PSPF APPOINTS ADVISORY TEAMS FOR MONOMOTAPA HOTEL ACQUISITION

The Public Service Pension Fund (PSPF) has appointed advisory teams to conduct due diligence on African Sun’s 234-room Monomotapa Hotel, in Harare, after the fund won the bid to buy the iconic property.

PSPF chief investment officer Dr Farai Gaba, confirmed the fund’s strategic interest in acquiring the Monomotapa Hotel on Tuesday, highlighting that due diligence processes, involving technical, legal and financial assessments, are being carried out by the fund’s advisory teams.

The disposal of the Monomotapa Hotel is part of African Sun’s strategy to offload underperforming units to reinvest in and rejuvenate higher-performing assets. 

The initiative also includes the Caribbean Bay Hotel in Kariba and has already divested from the Great Zimbabwe Hotel.

Dr Gaba said Monomotapa Hotel was a prime strategic commercial hospitality asset and the acquisition was significant as it strengthened PSPF’s exposure to stabilised income-generating real estate assets with potential for yield enhancement. 

The hotel’s existing brand equity, location and operational footprint also make it suitable for long-term institutional ownership. 

Although Dr Gaba did not disclose the transaction’s value, citing ongoing due processes, this publication understands the deal, which includes a piece of land adjacent to the hotel, to be worth about US$20 million.

“Independent valuations conducted by licensed property consultants and international hotel valuers have placed valuations within scope and acceptable range with the sellers, African Sun,” he said.

Dr Gaba said the acquisition was considered a capital-intensive transaction and would be funded from PSPF’s real estate allocation within its strategic asset allocation model.

He said the investment aligns with PSPF’s long-term strategy of acquiring “tangible, inflation-hedging assets” that generate consistent income and offer capital appreciation over time.

The hotel also fits within PSPF’s Environmental, Social and Governance framework as it supports urban regeneration and formal employment.

Based on financial modelling and scenario stress testing conducted by PSPF’s investment risk team, Monomotapa Hotel is expected to deliver an internal rate of return (IRR) exceeding 11 percent over a 10-year horizon.

“This acquisition enhances the fund’s liquidity profile through hard currency income streams and contributes meaningfully to meeting long-term pension liabilities.

“The asset will also improve the Fund’s rental yield within the hospitality sub-sector of the real estate portfolio.”

PSPF intends to retain Monomotapa hospitality brand and management to ensure continuity, while exploring operational improvements through key performance-based indicators, said Dr Gaba.

Strategic partnerships with experienced hospitality operators are also under review to enhance operational efficiency, modernise the offering, and reposition the asset in line with regional hotel benchmarks.

The transaction structure includes a capital expenditure component for refurbishment and key service upgrades.

Dr Gaba said the acquisition of Monomotapa Hotel contributed to PSPF’s ongoing diversification drive, by balancing exposure across asset classes and sectors.

The fund’s portfolio is diversified across public equities, private equity, fixed income, infrastructure, agriculture and property.

With the acquisition, the hospitality sector’s contribution to overall net asset value (NAV) increases marginally, but materially, brings in currency diversification and downside protection through stable cash flows from the tourism and business travel markets, said Dr Gaba.

African Sun has indicated that its overarching strategy is centred on optimising its portfolio by focusing on smaller, more profitable hotel segments.

The hospitality group plans to utilise the proceeds from this sale to upgrade several of its remaining hotels, primarily the Elephant Hills Resort in Victoria Falls.

While African Sun chief executive Mr Laurie Ward could not be immediately reached for a comment, he said in the company’s 2024 annual report that the disposal will allow prioritisation of the remaining properties under its portfolio, as well as allocating funds for the development of phase two of the Malbrough Sunset Views residential stands.

African Sun’s top three performing hotels — Elephant Hills Resort and Conference Centre, Holiday Inn Harare, and Holiday Inn Bulawayo — contributed 54 percent to the group’s overall revenue in 2024. 

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