LEADING gaming and leisure group Tsogo Sun is contemplating splitting off its sprawling property interests and separately listing a real estate investment trust (Reit) on the JSE.

Hosken Consolidated Investments (HCI)-controlled Tsogo is one of the biggest real estate owners in SA with an estimated R10bn in hotel, office and retail properties — excluding its core casino properties.

The envisaged listing would rank the specialised Reit among the biggest real estate counters on the JSE.

Speaking at the release of year to end-March results on Thursday, Tsogo CEO Marcel von Aulock said a separate property listing was still being discussed at “internal level”.

“We have not taken a decision yet, but if we go ahead (it) could transpire by the end of the current financial year.”

Lentus Asset Management portfolio manager Nic Norman-Smith welcomed the development. “I would be surprised if HCI did not have some input here… they have been trying to create value by unbundling and listing various of their interests over the last few years.”

The Reit portfolio’s income stream would comprise mainly rental from Tsogo’s hotel properties, casino-tenant revenue (restaurants and retail outlets) and offices (including a development at Montecasino). Tsogo is also developing the 48,000m² Suncoast Mall.

Mr von Aulock stressed the Reit would not be unbundled to Tsogo shareholders. “We intend to list it separately, but we want to retain control.” He said the proposed Reit structure aimed to unlock a third business segment for the group.

Mr Norman-Smith said it was a great time in the investment cycle to spin off property assets. “There has been strong demand for real estate counters in recent years, and Tsogo have been investing heavily in their properties,” he said.

A fair chunk of Tsogo’s capital expenditure of R5.9bn in the last financial year was allocated to bolstering its property interests — most notably increasing the interest in Cullinan Hotels for R762m and buying out the remaining 49% interest in the Pivot office development at Montecasino for R144m, as well as acquiring the Garden Court in Polokwane for R80m.

The developments could be a distraction for shareholders after the year under review saw the casino business grinding through a tough period.

Total gaming revenue was up just 3% to R8.3bn with Mr von Aulock reporting gaming win growth of only 2% when satisfactory gaming win growth should be about 7% to 8%.

The star performer was the Mykonos property on the West Coast, which managed a 12% hike in earnings before interest, tax, depreciation, amortisation and rentals to R64m.

SourceL BDLive – Marc Hasenfuss