Tsogo Sun Considers New Investment Trust for Property Portfolio

Tsogo Sun Holdings Ltd., South Africa’s biggest hotel and gaming company, will decide this year on whether to create a real estate investment trust to hold its hotel, retail and office property portfolio.

The REIT, which would exclude the company’s casino properties, could be valued at as much as 10 billion rand ($846 million), Chief Executive Officer Marcel von Aulock said by phone on Thursday. The trust would eventually seek a public listing, giving Johannesburg-based Tsogo Sun another means of accessing capital, he said.

“If this works, we could have an entire third new division which has a lot of opportunities going forward,” Von Aulock said. “It’s a vehicle through which we can raise money for expansion, without being dilutory at the top holding structure.”

Tsogo Sun has been expanding through acquisitions and renovating existing hotels and casinos as it seeks to offset the impact of sluggish growth in the continent’s second-biggest economy. While the casino business remains volatile, hurt by weak consumer sentiment in South Africa, the hotel environment is improving “quite nicely,” Von Aulock said.

Tsogo Sun’s net income was 1.67 billion rand in the 12 months through March, 11 percent lower than the same period a year earlier, the company said in a statement on Thursday. Sales rose 5 percent to 11.3 billion rand. The shares declined 0.5 percent to 26.50 rand as of 10:34 a.m. in Johannesburg, valuing the company at 27.8 billion rand.

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