IHIC 2014 Break-Out Session: Hotel Branded Residences
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Transcript of IHIC 2014 Break-Out Session: Hotel Branded Residences
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Bill Barnett, Managing Director C9 Hotelworks
The 2nd Annual Indonesia Hotel Investment Conference 2014
Hotel Branded Residences
Grand Nikko Bali June 6,
2014
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The Good• Funding – full development funding to completion irrespective
of unit sales, or an existing property with units as an extension, or already in progress;
• Ownership – freehold or registered land title;• Management – branded, international, or otherwise credible/
recognizable. Maintenance of unit inclusive;• Market – product proactively created to match requirements of
pre-determined end user;• Investment:
• Opportunity for strong ROI through rental yields and/or capital appreciation;
• Pricing to comp set and with reasonable developers margins
• Low completion risk due to full developers project funding• Financing available: bank or developer financing
• Legal Structure – full due diligence pack and clear and thorough transaction documents;
• Quality – strong partners and stakeholders across the board (developer, designers, contractors, consultants);
• Tax / Revenue Structure – clear documentation on tax liabilities and treatment of rental revenues;
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The Bad• Often have over reliance on unit sales to complete, but perhaps
have fall back funding if required
• Often are on leasehold tenures;
• No international brand standard management and an only average attempt to show “new brand” or boutique management capabilities;
• Product often created “reactively” based on developer or designers thoughts / ideas / preferences;
• Often not flexible on rental management structure: i.e. mandatory vs. non-mandatory;
• Often not 100% solid / clear in treatment of rental revenues;
• Often difficult to generate a solid ROI as priced too high;
• Financial Forecasting often done internally - subjective
• Often difficult to derive capital appreciation because of lease tenure;
• Often high perceived “completion risk” due to lack of clear developers funding or existing facilities on site;
• Often unclear on tax obligations and rental revenues;
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The Ugly• Often try to sell off plan with no funding in place;
• Often utilizing strategy of not starting project until a certain number of unit sales completed;
• Often are on leasehold tenures;
• Often have poor or no management in place;
• Product often created purely on developer preferences;
• Often very week in Legal Due Diligence and Transaction Documents – selling on Booking Forms only;
• Often extremely unclear in treatment of rental revenues;
• Financial Forecasting almost exclusively done internally – highly subjective
• Often high perceived “completion risk” due to lack of clear developers funding or existing facilities on site;
• Often unclear on tax obligations and rental revenues;
• Often unrecognizable stakeholders (developers, designers, management companies, contractors, etc.);
• Often lots of hidden fees in transaction costs, taxes, ongoing maintenance costs, etc.
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The Good
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The Bad
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The Ugly
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The Good• Legian Beach, 112 Apartments sold out
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The Bad• Brand new 3 Star Hotel• Selling Rooms for $24 per night• Front page Agoda assume 30% commission• Hotel takes $17 Gross
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The Ugly• Selling Fast, 50% already completed• Overlooking Canggu’s last rice paddies
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Details Details
10 Commandments
Quality
Lifestyle
Funding
Ownership
Property Management
Market
Investment
Legal Structure
Tax / Revenue Structure
Maintenance
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Last Words