# HPI - Hotel Property Investments



## System (8 December 2013)

Hotel Property Investments owns a portfolio of 48 properties. There are 41 pubs, 7 detached bottle shops and other on-site specialty stores in the portfolio. The properties are located throughout Queensland and South Australia and have been independently valued at $481.5m as at 1 October 2013.

http://www.hpitrust.com.au


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## peaceofmind (10 December 2013)

My first post on ASF. Thought i'd compare this to ALE property group(LEP) which is the only other pub property trust on the ASX. LEP has a NTA of around $1.90, same as HPI, but trades at a massive 40%+ premium to NTA, currently $2.80. 

HPI owns about 41 pubs, 7 bottleshops and some specialty stores, leased to Coles(Wesfarmers). Compare it to LEP which has about 90 pubs by Woolies, which is about double the size. 

LEP has been the REIT sector's darling in the last decade. In the past year significant share price growth has been seen from low $2 to currently $2.80, on top of that distributions, so it has been a very good ride for LEP.

Comparing the FY15 distribution yields, HPI looks solid value.

LEP's FY15 distribution yield @ $2.80 is ~5.8% at current price of $2.80.  

HPI's FY15 distribution yield @ $2.07(last sale, just listed today) is 7.7% as in the PDS. Which is significantly above LEP. 

Lease terms wise, LEP admittedly has very long leases of about 20 years and various staged increases at 2018 and 2028 dates, but HPI is no snooze with a WALE of 9 years with 10 year options on top of that, with 4% approx rental growth per annum. Tenant strength is about the same. So it compares quite favourably, esp with the 4% rental increases which is about the best in the sector.

Of course i do not expect it to be as good as LEP. But it has some upside compared to LEP as there is a huge discount above. Pubs, gaming, and food are fairly safe reliable earners.


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## coolcup (10 December 2013)

peaceofmind said:


> My first post on ASF. Thought i'd compare this to ALE property group(LEP) which is the only other pub property trust on the ASX. LEP has a NTA of around $1.90, same as HPI, but trades at a massive 40%+ premium to NTA, currently $2.80.
> 
> HPI owns about 41 pubs, 7 bottleshops and some specialty stores, leased to Coles(Wesfarmers). Compare it to LEP which has about 90 pubs by Woolies, which is about double the size.
> 
> ...




There is usually a reason why one stock trades at a discount to others which appear on face value to be a close comparable. Here are some of the reasons why LEP should trade at a premium to HPI. 

1. Track record of performance
2. Lease term on LEP assets much higher than HPI
3. LEP leases are triple net whereas HPI is double net only
4. Coles is only really in the pub business in qld and sa. Woollies has a much larger pub business nationally
5. LEP leases are subject to market reviews every ten years or so whereas HPI has limited ability to revert rents to market. Historically market rents for good pubs have grown well in excess of 4% pa
6. LEP,s funding profile is significantly more diversified and of longer duration than HPI
7. LEPs funding cost is predominantly hedged whereas HPI has a significant amount of floating rate debt


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## skc (10 December 2013)

coolcup said:


> There is usually a reason why one stock trades at a discount to others which appear on face value to be a close comparable. Here are some of the reasons why LEP should trade at a premium to HPI.






peaceofmind said:


> My first post on ASF. Thought i'd compare this to ALE property group(LEP) which is the only other pub property trust on the ASX. LEP has a NTA of around $1.90, same as HPI, but trades at a massive 40%+ premium to NTA, currently $2.80.




Great posts you two. Thanks for sharing your thoughts. I think they will be great to trade as a pair.


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## peaceofmind (11 December 2013)

coolcup said:


> Here are some of the reasons why LEP should trade at a premium to HPI.
> 
> 2. Lease term on LEP assets much higher than HPI
> 3. LEP leases are triple net whereas HPI is double net only
> 5. LEP leases are subject to market reviews every ten years or so whereas HPI has limited ability to revert rents to market. Historically market rents for good pubs have grown well in excess of 4% pa




cheers coolcup. re lease terms, even though LEP has triple net versus HPI double net, the market reversions for LEP occur in 2018 and 2028, which are far from investors minds, and don't impact valuation of a company too much as they are too far out.As per DCF valuation, most of the value is the first 5 years. Esp the 2028 that is very far to make an impact on value.

Re HPI current lease term is 9 years WALE, with options for 5-10 years. strong chance of renewal of lease as gaming is a great business and money maker for Coles, and the 4% increases per annum continue which is still very strong. so it has bond like qualities, with some growth that bonds dont have.


At $2 a share it offers 8% yield on 2015, so under $2 could be good value for long termers. If it does a bolt on acquisition or two then it could offer additional upside.


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## coolcup (11 December 2013)

peaceofmind said:


> Re HPI current lease term is 9 years WALE, with options for 5-10 years. strong chance of renewal of lease as gaming is a great business and money maker for Coles, and the 4% increases per annum continue which is still very strong. so it has bond like qualities, with some growth that bonds dont have.




In QLD the laws mean that for a company to hold a liquor license, they must operate a pub. This is the real reason why Coles is in the pub industry. This is also why Coles does not have a significant pub business outside of QLD. If those laws change it could be a game changer for Coles' participation in the pub sector. While there is no evidence to suggest a change is imminent, it is a significant risk factor for HPI vs LEP where WOW is operating pubs around the country as a business in their own right as opposed to a pre-requisite for obtaining a liquor license.


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## peaceofmind (11 December 2013)

coolcup said:


> If those laws change it could be a game changer for Coles' participation in the pub sector.




thanks for disclosing that risk. whilst everything has risks, i believe the above is not on the agenda now.  right now investors can focus on yield. Most of the income also comes from the gaming side, more than the alcohol or food side.


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## peaceofmind (11 December 2013)

LEP is due for a correction. trading at a fair premium with 6.2% FY2015 yield forecast @ 2.69. it is the only REIT not to undergo a significant correction.


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## peaceofmind (13 December 2013)

peaceofmind said:


> LEP is due for a correction. trading at a fair premium with 6.2% FY2015 yield forecast @ 2.69. it is the only REIT not to undergo a significant correction.




getting hammered following the listing. good for those looking for safer yield with nominal built in growth of 3-4%. bad for instos and broker firm holders of IPO who have lost a fair chunk as the listed REIT sector has turned a fair degree south since the bookbuild.

Long term support is at $1.80 and thats where i expect it to stabilise.


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## ricee007 (14 December 2013)

peaceofmind said:


> Long term support is at $1.80 and thats where i expect it to stabilise.



Sorry, are you talking about LEP that is currently $2.67, with a 12 month low of $2.25 and that has only gone up this entire year.....

Or, are you talking about HPI that has never gone below $1.93, and saying it has long term support at $1.80?


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## peaceofmind (14 December 2013)

ricee007 said:


> Sorry, are you talking about LEP that is currently $2.67, with a 12 month low of $2.25 and that has only gone up this entire year.....
> 
> Or, are you talking about HPI that has never gone below $1.93, and saying it has long term support at $1.80?




hi me talking about HPI. currently REIT sector definitely out of favour. looks like potential support is 1.80 region next. no demand at the moment but could be at 1.70s or 1.80s next stop. retail holders of the IPO @ 2.10 will continually sell bringing pressure on the price, due to stop losses being triggered.


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## ricee007 (15 December 2013)

peaceofmind said:


> hi me talking about HPI. currently REIT sector definitely out of favour. looks like potential support is 1.80 region next. no demand at the moment but could be at 1.70s or 1.80s next stop. retail holders of the IPO @ 2.10 will continually sell bringing pressure on the price, due to stop losses being triggered.



Cool, so, when you said


> Long term support is at $1.80



 you were talking about HPI... which, again, has never, ever, in the history of the world, been below $1.93. Has been trading for LESS than one week.......

and has LONG term SUPPORT at $1.80!?

When the "buy orders" are not even down to $1.80?!


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## peaceofmind (15 December 2013)

yep, i think it will find buyers in the 1.70 to 1.80 region for HPI
its losing an average of 2-3% a day, it will take a few days to get there.


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## coolcup (16 December 2013)

peaceofmind said:


> yep, i think it will find buyers in the 1.70 to 1.80 region for HPI
> its losing an average of 2-3% a day, it will take a few days to get there.




Hi peaceofmind,

I think what ricee007 is getting at is that "support" is generally a technical term which is based on the trading history of a stock. Given HPI has never traded as low as you suggest it does not fit the technical terminology that there is "support" at that level. I suspect where you are coming from is that you think there is "valuation support" at around the $1.70-$1.80 level. Hope this clears up the line of questioning.

Cheers


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## peaceofmind (16 December 2013)

should be in the 1.80s shortly. All 5 days post listing are in the red. This is one of the worst IPOs of the year. Setting a new post GFC record, most consecutive down days for an IPO with at least $200m market cap.

the NAV of 1.90 seems a reasonable guide at this point.

On the plus side, fund manager notices are starting to be filed. investors mutual with 11% of the stock at 2.10. So it must be more interesting at lower prices. when the sector recovers they will support the stock.


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## Cam019 (24 March 2019)




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## divs4ever (16 December 2021)

Hotel Property Investments Limited (“HPI”) (ASX Code: HPI)
HPI is pleased to announce the following transactions:
• Acquisition of South Australian pub portfolio of seven properties for $66.1 million
(excluding costs) at a cap rate of 5.4%;
• A $30.4 million Portfolio Capex program and associated rentalisation agreed with
our largest tenant across the existing Queensland Venue Company (“QVC”)
portfolio;
• Sale of the Acacia Ridge Hotel for $25 million (excluding costs) at a cap rate of
4.4%;
• Completion of a $3.8 million development at Ferry Road Tavern, Gold Coast; and
• An increase in debt facilities to preserve our ability to continue to recycle and
acquire properties to expand and diversify the portfolio.
Following completion of these transactions HPI’s Total Assets are expected to exceed $1.1 billion.
Acquisition of South Australian pub portfolio for $66.1 million (excluding costs)
HPI confirms that agreement has been reached to acquire a portfolio of seven pubs (and ancillary
retail) in South Australia from the Saturno Group, in conjunction with Australian Venue Company
(“AVC”) who has acquired the operating businesses on new 15 year leases with two, fifteen year
extension options.
The portfolio includes:
• The Unley – Parkside, SA
• The Mile End – Mile End, SA
• Avenues Café Bar – Adelaide, SA
• The West End Tavern – Adelaide, SA
• Mick O’Shea’s Hotel – Hackham, SA
• The Duck Inn – Coromandel Valley, SA
• Victoria Hotel - Strathalbyn, SA
The total acquisition price is $66.1 million (excluding costs) and the weighted average passing yield
is 5.4%. Settlement is expected in February 2022.
The acquisition adds to HPI’s current portfolio of three assets in South Australia.
$30.4 million Portfolio Capex program
HPI also confirms that agreement has been reached to invest a further $30.4 million into a
significant capex program across our portfolio at a rentalised weighted average yield of 5.9%.
Under the agreement, HPI will provide QVC with funding for major renovation works at 12 venues
with an upfront payment in December 2021. The additional rental income will commence from
the payment date and will escalate in future years in accordance with the terms of the individual
leases.
Sale of the Acacia Ridge Hotel for $25 million (excluding costs)
HPI have entered into an unconditional contract for the sale of the Acacia Ridge Hotel for $25 million
(4.44% yield on the current passing rent). Settlement is expected in February 2022.
The Acacia Ridge Hotel was acquired by HPI in January 2020 for $20 million with an initial yield of
5.5%.
The proceeds of the sale will be utilised to partly fund the acquisition of the South Australian
portfolio.
$3.8 million development at Ferry Road Tavern, Gold Coast
HPI has recently completed a $3.8 million retail development at Ferry Road Tavern which is fully
leased with a Year 1 forecast return of 8% on investment.
Increase in debt facilities
In conjunction with the transactions noted above, HPI has increased available bank debt facilities
by $100 million maturing in August 2024, which will be partly used to fund the transactions.
FY22 distribution guidance
HPI maintains current FY22 guidance of 20.5 cents per security, barring any unforeseen events and
no material change in market conditions.
This ASX announcement was authorised by the Hotel Property Investments Limited Board.

courtesy of Bell Direct
================================================================================================

DYOR

 i hold HPI


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