Charter Hall and Hostplus made one final increased bid to takeover Hotel Property Investments (HPI), which was rejected by the HPI board.
Late last week, Charter Hall Retail REIT (ASX: CQR) and Hostplus made one final bid for the off-market takeover of HPI, increasing its offer from $3.65 to $3.85 cash per HPI security. The improved offer price came with the caveat that it was the best and final offer that would be made, and would be valid until 4 November.
Within days of the new bid being announced, the HPI board unanimously recommended to securityholders to reject the bid from CQR and Hostplus.
In a letter to securityholders, HPI Chair Giselle Collins wrote: “The Board has unanimously concluded that the Revised Offer is not compelling, materially undervalues HPI’s portfolio and does not compensate HPI Securityholders for the value of our unique portfolio, or the strength and outlook for our business.”
The HPI portfolio comprises the freeholds of 59 pub assets, valued at $1.28 billion as at 30 June 2024. HPI’s major tenant is Australian Venue Co. (AVC). In the letter to HPI securityholders, Collins pointed to the relationship with AVC, and the underlying organic growth opportunities and a strong acquisition pipeline. Collins stated that the partnership had seen HPI grow its investment portfolio, as well as increase the portfolio’s value by investing in existing asset upgrades.
Paul Waterson, CEO of AVC, reiterated the productive and profitable nature of the partnership with HPI in these pub assets.
“We have a strong history in partnering with Hotel Property Investments in both acquisitions and developments. As partners we have a systematised and well-defined process for undertaking due diligence on hotels that are available for sale on a freehold going concern basis that has resulted in a substantial growth in our respective portfolios.
“The seamless nature of this partnership makes Hotel Property Investments a preferred partner for Australian Venue Co when assessing acquisition opportunities. From a venue development perspective we have had substantial success through our venue refurbishment programme. We have undertaken major refurbishments and land intensification projects across 23 HPI venues to date. In aggregate those venues have delivered an EBITDAR uplift of 73%. We continue to plan for further investments across a range of venues in the HPI portfolio.”
The HPI Board called the timing of the revised CQR/Hostplus offer “opportunistic”, with the outlook for REITs improving due to a strengthening view that global official interest rates are expected to reduce, and the appetite for long-weighted average lease expiry assets expected to increase as the interest rate cycle peaks and inflation is expected to fall.
As the only “pure play” pub REIT on the S&P/ASX 300, the Board suggested the business was in a strong position and delivering reliable and growing returns.
“The HPI Board believes that its existing portfolio and strategy offers significantly greater value to HPI securityholders,” stated Collins.
HPI’s new CEO and managing director John White is expected to elaborate further on the company’s strategy at its AGM on 13 November.
