HPI hotel acquisition and SPP
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Hotel Property Investments (HPI) is acquiring another hotel leased to Coles: the Beenleigh Tavern in Eagleby, Brisbane. The price tag of $9.9m offers an initial yield of 7.9% and there are 12 years remaining on the lease. The lease grants HPI annual rent increases based on the CPI (up to a maximum of 3%), with other terms being similar to those of HPI's other properties leased to Coles (see HPI: beer we go again from 5 Mar 14 (Buy - $2.00)).
HPI is funding the acquisition with a $25m institutional placement priced at $2.27 per share (already completed) and is considering increasing its loan facility by up to $50m to increase the pace of acquisitions. A Security Purchase Plan (SPP) will also allow shareholders on the register at the close of trading on 8 October 2014 to apply for up to $15,000 of additional shares. The maximum amount raised under the SPP will be $5m.
We'll explain whether it's worth participating once we receive further details. Until then, with the share price down slightly since HPI downgraded to Hold on 19 Aug 14 (Hold - $2.35), we're switching to UNDER REVIEW.
Note: The model Income Portfolio owns shares in HPI.
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