group and the Australian Venue Co.
The ongoing three-month takeover bid has reached an impasse, with Charter Hall twice extending its offer acceptance deadline in a bid to secure more support.
Meanwhile, HPI’s directors are hoping for a competing bid after calling Charter Hall’s offer “opportunistic” and arguing it “materially undervalues” HPI’s assets.
HPI’s main contention is that Charter Hall’s $3.85 per share offer, after accounting for recently paid distributions, effectively drops to $3.785, a 6 percent discount to HPI’s net asset value of $4.01 per share. Charter Hall, one of Australia’s largest freehold pub owners, contends its offer is attractive, highlighting it as an 18 percent premium over HPI’s last closing share price before Charter Hall’s acquisition of a 14.8 percent interest in March. The offer also implies a high valuation multiple of over 19 times HPI’s projected earnings for FY25.
To counter the argument about the discount to net asset value, Charter Hall points to a premium against HPI’s “adjusted” NAV, which considers “recurring corporate overheads” and would reduce net tangible assets by 41¢ per share. Charter Hall declined to comment when approached.
Analysts who spoke with the Financial Review support HPI’s stance, noting that the offer undervalues a unique asset with appealing lease structures—including long leases, a 4 percent annual rent increase, solid land values, and potential for site densification over time.
“The other attractive things are the gaming and liquor licences, which revert to the landlord at expiry of the lease, and which have tangible value as well,” said an analyst, who declined to be identified.
A notice filed on November 8 reveals that Charter Hall/Hostplus now holds 24.68 percent of HPI securities, with acceptance instructions for an additional 1.21 percent, bringing total control to 25.89 percent. This remains below the 50.1 percent threshold required to make the offer unconditional, which would enable Charter Hall to assume board control and consider delisting HPI.
At Wednesday’s AGM, HPI directors updated investors on plans for site densification, a venue enhancement program, strategic acquisitions with AVC, capital recycling through selling non-core assets, “efficient” equity-raising methods, and optimizing debt costs.
The Charter Hall-HPI takeover is a standout in the REIT sector, where asset values may be stabilizing. Pubs, with their resilient, cash-generating models, continue to attract corporate investors. Amid the bid for HPI, Charter Hall has also acquired individual properties, including the Cecil Hotel on the Gold Coast for $14.25 million and Harlow Bar in Melbourne.
Meanwhile, a group led by Sydney Roosters chairman Nick Politis has made a $77 million cash offer for Eumundi Group, another ASX-listed pub owner. Unlike the HPI bid, Eumundi’s offer, at an 11.5 percent premium to NAV, has been endorsed by its board.
Some HPI shareholders, however, oppose Charter Hall’s offer due to its discount to NTA, seeing growth potential in developing surplus land on pub sites, aligning with HPI’s strategy. Shareholders have until November 26 to respond unless Charter Hall extends the offer.
Jonathan Jackson, 14th November 2024
