Thesis (MBA)--Stellenbosch University, 2005. / ENGLISH ABSTRACT: This study explores the feasibility of establishing a diversified hotel property fund
(DHPF) on the Johannesburg Stock Exchange. To be launched in 2005/2006, the
proposed unit trust fund is made up of a diversified portfolio of hotels located throughout
South Africa. Research suggests that Hotel Property Funds have traditionally been the
most volatile of Real Estate Investment Trusts (REITs) with their share value largely
dependent on hotel revenue. However, investing in HPFs and REITs have numerous
advantages such as their stipulated 90% dividend-payout ratio, steady stream of cash flow
and zero corporate income taxes.
The Property Unit Trust sector in South Africa in 2003 realised annualised rates of
returns of 39%, and furthermore, the economic outlook and hotel industry sector show
promising signs with economic growth rates for 2004 and 2005 reaching 4% and 5%
respectively. This study thus considers whether a hotel property fund will succeed in
South Africa and what returns investors can expect.
By drawing on empirical and primary research and lessons learnt from international best
practices this ground-breaking report identifies and analyses key performance variables
of HPFs and REITs and applies them to a South African context. These variables
include; capital structure, investment strategy, risk and return, Net Asset Value (NA V)
and initial public offerings (IPO's).
The report establishes that there is no optimal capital structure for REITs and only when
the market reacts to the issuance of debt can one tell if the REIT is favourably structured
or not. Concerning investment strategy, investors are in general, often lured to a
diversified portfolio, however this report suggests that there is no optimal strategy for
investing in REITs. In addition, over a medium to long term, REIT performance is
strong, while over the short term performance is varied impacting on investor strategy.
In assessing risk and return it was concluded that including REIT shares in an already
diversified portfolio, the maximum expected return for each given level of risk is
increased, and the level of risk for each level of expected return is reduced. Furthennore,
the performance of RElTs is not necessarily detennined by size or Net Asset Value and
thus small and large REITs can offer investors similar returns. Finally, initial-day returns
for industry lnitial Public Offerings (lPO's) easily outperfonn REIT lPO's.
Similarly to RElTs, there are numerous advantages to Hotel REITs which include,
unlocking and redeployment of capital, investment spread and risk reduction and the
provision of synergies between counter cyclical performing properties. However,
empirical research indicates that Hotel REITs prove to be the most volatile of REIT
sectors. Hotel REITs differ enonnously from their parent group in terms of their revenue
& earnings which are more diverse in source and are generated from short-tenn leases.
As such. Hotel REITs are also considered to be more management intensive. As with
REITs there is no evidence to suggest an optimal capital structure and with the envisaged
50% debt ratio, the DHPF could be considered to be following international best
practices. Several drawbacks with Hotel REITs include the lowest dividend yield among
all RElT sectors, high volatility in income earnings, sensitivity to upswings and
downturns in the tourism market, large capital investments and fixed operating expenses
for staff and infrastructure.
However despite these obstacles and in answer to the research problem, the prospects of
the DHPF succeeding in South Africa are very high indeed. The REIT and Hotel REIT
markets have proved successful throughout major capital markets, providing investors
with a multitude of benefits. South Africa's economic and tourism climate is very
favourable. The Property Unit Trust (PUT) sector has performed immensely well and
investors can expect a healthy return which, as shown, is considerably higher than other
investments. Finally, the fund is being spearheaded by a high calibre DHPF management
team, which is key to the listing and management of the fund. / AFRIKAANSE OPSOMMING: Hierdie studie ondersoek die moontlikheid om 'n Diverse Hotel Eiendomsfonds (DHEF)
op die Johannesburgse Aandelebeurs te loods. Die huidige aanvangsfase sal in 2005/2006
wees, en sal bestaan uit 'n portfolio van verskillende hotelle wat reg oor Suid-Afrika
versprei is. Die navorsing toon dat hoteleiendomsfondse tradisioneel die mees
veranderlikste van die Eiendoms Beleggings Trusts (EBT) was en dat die aandeel waarde
hoogs afhanklik is van die hotel se inkomste. Nieteenstaande, het investering in DHEFs
en EBTs 'n verskeidenheid van voordele soos die voorgeskrewe 90% dividend
uitbetalingspersentasie, 'n bestendige kontantvloei en geen korporatiewe
inkomstebelasting nie.
Die eiendomsbeleggingsfondse sektor in Suid-Afrika het gedurende 2003 'n jaarlikse
groei van 39% getoon, en verder beloof die ekonomiese uitkyk in die hotel bedryf om
tussen 4% en 5% gedurende 2004 en 2005 onderskeidelik te groei. Gegewe die inligting,
is die vraag dus of 'n hoteleiendomsfonds sukses kan behaal in Suid-Afrika en watter
opbrengs beleggers kan verwag.
Deur na primere empiriese navorsing, sowel as lesse wat geleer is deur beste
internasionale praktyke, te bestudeer, identifiseer hierdie verslag sleutel prestasie
veranderlikes van EBTs en DHEFs plaas dit in konteks van Suid-Afrika. Hierdie
veranderlikes sluit in: kapitaaistruktuur, beleggingsstrategie, risiko en terugkeer, Bruto
Bate Waarde (Net Assest Value) (BBW) sowel as aanvanklike openbare aanbod (Initial
Public Offering) (AOA).
Daar is bevind dat daar geen optimale kapitaalstruktuur vir DHEFs bereken kan word nie.
Verder word aangetoon dat daar slegs bepaal kan word of EBTs se struktuur voordelig is
wanneer die mark reageer op nuwe skuld wat aangegaan is. Wat beleggingsstrategie
betref, is beleggers oor die algemeen meer aangetrokke tot 'n diverse portefeulje van
beleggings. Hierdie verslag bevind egter dat daar geen optimale strategie is om in EBTs
te bele nie. Daar word verder bevind dat medium- tot langtermyn opbrengste goed
vertoon, terwyl prestasie oor die korttermyn wisselvallig is wat gevolglik 'n invloed op
beleggers se strategie het.
In waardering van risiko en wins, is dit bepaal dat die insluiting van EBT aandele in 'n
diverse portfeulje, die maksimum verwagte opbrengs vir elke vlak van risiko verhoog en
dat die vlak van fisiko vir elke vlak van die verwagte opbrengs verlaag word.
Verder is daar bevind dat die prestasie van EBTs nie noodwendig bepaal word deur
batewaarde of -groote nie en klein EBTs kan beleggers vergelykende opbrengste bied.
Eerstedag opbrengs vir industriele AOAs presteer beter as die van EBTs.
Soortgelyk aan EBTs is daar verskeie voordele aan hotel EBTs wat die ontsluiting en
herontplooiing van kapitaal, beleggingsverspreiding en risikoverlaging insluit. Empiriese
navorsing dui aan dat hotel EBT's die mees onstabiele van die EBT sektor is. Hotel
EBT's verskil wesenlik van ander EBTs in terme van opbrengs en verdienste wat meer
divers is in oorsprong en gegenereer word deur korttermyn huurkontrakte. Hotel EBTs
word ook gesien as meer bestuursintensief. Net soos met EBTs is daar geen bewyse dat
daar 'n optimale kapitaalstruktuur bestaan nie en met die verwagte 50% skuld
verhouding, volg DHEF wereldwye beste praktyk. Daar is verskeie nadele aan hotel
EBTs, insluitend die laagste dividenduitkeer onder alle EBT sektore, hoe vlakke van
onstabiliteit in verdienste, sensitiwiteit vir opswaai en afloop in die toerismemark, groot
kapitaalbelegging en hoe vaste operasionele uitgawes op werknemers en infrastruktuur.
Die gevolgtrekking is dat ten spyte van negatiewe faktore, die vooruitsig dat DHEF in
Suid-Afrika sal slaag, hoog is. Die EBT en hotel EBT mark het bewys dat dit suksesvol
is in talle ander groot kapitaalmarkte wat beleggers met 'n verskeidenheid van voordele
kan voorsien. Suid-Afrika se ekonomiese- en toerismevooruitsig is baie positief. Die
Eiendoms Eenheids Fonds (EEF) sektor het goed vertoon en beleggers kan 'n gesonde
opbrengs verwag wat, soos aangedui word, aansienlik hoer is as ander beleggings. Die
fonds word gedryf deur 'n hoe kaliber bestuurspan wat krities is tot die notering en die
bestuur van fondse.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/50491 |
| Date | 03 1900 |
| Creators | West, Matt |
| Contributors | Smith, Johann Du Plessis, Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | Unknown |
| Type | Thesis |
| Format | 69 p. : ill. |
| Rights | Stellenbosch University |
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