Acquisition of Tsogo s Casino Portfolio Investor Presentation. October 2018

Transcription

1 Acquisition of Tsogo s Casino Portfolio Investor Presentation October 2018

2 Disclaimer Certain statements in this document may constitute forward looking statements. Such forward looking statements reflect the company s beliefs and expectations and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Hospitality Property Fund Limited and its subsidiaries to be materially different from the future results, performance or achievements expressed or implied by such forward looking statements. The company undertakes no obligation to update publicly or release any revisions to these forward looking statements to reflect events or circumstances after the date of this document, or to reflect the occurrence of anticipated events. Past performance of the company cannot be relied on as a guide to future performance. Forward-looking statements speak only as at the date of this document. You are cautioned not to place any undue reliance on such forward looking statements. Save as expressly stated, no statement in this document is intended to be a profit forecast. This document is being supplied to you for informational purposes only. This document is not a prospectus or an offer or invitation or inducement to subscribe for or purchase any securities, and nothing contained herein shall form the basis of any contract or commitment whatsoever. This document does not constitute a recommendation regarding the securities of the company. No representation or warranty, express or implied, is given by the company, its subsidiaries or any of their respective directors, officers, employees and affiliates or any other person as to the fairness, accuracy or completeness of the information (including data obtained from external sources) or opinions contained in this document, nor have they independently verified such information, and any reliance you place thereon will be at your sole risk. Without prejudice to the foregoing, no liability whatsoever for any loss howsoever arising, directly or indirectly, from any use of information contained in this document, or otherwise arising in connection therewith is accepted by any such person in relation to such information. None of the data in this document has been reviewed or reported on by the group s auditors and no guarantee or warranty as to the data s accuracy, expressed or implied, is given. 2

3 Table of Contents 1. Proposed Casino Acquisition 2. Financials 3. Contact Details Appendices A. Casino Precincts B. Index Inclusion C. Existing Hotel Portfolio D. Rental Aggregation Agreement 3

4 1. Proposed Casino Acquisition 4

5 Transaction Overview Overview Hospitality will acquire 7 premium casino precincts (Montecasino; Gold Reef City; Silverstar; Suncoast; Blackrock; Emnotweni; and The Ridge) from Tsogo Sun Holdings Limited ( TSH ) Hospitality will lease the casino precincts to TSH under triple-net leases 20 year minimum lease period Annual escalations at CPI Rental review conducted on 1 Apr 2025 and every 5 years thereafter with reference to the underlying casino precincts EBITDAR The acquisition will be effected through Hospitality s wholly-owned subsidiary Merway, which will acquire the entire issued share capital of each of Cassava and Listed Investments (which own the casino precincts) from the vendors (various subsidiaries of TSH) Purchase Consideration and Funding Purchase consideration = R23 billion Based on an initial rental of R1.94 billion and an agreed forward yield of 8.45% Assuming a 4.5% increase in the initial rental as of 1 April 2019, being the first escalation date, the yield will increase to approximately 8.81% Funding Equity = R15.0 billion (TSH subscribes for 1.2 billion new Hospitality shares at R12.50 per share) Debt = R8.1 billion (combination of new bank debt and new notes issued under Hospitality s DMTN programme) Unbundling If the transaction is successfully implemented, TSH will distribute its entire shareholding (c.87%) in Hospitality to its shareholders as soon as possible after the effective date Timing 21 Sep 2018: Circular and revised listing particulars made available 23 Oct 2018: General meeting to vote on the transaction 01 Mar 2019: Anticipated effective date 04 Mar 2019: Clean-out dividend paid for the 5 months (1 Oct 2018 to 28 Feb 2019) 01 May 2019: Anticipated unbundling of Hospitality shares by TSH 5

6 Transaction Rationale Triple net leases and no future capex Diversified earnings base (hotels + casino precincts) Increased share liquidity resulting from unbundling and potential re-rating of the Hospitality share price Increased scale and low LTV creating the ability to make future acquisitions No vacancy risk for a minimum of 20 years Stable and predictable income and longterm growth (long term leases with CPI escalations) High quality established casino precincts with long records of performance Index inclusion, with an equity value of c.r22 billion (drives technical demand) Tenant s obligations guaranteed by TSH (Refer to slide 10 for detail on TSH post-transaction) 6

7 Transaction Mechanics TSH undertakes an internal restructuring The casino precincts are packaged into two wholly-owned subsidiaries Listed Investments and Cassava Hospitality subscribes for shares to the value of R23.0 billion in Merway Hospitality uses an intra-day bridge loan to advance the R23.0 billion to Merway Merway acquires the entire issued share capital of Listed Investments and Cassava for R23.0 billion The vendors (various TSH subsidiaries) use the proceeds to: subscribe for shares in Hospitality to the value of R15.0 billion; and settle existing debt of R8.1 billion Hospitality uses the R15.0 billion of new equity and draws on R8.1 billion of new long-term debt facilities to settle the intra-day bridge In preparation for unbundling, the vendors dispose of their Hospitality shares to TSH 7 Listed Investments and Cassava amalgamate into HPF Properties 8 TSH unbundles its Hospitality shares to its shareholders 7

8 Lease Terms Lease type and duration Each casino precinct will be let to TSH in terms of a triple net lease Each head lease is for an initial period enduring to 31 Mar 2023, thereafter the lease may be terminated by either party on 15 years written notice Rent Initial aggregate base rental payable for the seven precincts is R1.94 billion per annum Rental escalates annually at CPI. The first escalation date is 1 Apr 2019 Rental reviews On 1 Apr 2025 and every 5 years thereafter, the rental payable shall be reviewed and re-calculated for the immediately subsequent 5 year period Alterations and/or additions The re-calculated rental shall equal the lesser of the aggregate escalated base rental and 70% (1.4:1 EBITDAR to rent ratio) of the aggregate casino portfolio EBITDAR for the previous year escalated at the escalation rate. Any adjustment will be subject to a 2.5% threshold On the first and second anniversaries of any rental review date, the parties will review the current rental against the aggregate escalated base rental in order to possibly re-set the rental payable upward only (with the aggregate escalated base rental as a maximum) At the cost of TSH Right of first refusal for any material improvements to Hospitality Any earnings stemming from any material improvement(s) shall be included for purposes of calculating casino precinct EBITDAR, regardless of who paid for the improvement(s) Operating plant Ownership remains with TSH until termination of the head lease(s) in question Maintenance Casino precinct and operating plant to be maintained and repaired by TSH for the duration of the lease The standard of maintenance and repair that shall be maintained at all times by TSH is that of an upmarket casino 15 year s written notice post 1 Apr 2023 by either party Termination 5 year s written notice in the event of two consecutive downward rental resets (either entire casino portfolio or specific precinct(s) causing the downward re-sets) TSH has the right to waive a downward re-set to prevent termination if, within the prescribed time, it continues to pay the rental due for the casino precinct for the ensuing year, being the previous year s rental escalated at the relevant escalation rate 8

9 Casino Precincts Overview Montecasino Suncoast Gold Reef City Silverstar Emnotweni The Ridge Blackrock Description Mixed-use entertainment destination incorporating a wide variety of entertainment facilities. The precinct also includes an office component The premier entertainment destination in the Kwa-Zulu Natal province located close to the landmark Moses Mabhida stadium Mixed-use entertainment precinct, which is home to the popular Lyric and Barnyard theatres The precinct is a comprehensive entertainment and conferencing venue which caters to the western Gauteng region Dedicated gaming complex, adjacent to the Riverside Mall shopping centre Prime entertainment destination in the emalahleni area, which is also adjacent to The Highveld Mall Mixed-use precinct which is located in the largest town in Kwa-Zulu Natal, which is also the Northern Natal government hub Location Fourways, GP Durban, KZN Johannesburg, GP Muldersdrift, GP Nelspruit, MP emalahleni, MP Newcastle, KZN Opened Casino licensee TSH TSH TSH TSH TSH TSH TSH Casino tables Casino slots Built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) Hotels Hotel rooms

10 TSH Post-Transaction (Tenant profile) Revenue R13.6 billion (1) Total Assets R17.3 billion (2) Property and equipment rental expense R2.8 billion (1) Interest bearing borrowings R5.3 billion (2) Net finance costs R0.3 million (1) Basic and diluted adjusted HEPS 97.7 cents (1) NAV per share R7.0 (2) TNAV per share R3.5 (2) Lenders financial covenants: Interest cover ratio of at least 3.0x and Net debt to EBITDA ratio of less than 3.0x Source: TSH circular issued on 21 Sep 2018 (1) Pro forma for the year ended 31 Mar 2018 (assuming the transaction was implemented on 1 Apr 2017) (2) Pro forma as at 31 Mar

11 US Net Lease REITS In the US market, there are 3 listed REITS that focus solely on triple net leases within the gaming, hospitality and entertainment sector VICI Properties Inc. (IPO date February 2018) MGM Growth Properties LLC (IPO date 2015) Gaming & Leisure Properties Inc. (IPO date 2013) These three US Gaming REITS have features that are similar to this transaction: Property assets transferred from a gaming operator into a REIT and leased back Triple net leases, with the tenant also responsible for ongoing capex Initial lease terms of years followed by multiple long-term renewal options Rental escalations linked to inflation EBITDAR or revenue-to-rent ratio covenants or triggers Tenant s performance is guaranteed by the gaming operator 11

12 Impact on Hospitality Investment Property increases to R35.6 billion (1) LTV increases to 28.1% (2), leaving sufficient additional borrowing capacity Impact on Key Line Items R million FY18 FY19 FY20 Revenue Hotel portfolio Casino portfolio Distributable earnings Hotel portfolio capex Hotel portfolio capex % of hotel portfolio revenue 16.8% 26.5% 25.9% Hotel portfolio capex % of total revenue 8.3% Hotel portfolio capex % of distributable earnings 22.3% 29.6% 11.8% DPS decreases initially, but earnings become more stable and sustainable going forward NAV per share decreases, but new shares are issued at 7.5% premium to market price (3) Impact on DPS(⁴) (1) From R12.6 billion as at 31 Mar 2018 (2) From 15.4% as at 31 Mar 2018 (3) Measured against the 30-day VWAP the day prior to the release of the first announcement and cautionary related to this transaction (4) Assuming 100% of distributable earnings paid to shareholders and that no portion thereof is retained to fund capital expenditure Cents FY18 11m19 1m19 FY19 FY20 DPS excl. casino portfolio Growth 2.2% 6.9% DPS incl. casino portfolio Growth -1.1% 0.7% Dilution (4) (12) Dilution % 3.2% 8.8% 12

13 Casino Precincts: Oversight of Properties Introduction Key management personnel The casino portfolio is currently in very good condition and has been very well maintained by TSH. Many properties in the casino portfolio are relatively new or have been recently refurbished by TSH The key management personnel listed below will be charged with, inter alia, ensuring that timely and sufficient repair and maintenance procedures are followed by TSH throughout the duration of the lease They will appoint independent experts with appropriate skills and expertise to assist Rob Nicolella Rob joined HCI in Rob has played a pivotal role in the growth of the HCI Properties portfolio which comprises a diverse portfolio encompassing the entire property life cycle, including conference and exhibition properties, industrial, inner city housing, mixed use precincts, office, student accommodation and retail properties Rob s leadership, real estate experience, and broad skills base will be instrumental in the growth of the HPF portfolio Keith Randall Keith has been employed within the TSH group for over 20 years, principally in the development of new hotels and the oversight of major hotel refurbishments in South Africa, Africa and the Middle East. More recently, he was a director of Sun1 Hotels (Pty) Ltd, following the acquisition of the Formula 1 Group in South Africa from Accor and was responsible for the redevelopment and repositioning of this hotel chain Having developed, redeveloped and refurbished over half of the hotels in the portfolio, Keith's asset specific knowledge is key to product quality and performance delivery. Keith has in-depth and diverse sector experience, encompassing both asset and development management as well as hotel operations James Nathan James joined HPF as Investment and Asset Manager in Jan 2018 and is responsible for the analysis and execution of acquisitions and disposals as well as the asset management and implementation of commercial strategies relating to the existing hotel portfolio Prior to joining HPF, James held a senior management position within the Hotels & Hospitality Capital Markets team at JLL, sub-saharan Africa James has extensive experience in the underwriting of new opportunities, as well as asset and development management Mario Monica Mario joined HPF in 2011 and currently holds the position of Group Facilities and Development Manager. He is responsible for all maintenance and facilities management, as well the implementation of refurbishments and development projects pertaining to the existing hotel portfolio Mario works closely with onsite hotel management to ensure that all planned maintenance programs and capital expansion projects are executed within budget and on time Mario has extensive experience having also held various other maintenance and development roles within the greater TSH group after joining Southern Sun Hotels Offshore Division in

14 2. Financials 14

15 Combined Forecast 11 months ending 28 Feb 19 1 month ending 31 Mar 19 FY19 FY20 R million Revenue Operating costs (51) (5) (56) (63) Operating profit Finance income Finance costs 5 (171) (75) (246) (906) Transaction costs 6 - (17) (17) - Profit before tax Tax Earnings from associates Profit after tax Transaction costs Headline earnings Straight-line lease adjustments Earnings from associates (1) Dividends received from associates Distributable earnings Existing portfolio only 2 Combined portfolio, based on an effective date for the transaction of 1 Mar Forecast based on: Existing portfolio: each hotel s rental agreement and latest available budgets Casino portfolio: the initial agreed rental per the rental aggregation agreement, escalated on 1 Apr 2019 at 4.5% (assumption of CPI) 4 Interest earned on cash at 7.5% p.a 5 Interest on bank borrowings and notes issued, and the amortisation of upfront debt raising fees. The weighted average cost of the new R8.1 billion debt facilities (excl. amortisation of fees) is 8.54% 6 Costs relating to the acquisition of the casino portfolio 7 Shares in issue (excl. shares held by dissenting shareholders) 8 Shares in issue, less shares held by the HPF Employee Share Trust Shares ranking for distribution (million) Net shares in issue (million) Weighted ave. net shares in issue (million) Basic and diluted EPS (cents) Headline and diluted headline EPS (cents) Distributable income per share (cents)

16 Forecast Build-Up R million Existing hotel portfolio 12 months 3 FY19 Casino portfolio 1 month Total 2 1 Existing hotel portfolio 12 months 3 FY20 Casino portfolio 12 months Total 2 1 Revenue Operating costs (56) - (56) (63) - (63) Operating profit Finance income 4 48 (2) Finance costs (187) (59) (246) (209) (697) (906) Transaction costs - (17) (17) Profit before tax Tax Earnings from associates Profit after tax Transaction costs Headline earnings Straight-line lease adjustments Earnings from associates (1) - (1) Dividends received from associates Distributable earnings Combined forecast per the revised listing particulars 2 Casino portfolio forecast per the Category 1 circular 3 = As disclosed in, and derived from note 8 to the forecast per the revised listing particulars. Forecast finance income for the existing hotel portfolio is based on the assumption that the transaction does not take place and no cleanout dividend is paid in FY19. Finance income of the casino portfolio reflects the payment of the clean-out dividend as well as larger cash balances as a result of the transaction Shares ranking for distribution (million) Distributable income per share (cents)

17 Pro-forma Balance Sheet R million HPF 31 Mar 2018 audited Acquisition of Listed Investments and Cassava Listed Investments 31 Mar 2018 audited Cassava 31 Mar 2018 audited Adjustments and consolidation entries Transaction costs A B C Pro-forma after the transaction Investment properties Investment in subsidiaries (23 007) - - Non-current assets held for sale Cash (17) 374 Other assets Total assets (25) (17) Equity (17) Interest bearing borrowings Derivative liabilities Loans from group companies (25) - - Other liabilities Total liabilities (25) Total liabilities and equity (25) (17) Net shares in issue (million) D NAV per share (R) LTV E 15.4% 28.1% A (1) Acquisition of Listed Investments and Cassava for R23.0 billion; (2) issue of 1.2 billion shares to TSH at the subscription price of R12.50 per share, raising a total of R15.0 billion; (3) drawdown of R8.1 billion from new debt facilities B (1) Acquisition by Listed Investments and Cassava of the casino precinct properties; (2) entries required to consolidate Listed Investments and Cassava C Settlement of transaction costs, which relates to the acquisition of the casino portfolio D Shares in issue, less shares held by the HPF Employee Share Trust E Interest bearing borrowings (investment properties + non-current assets held for sale) 17

18 Debt Funding Summary R million Tenor Maturity Repayment Profile Facility Amount Drawn Base Rate Margin Current Interest Rate Weighted Average Rate A B Existing Funding Term loan A 3 yrs 31 Jul 2020 Bullet m JIBAR 1.78% 8.75% 2.48% Term loan B 5 yrs 31 Jul 2022 Bullet m JIBAR 1.98% 8.95% 2.31% RCF 5 yrs 30 Sep 2022 Bullet 500-3m JIBAR 1.60% 8.57% - DMTN HPF06 5 yrs 20 Feb 2020 Bullet m JIBAR 2.80% 9.77% 0.30% DMTN HPF08 3 yrs 15 Apr 2019 Bullet m JIBAR 3.00% 9.97% 0.41% DMTN HPF09 3 yrs 15 Apr 2019 Bullet m JIBAR 2.25% 9.22% 0.71% DMTN HPF11 5 yrs 31 Mar 2023 Bullet m JIBAR 1.95% 8.92% 2.76% Total % Transaction Funding Banks 1-7 yrs Bullet m JIBAR % % 1.92% DMTN 2-7 yrs Bullet m JIBAR % % 6.62% Total % Grand total % A Based on 3m JIBAR of 6.97% (31 Jul 2018) B Based on amounts drawn/anticipated to be drawn, and excludes amortisation of upfront debt fees 18

19 Debt Funding Summary (cont d) Capex Funding Ongoing capex related to the hotel portfolio will be funded by a combination of debt and cash Assumed pricing is 3m JIBAR plus 2.0% Hedging strategy Management uses interest rate swaps to hedge Hospitality s exposure to interest rate risk (swapping the floating 3m JIBAR rate for a fixed rate). Approximately 50% of the value of the drawn facilities is currently covered under existing swap agreements Management plans to hedge +/- 50% of the new transaction funding The weighted average interest rate of c.8.62% increases to c.9.08% after adjusting for the estimated impact of the existing and new interest rate swaps 19

20 3. Contact Details Rob Nicolella Keith Randall Mara De Lima

21 Appendix A. Casino Precincts 21

22 Montecasino Precinct Overview The Montecasino precinct is a premier mixed-use entertainment destination which includes gaming, leisure, retail, restaurant and hotel facilities The privé, in the main casino area, offers various slots and tables that cater to the more discerning gamer with private and semi-private gaming rooms Situated on the corner of William Nicol Drive and Witkoppen Road, the precinct enjoys good access via the Sandton road network There are three hotels on the Precinct: the luxury Palazzo, the upscale Southern Sun Montecasino, and the midscale Sun Square Montecasino Ancillary entertainment offerings in the precinct include the Teatro and Pieter Toerien theatres, the second largest movie house in the country with 15 cinemas, The Magic Company, and numerous restaurant offerings There is a good mix of restaurants and fast food outlets, with both national franchises as well as independent operators Key Metrics 31 Mar 2018 Casino tables 82 Casino slots Gross built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) Hotel rooms

23 Suncoast Precinct Overview Suncoast Casino and Entertainment World enjoys an attractive location on Durban s Golden Mile and in the heart of Durban s sport precinct The precinct is currently undergoing a redevelopment which started in 2016 and is expected to be completed in Dec 2018, adding: The Barnyard Theatre; The Globe (a 2 200m² multipurpose eventing arena); 400 underground parking bays; 22 restaurants and retailers; and an enlarged kids entertainment area The redevelopment is expected to increase footfall and attract high-end demand The world-class privé caters to the more discerning gamer and also includes private gaming areas The eight movie theatres in the precinct has one of the highest occupancy rates in South Africa There are two hotels within the precinct: the SunSquare Suncoast and the Suncoast Towers Key Metrics Dec Mar 2018 Post-redevelopment Casino tables Casino slots Gross built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) - - Hotel rooms

24 Gold Reef City Precinct Overview Gold Reef City is located in an old, established suburb 10km south of the Johannesburg CBD Located adjacent to the precinct is the well-known Apartheid Museum and Gold Reef City theme park The precinct provides a full entertainment offering including gaming, leisure, retail, restaurant and hotel facilities The privé offers a mix of slots and tables and caters to the more discerning gamer Restaurants in the precinct include a good mix of national franchises and independent operators, with some being operated by TSH There is an upscale Southern Sun hotel in the precinct Key Metrics 31 Mar 2018 Casino tables 51 Casino slots Gross built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) - Hotel rooms 38 24

25 Silverstar Precinct Overview The Silverstar Casino precinct is located in the mature and established suburb of Muldersdrift The privé in the main casino area offers a mix of slots and tables, with a semiprivate area that includes tables and slots The casino targets the West Rand area, with the majority of patrons residing within a 15-km radius The precinct also offers corporate event venues which are located in the casino and also has a banqueting facilities There is an upscale Southern Sun hotel in the precinct Key Metrics 31 Mar 2018 Casino tables 30 Casino slots 900 Gross built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) - Hotel rooms 34 25

26 Emnotweni Precinct Overview The Emnotweni precinct forms part of an expanding commercial node in Mbombela (formerly Nelspruit) which has seen much new development in recent years The precinct adjoins the popular Riverside Mall, and therefore the food and beverage offerings within the actual casino complex is limited Ancillary entertainment offerings are provided in space rented from Riverside Mall and therefore do not form part of the casino complex The precinct offers a large corporate event venue known as The Arena, which is located inside the casino There are two hotels on the precinct: an upscale Southern Sun hotel and a midscale Stay Easy hotel Key Metrics 31 Mar 2018 Casino tables 19 Casino slots 425 Gross built-up area (m 2 ) Retail GLA (m 2 ) 40 Office GLA (m 2 ) - Hotel rooms

27 The Ridge Precinct Overview The Ridge precinct is located in an area of emalahleni (formerly Witbank) which has seen a large amount of development in recent years The precinct is adjacent to The Highveld Mall and therefore the food and beverage offerings within the actual casino complex is limited The food and beverage offerings that are currently in the casino complex are all operated by TSH The precinct also offers a seater venue that is used to host live shows and events Ancillary entertainment offerings include a movie theatre, The Magic Company and open-air Putt-Putt course There are two hotels in the precinct: the upscale Southern Sun Ridge and a midscale Stay Easy hotel Key Metrics 31 Mar 2018 Casino tables 19 Casino slots 436 Gross built-up area (m 2 ) Retail GLA (m 2 ) Office GLA (m 2 ) - Hotel rooms

28 Blackrock Precinct Overview Blackrock casino is located in Newcastle which is the largest town in KwaZulu Natal A portion of the precinct has recently been renovated The property also has four corporate event venues There is a midscale Garden Court hotel in the precinct, which is one of only a few branded hotels in Newcastle Key Metrics 31 Mar 2018 Casino tables 10 Casino slots 300 Gross built-up area (m 2 ) Retail GLA (m 2 ) 733 Office GLA (m 2 ) - Hotel rooms 80 28

29 Appendix B. Index Inclusion 29

30 Index Inclusion On the assumption that Hospitality qualifies for inclusion in the SAPY, and based on a market cap of c.r22.1 billion (1) and free-float of 53% (2), Hospitality would rank 8th in the SAPY Key SAPY requirements: Primary listing on the JSE Minimum free float of 15% SAPY Market Cap Ranking R million Fortress Hyprop Resilient Hospitality Vukile EPP MAS Current SAPY Rank Fortress 6 Hyprop 7 Resilient 8 Hospitality Vukile 9 EPP 10 MAS 11 Projected SAPY Weighting % 7.0% 4.6% 4.1% 3.4% 3.2% 3.2% 2.2% Fortress Vukile Resilient Hospitality Attacq SA Corporate Investec Prop Current weighting Fortress 7.2% 4.8% Vukile Resilient 4.2% Hospitality Attacq 3.3% SA Corporate 3.3% Investec 2.2% Property Free float % 66.6% 92.1% 58.4% 53.2% (2) 93.0% 99.7% 68.3% (1) 1.8 billion shares in issue post-transaction x R12.50 (transaction issue price) (2) Free float calculation only excludes shares held by HCI and the HCI Foundation. All other shareholders are assumed to be public shareholders 30

31 Appendix C. Existing Hotel Portfolio 31

32 Existing Hotel Portfolio Geographic Profile Hotels Revenue FY20 % Prop Value 31 Mar 2018 % Rooms % Western Cape Gauteng KwaZulu-Natal Eastern Cape Limpopo All other provinces Total Tenant Profile Hotels Revenue FY20 % Prop Value 31 Mar 2018 % Rooms % TSH Marriott Radisson Birchwood Champagne Sports AHA Total Class of Hotel Profile Hotels Revenue FY20 % Prop Value 31 Mar 2018 % Rooms % Luxury Upscale Midmarket Economy Total Lease Expiry Profile Hotels Revenue FY20 % Prop Value 31 Mar 2018 % Rooms % 1 5 years years years Total Leases for the Radisson Waterfront and Kopanong Hotel and Conference Centre expire during the forecast period. The directors are confident that leases will be renewed. 32

33 Hotel Operating Model Ownership of the tenant typically lies with the hotel management company Lease agreement Management agreement Hospitality Rental payment Tenant (SPV) Management fee Hotel management company Property owner / Landlord Licence agreement Licence / royalty fee Hotel brand owner Tenants have management agreements with reputable hotel management companies The interaction and liaison regarding operational performance and strategic direction of the hotels is predominantly with hotel management companies on behalf of the tenants 33

34 Existing Hotels # Property Name Location Class of hotel Rooms Conference facilities Valuation 31 Mar 2018 R million % of total 1 Westin Cape Town (1) Cape Town, Western Cape Luxury Southern Sun Waterfront (1) Cape Town, Western Cape Upscale Southern Sun The Cullinan (1) Cape Town, Western Cape Upscale Birchwood Hotel and OR Tambo Conference Centre (1) Benoni, Gauteng Midscale Radisson Blu Gautrain Johannesburg, Gauteng Upscale Garden Court South Beach Durban, Kwa-Zulu Natal Midscale Radisson Blu Waterfront Cape Town, Western Cape Upscale Crowne Plaza Rosebank Rosebank, Gauteng Upscale Holiday Inn, Sandton (1) Sandton, Gauteng Upscale Garden Court O.R. Tambo Kempton Park, Gauteng Midscale Champagne Sports Resort Central Berg, Kwa-Zulu Natal Upscale Garden Court Milpark Johannesburg, Gauteng Midscale Garden Court Polokwane Polokwane, Limpopo Midscale Stay Easy Century City Hotel Milnerton, Western Cape Midscale Garden Court Umhlanga Umhlanga, Kwazulu-Natal Midscale Protea Hotel Victoria Junction (1) Cape Town, Western Cape Midscale Garden Court King s Beach Port Elizabeth, Eastern Cape Midscale Garden Court Hatfield Hatfield, Gauteng Midscale Arabella Hotel & Spa Kleinmond, Western Cape Luxury Protea Hotel Edward Durban, Kwa-Zulu Natal Midscale (1) Due to a change in circumstances that had a material impact on the value, the valuations of these properties were updated subsequent to their original valuations 34

35 Existing Hotels (cont d) # Property Name Location Class of hotel Rooms Conference facilities Valuation 31 Mar 2018 R million % of total 21 Southern Sun Newlands Newlands, Western Cape Upscale Mount Grace Country House & Spa Magaliesberg, Gauteng Luxury Stay Easy Pietermaritzburg Pietermaritzburg, Kwa-Zulu Natal Midscale Garden Court Morningside Morningside, Gauteng Midscale Garden Court Kimberley Kimberly, Northern Cape Midscale Stay Easy Rustenburg Rustenburg, North West Midscale Sun1, Pretoria Pretoria, Gauteng Economy Sun Square Cape Town Gardens Gardens, Western Cape Midscale Southern Sun Bloemfontein Bloemfontein, Free State Upscale Southern Sun Katherine Street Sandton, Gauteng Upscale Garden Court Eastgate Bruma, Gauteng Midscale Protea Hotel Marine Port Elizabeth, Eastern Cape Midscale Sun1, Southgate Southgate, Gauteng Economy Sun1, Midrand Midrand, Gauteng Economy Kopanong Hotel & Conference Centre Benoni, Gauteng Midscale Protea Hotel Hazyview Hazyview, Mpumalanga Midscale Sun1, Port Elizabeth Port Elizabeth, Eastern Cape Economy Sun1, Milnerton Milnerton, Western Cape Economy Sun1, Alberton Alberton, Gauteng Economy Stay Easy Eastgate Bruma, Gauteng Midscale

36 Existing Hotels (cont d) # Property Name Location Class of hotel Rooms Conference facilities Valuation 31 Mar 2018 R million % of total 41 Sun1, Cape Town Cape Town, Western Cape Economy Sun1, Parow Parow, Western Cape Economy Sun1, Nelspruit Nelspruit, Mpumalanga Economy Sun1, Wynberg Johannesburg, Gauteng Economy Sun1, Bloemfontein Bloemfontein, Free State Economy Sun1, O.R. Tambo Germiston, Gauteng Economy Sun1, Berea Berea, Kwa-Zulu Natal Economy Sun1, Kimberley Kimberly, Northern Cape Economy Sun1, Benoni Benoni, Gauteng Economy Sun1, Witbank Witbank, Mpumalanga Economy Sun1, Richards Bay Richards Bay, Kwa-Zulu Natal Economy Sun1, Vereeniging Vereeniging, Gauteng Economy Sun1, Edenvale Edenvale, Gauteng Economy Total

37 Appendix D. Rental Aggregation Agreement 37

38 Illustrative Example 3 1 Apr 2025: First rent review date 4 70% FY25 casino EBITDAR (1 + inflation) < Base Rent and the difference is > 2.5% of the Base Rent Rent is reset downwards to 70% FY25 casino EBITDAR (1 + inflation) R m Annual Rent Base Rent [ starting rent, escalated at inflation ] PY actual rent x (1 + inflation) 70% x PY Casino EBITDAR x (1 + inflation) 1 Apr 2026: Upward reset test 70% FY26 casino EBITDAR (1 + inflation) > prior year actual rent (1 + inflation) but < the Base Rent Rent is reset upwards to 70% FY26 casino EBITDAR (1 + inflation) 5 1 Apr 2027: Upward reset test 70% FY27 casino EBITDAR (1 + inflation) > prior year actual rent (1 + inflation) but < the Base Rent Rent is reset upwards to 70% FY27 casino EBITDAR (1 + inflation) 1 FY20: R1.94 million (1 + inflation) FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY Apr 2030: Second rent review date 70% FY30 casino EBITDAR (1 + inflation) < Base Rent and the difference is > 2.5% of the Base Rent Rent is reset downwards to 70% FY30 casino EBITDAR (1 + inflation) 2 Prior year rent escalated at inflation on 1 April each year (1) The forecast (refer to section 3) assumes an inflation rate of 4.50% (mid-point of the SA Reserve Bank s target range) (2) The resets shown in this example are theoretical, for illustrative purposes only, and do not represent any kind of forecast 6 Prior year rent escalated at inflation on 1 April each year Double downward reset Landlord may give 5-years notice, or tenant may cure to FY30 rent + inflation 38

39 Thank you