Alternaty Feasibility Study & Development Recommendations_Report Sample_EN

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Investment Feasibility Analysis and Development Recommendations

2014

2014

Table of ContentsInvestment Feasibility Analysis and Development Recommendations Sample

• 1.0 Executive Summary

• 2.0 Property Description

• Overview

• Project Status

• Location

• Building Plan

• Components

• 3.0 Project Parameters

• 4.0 Development Stages

• 5.0 Construction Cost Estimates

• 6.0 Market Overview

• City Overview

• Population

• Geography

• Climate

• Foreign Direct Investment

• Visitor Arrival

• Serviced Apartment Market

• Hotel Market

• Residential Market

• Office Market

• Retail Market

• 7.0 Investment Parties and Interests

• Developer

• Partner

• Main Contractor

• Office Head Lease

• Senior Loan

• Pre-sale

• 8.0 Cash Flow Analysis

• Cash Flow Input

• Residential Cash Flow

• Commercial Cash Flow - Office

• Commercial Cash Flow - Retail

• Hotel Cash Flow

• Consolidated Cash Flow

• Considerations and

Recommendations

• 9.0 Conclusion

• Disclaimers

2

1.0 Executive Summary Investment Feasibility Analysis and Development Recommendations Sample

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2.0 Property Description Investment Feasibility Analysis and Development Recommendations Sample

42014

3.0 Project Parameters Investment Feasibility Analysis and Development Recommendations Sample

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4.0 Development Stages Investment Feasibility Analysis and Development Recommendations Sample

6

5.0 Construction Cost Estimates Investment Feasibility Analysis and Development Recommendations Sample

• The construction costs have been estimated by the main contractor, [confidential] Corporation, with total costs of

approximately $51,000,000 divided into hard costs (82%), soft costs (10%), pre-opening costs (4%) and contingency

costs (4%), excluding land and financing costs, as follows:

• Hard Costs

• Site works cost is $295,406 which is the equivalent of $97/sqm

• Basement cost is $5,125,344 which is the equivalent of $897/sqm

• The construction cost for the residential and commercial components is $13,531,608 and $8,831,222

respectively, which is equals to 53% of the total hard cost

• The construction cost for the hotel is $14,200,819, accounting for 34% of the total hard cost

• Soft Costs

• Consultancy costs are 2% of total soft cost while design, architect and project management cost equal 10% of

total soft cost. The subtotal of soft costs is $5,038,128, which accounts for of 10% total cost

• Pre-opening Costs

• This includes the working capital for the pre opening activities and is equal to $2,000,000

• Contingency Costs

• A total of $1,900,000 has been allocated to contingency costs, for an amount of approximately 4% of total

construction cost

• Construction costs have been independently verified by an international third party quantity surveyor. The summary

of the costs breakdown has been included in the hard copy of Appendix

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6.0 Market Overview Investment Feasibility Analysis and Development Recommendations Sample

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6.1 Visitor Arrivals Vietnam Investment Feasibility Analysis and Development Recommendations Sample

• International visitor arrivals reached a record 7.6

million in 2013, increasing by 10.6% from 2012

• The purpose of trip for 61.3% of visitors was

tourism, while 16.7% visited for business and 16.6%

visited family and friends

• 79.0% arrived to Vietnam by air while 18.5% arrived

by road and 2.6% arrived by sea

• The CAGR of international arrivals to Vietnam for

business purposes during the 5 year period of 2008

to 2013 has been 8.4%

• Average length of stay in Vietnam in 2012 was 9

days

61%17%

17%

5%

By Purpose of Trip (2013)

Tourism Business

Visiting Relatives Other

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Vis

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International Visitor Arrivals to VietnamBy Purpose of Trip

Tourism Business Visiting Relatives Other

-30%

0%

30%

60%

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13A

nn

ual G

row

th R

ate

International Visitor Arrivals to Vietnam

Annual Growth Rate

International visitors Business

79%

3%

18%

By Means of Transport

(2013)

Air Sea Road

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6.2 Serviced ApartmentAverage Daily Rate (ADR) and RevPAR

Investment Feasibility Analysis and Development Recommendations Sample

• Since ADR information is not available for Serviced Apartments, the weighted average Public Monthly Rates have

been used as a proxy in order to arrive at the estimated Serviced Apartment RevPAR

• Weighted average Monthly Public Rate of the first room category (cheapest available) = $1,649.50

• Discount factor applied to Public Rate (Entry Level Room Category) = 90%

• Weighted average Monthly Rate of (Entry Level Room Category)= $1,484.59

• Estimated ADR 2013 = $48.81 (1,484.59*12/365)

• Occupancy 2013 = 92.0%

• 2013 Estimated A & B Grade Serviced Apartment RevPAR = $44.90 (48.81 * 92%)

Name [confidential] [confidential] [confidential] [confidential] [confidential] [confidential] [confidential] [confidential]

Grade A B B B B B B B

Keys 78 180 30 29 15 20 124 6

Entry Level Room Category 1 Standard A Standard A 1 1 1 (H2) 1

Size (sm) 80 83.8 47 55 70 75 65 124

Quantity 54 72 6 6 11 4 18 3

Mnthly Rate 1,500 2,100 1,100 1,100 1,300 1,325 1,040 1,100

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6.3 Hotel Total Supply Investment Feasibility Analysis and Development Recommendations Sample

• The total supply of 3 and 4 star hotels in [confidential]

currently stands at 1,175 keys across 17 properties

• The supply of 4 star hotels is 672 keys (7 hotels)

accounting for 57.2% of total supply, while 3 star hotel

rooms supply is 503 keys (10 hotels), accounting for the

remaining 42.8%

• There have been 2 main periods of supply growth in

[confidential] which coincide with peaks of the Vietnam

business and real estate cycle:

• 1997 – 2000: 225 keys to 587 keys (up 160.9%)

• 2006 – 2011: 718 keys to 1,175 keys (up 63.6%)

• Supply has remained stable since 2011

• The majority of supply is located in [confidential]

District, with 659 keys accounting for 56% of total

supply

• [confidential] District has 365 keys of

supply, representing 31%, while [confidential] District

and each have 1 property only

659, 56%

365, 31%

101, 9%

50, 4%

Location of 3 & 4 Star

Hotels

672, 57%

503, 43%

Hotel Supply in

[confidential]

4 star 3 star

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Su

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Keys)

Hotel Supply in [confidential]

4 Star 3 Star

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6.4 Hotel Supply Map Investment Feasibility Analysis and Development Recommendations Sample

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• 3 Star Hotel

• 4 Star Hotel

• Serviced Apartment

• The Property Site

1km Radius

2km Radius

Cat Bi International

Airport

Big C

Tam Bac Bus Station

International Hospital

Sport and ulture Center

Lach Tray Stadium

Train Station

2014

6.5 Hotel4 Star Public Rates and Room Types


Name [Confidential] [Confidential] [Confidential] [Confidential [Confidential [Confidential [Confidentiall Min Max Avg.

Grade 4 4 4 4 4 4 4

Keys 122 101 80 129 78 80 82

Room Category 1 Superior Deluxe Deluxe Deluxe Superior Standard Superior

Size (sm) 30 35 28 26 30.5 30 28 26 35 29.6

Quantity 82 115

Rate

Public 125

Corporate 99

Best Avail 115

Adv Purch 105 80

Sngl Public 57

Sngl Corp 54

Dble Public 69

Dble Corp 64

Single 70

Double 80

85.7

Public 100

Corp 80 92.5 57.1 57 125 81.0

Room Category 2 Deluxe Executive Executive Suite Deluxe Superior Deluxe

Size (sm) 30 45 45 52.5 40.2 35 33 30 52.5 40.1

Quantity 8 8

Rate

Public 145

Corporate 115

Best Avail 135

Adv Purch 122 100

Sngl Public 86

Singl Corp 79

Dble Public 98

Dble Corp 89

Single 110

Double130

Spr Single 130

Spr Dbl 150 95.2 115.1 66.7 66.7 145 102.6

Room Category 3 Executive Junior Suite Junior Suite Villa Junior Suite Deluxe Executive

Size (sm) 30 50 60 70 57.2 45 38 30 70 50.0

Quantity 6 2

Rate

Public 170

Corporate 135

Best Avail 160

Adv Purch 145 120

Sngl Pub 133

Sngl Corp 129

Dble Publ145

Dble Corp 139 138.1 162.6 76.2 76.2 170 133.3

Room Category 4 Apart Suite Suite Flat Suite Suite Suite

Size (sm) 60 75 54 64.2 55 70 54 75 63.0

Quantity 5 4

Rate

Public 190

Corporate 155 160 185.7 212.6 119 119 212.6 173.5

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7.0 Investment Parties Investment Feasibility Analysis and Development Recommendations Sample

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8.0 Cash Flow Analysis Investment Feasibility Analysis and Development Recommendations Sample

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8.1 Market Penetration AnalysisInvestment Feasibility Analysis and Development Recommendations Sample

• Due to several factors including the overall increase of tourist for Vietnam market, the increased number of Japanese

and Korean business visitors in [confidential] and the recovery of the Vietnamese economy. We have forecasted an

increase in demand of approximately 13% per year

• The limited new supply coming into the market and the increase in room demand should lead to progressive increase

in occupancies until the Subject Property will be opening and operating in 2017

Projected

Demand Growth 2014 2015 2016 2017 2018 2019 2020

Variance Var. Var. Var. Var. Var. Var. Var.

Leisure 5% 77,608 5% 81,489 5% 85,563 5% 89,841 10% 98,825 5% 103,766 5% 108,955

Mice 0% 36,956 10% 40,652 10% 44,717 15% 51,425 15% 59,138 10% 65,052 10% 71,557

Long Term 15% 14,167 5% 14,875 5% 15,619 10% 17,180 5% 18,040 5% 18,941 5% 19,889

Induced Demand 0% 0% 5% 7,295 0% 15% 26,400 3% 5,633 15% 30,060

Total Demand

(room/year) 128,731 6% 137,015 12% 153,194 8% 165,741 27% 209,698 8% 227,088 19% 269,789

Total Supply Base 215,350 215,350 215,350 215,350 215,350 215,350 215,350

New Supply

(Subject Ppty) 206 206 206 206 206

Property 1 100 100 100 100 100 100

Property 2 50 50 50

Property 3 200 200

Total Supply 215,350 251,850 327,040 327,040 345,290 418,290 418,290

Market Occupancy 60% 54% 47% 51% 61% 54% 64%

Penetration

Analysis 0% 0% -10% 5% 5% 10% 10%

Property

Occupancy 0% 0% 42% 53% 64% 60% 71%

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8.2 Hotel Cash FlowInvestment Feasibility Analysis and Development Recommendations Sample

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1 2 3 4 5 6 7 8 9 10

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Development Status Soft Opening Start Up Start Up Stabilization Renovation

Hotel Component

Number of Rooms 206 206 206 206 206 206 206 206 206 206

Occupied Rooms/Room Sold 31,699 40,011 47,947 44,902 53,346 51,129 37,595 51,129 51,129 51,129

Annual Room Available 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190 75,190

Room Occupancy 42% 53.2% 63.8% 59.7% 70.9% 68.0% 50.0% 68.0% 68.0% 68.0%

Average Daily Rate (ADR) - 85 94 94 108 113 119 119 119 124 131

RevPar 36 50 60 64 80 81 59 81 85 89

REVENUES

Room Revenue (Hotel) 2,694,395 3,741,024 4,483,036 4,828,136 6,022,799 6,061,178 4,456,749 6,061,178 6,364,237 6,682,449 Operating Income (OI): -

Total Room Revenue (net S.C.) 2,694,395 3,741,024 4,483,036 4,828,136 6,022,799 6,061,178 4,456,749 6,061,178 6,364,237 6,682,449

Service charges 134,720 187,051 224,152 241,407 301,140 303,059 222,837 303,059 318,212 334,122

Room Revenue 2,829,115 3,928,075 4,707,188 5,069,543 6,323,939 6,364,237 4,679,586 6,364,237 6,682,449 7,016,571

Food & Beverage 785,865 1,335,971 2,137,553 2,458,186 2,826,914 2,968,260 2,968,260 2,968,260 3,116,673 3,272,506

Other Dept Income 314,346 534,388 694,705 764,175 878,802 922,742 922,742 922,742 968,879 1,017,323

Gross Operating Revenue (GOR) 3,929,326 5,798,434 7,539,446 8,291,905 10,029,654 10,255,239 8,570,588 10,255,239 10,768,000 11,306,400

EXPENSES

Department Cost & Expenses

Hotel Rooms 509,241 636,551 732,033 732,033 768,635 807,067 847,420 889,791 934,281 980,995

Food & Beverage 510,812 740,678 814,746 814,746 855,483 898,257 943,170 990,328 1,039,845 1,091,837

Other Operating Expenses 204,325 275,839 317,214 317,214 333,075 349,729 367,215 385,576 404,855 425,098

Total Cost of Sales 1,224,378 1,653,067 1,863,994 1,863,994 1,957,193 2,055,053 2,157,806 2,265,696 2,378,981 2,497,930

Department Gross Income

Hotel Rooms 2,319,874 3,291,524 3,975,154 4,337,510 5,555,304 5,557,170 3,832,166 5,474,446 5,748,168 6,035,577

Food & Beverage (Restaurant & Banquet) 275,053 595,293 1,322,808 1,643,441 1,971,431 2,070,003 2,025,090 1,977,931 2,076,828 2,180,669

Other Dept Income 110,021 258,550 377,490 446,961 545,726 573,013 555,526 537,165 564,024 592,225

Total Gross Income (Dep Profit) 2,704,948 4,145,367 5,675,452 6,427,911 8,072,461 8,200,186 6,412,782 7,989,543 8,389,020 8,808,471

Undistributed Operating Expenses

Sales & Marketing 235,760 202,945 223,240 245,564 282,398 296,518 311,344 326,911 343,257 360,420

Administrative and General (inc. "others") 550,106 579,843 666,820 733,502 880,202 924,212 970,423 1,018,944 1,069,891 1,123,386

Property Operation & Maintenance 78,587 144,961 159,457 175,403 228,023 239,425 1,197,123 239,425 251,396 263,966

Energy Cost 255,406 347,906 400,092 440,101 528,121 554,527 582,254 611,367 641,935 674,032

Total Undistributed Expenses 1,119,858 1,275,656 1,449,609 1,594,569 1,918,745 2,014,683 3,061,144 2,196,647 2,306,479 2,421,803

Gross Operating Profit 1,585,090 2,869,711 4,225,843 4,833,342 6,153,716 6,185,503 3,351,638 5,792,896 6,082,541 6,386,668

Basic Management Fee (on GOR) 78,587 115,969 150,789 165,838 200,593 205,105 171,412 205,105 215,360 226,128

Provision for FFE (on GOR) 117,880 173,953 150,789 165,838 200,593 205,105 171,412 205,105 215,360 226,128

Incentive Management Fee (on GOR) 79,255 143,486 211,292 241,667 307,686 309,275 167,582 289,645 304,127 319,333

Other non Op costs (inc insurance) 39,293 57,984 75,394 82,919 100,297 102,552 85,706 102,552 107,680 113,064

Mgt Fee and Other Expense Sub-total 315,014 491,392 588,264 656,262 809,168 822,037 596,111 802,407 842,527 884,653

Net Operating Profit (EBITDA) 1,270,076 2,378,320 3,637,579 4,177,079 5,344,547 5,363,466 2,755,527 4,990,489 5,240,014 5,502,015

Developer Share 1,079,565 2,021,572 3,091,942 3,550,518 4,542,865 4,558,946 2,342,198 4,241,916 4,454,012 4,676,712

Share 190,511 356,748 545,637 626,562 801,682 804,520 413,329 748,573 786,002 825,302

8.3 Residential Rental Cash FlowInvestment Feasibility Analysis and Development Recommendations Sample

1 2 3 4 5 6 7 8 9 10

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Development Status Soft Opening Start Up Start Up Stabilization Renovation

Apartment Component

Number of Units 24 24 24 24 24 24 24 24 24 24

Occupied Rooms/Room Sold 144 244 259 244 230 230 230 230 230 230

Annual Room Available 287 287 287 287 287 287 287 287 287 287

Room Occupancy 50% 85.0% 90.0% 85.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0%

Average Monthly Rate (AMR) 1,600 1,680 1,764 1,940 1,940 2,037 2,139 2,246 2,359 2,476

RevPar 800 1,428 1,588 1,649 1,552 1,630 1,711 1,797 1,887 1,981

REVENUES

Room Revenue (Apartment) 229,824 410,236 456,086 473,822 445,950 468,248 491,660 516,243 542,056 569,158 Operating Income (OI): -

Total Room Revenue (net S.C.) 229,824 410,236 456,086 473,822 445,950 468,248 491,660 516,243 542,056 569,158

Service charges 11,491 20,512 22,804 23,691 22,298 23,412 24,583 25,812 27,103 28,458

Room Revenue 241,315 430,748 478,890 497,514 468,248 491,660 516,243 542,056 569,158 597,616

Food & Beverage 28,390 42,585 55,361 63,665 73,214 76,875 76,875 84,563 88,791 93,230


Gross Operating Revenue (GOR) 283,900 494,625 561,931 591,626 576,478 605,302 629,885 667,061 700,414 735,435

EXPENSES

Department Cost & Expenses

Hotel Rooms 24,132 36,197 41,627 41,627 43,708 45,894 48,188 50,598 53,128 55,784

Food & Beverage 18,454 26,758 29,433 29,433 30,905 32,450 34,073 35,776 37,565 39,444

Other Operating Expenses 9,227 12,456 14,325 14,325 15,041 15,793 16,582 17,412 18,282 19,196

Total Cost of Sales 51,812 75,411 85,385 85,385 89,654 94,137 98,844 103,786 108,975 114,424

Department Gross Income

Hotel Rooms 217,184 394,550 437,263 455,887 424,540 445,767 468,055 491,458 516,031 541,832

Food & Beverage (Restaurant & Banquet) 9,937 15,827 25,927 34,231 42,309 44,425 42,802 48,786 51,225 53,787


Total Gross Income (Dep Profit) 232,088 419,214 476,546 506,242 486,824 511,165 531,041 563,275 591,439 621,011

Undistributed Operating Expenses

Sales & Marketing 2,839 4,946 5,441 5,985 6,284 6,598 6,928 7,275 7,639 8,020

Administrative and General (inc. "others") 14,195 24,731 28,441 31,285 31,285 32,849 34,492 36,216 38,027 39,929

Property Operation & Maintenance 5,678 9,893 10,882 11,970 13,765 14,454 72,268 14,454 15,176 15,935

Energy Cost 5,678 9,893 11,376 12,514 13,140 13,797 14,487 15,211 15,971 16,770

Total Undistributed Expenses 28,390 49,463 56,140 61,754 64,474 67,698 128,175 73,156 76,813 80,654 Gross Operating Profit 203,698 369,752 420,406 444,488 422,349 443,467 402,866 490,120 514,626 540,357

Basic Management Fee (on GOR) 5,678 9,893 11,239 11,833 11,530 12,106 12,598 13,341 14,008 14,709

Provision for FFE (on GOR) 5,678 14,839 11,239 11,833 11,530 12,106 12,598 13,341 14,008 14,709

Incentive Management Fee (on GOR) 10,185 18,488 21,020 22,224 21,117 22,173 20,143 24,506 25,731 27,018

Other non Op costs (inc insurance) 2,839 4,946 5,619 5,916 5,765 6,053 6,299 6,671 7,004 7,354

Mgt Fee and Other Expense Sub-total 24,380 48,165 49,117 51,806 49,941 52,438 51,638 57,859 60,752 63,790

Net Operating Profit (EBITDA) 179,318 321,587 371,289 392,682 372,408 391,029 351,229 432,261 453,874 476,567

hare 161,387 289,428 334,160 353,414 335,167 351,926 316,106 389,035 408,486 428,911

Developer Share 17,932 32,159 37,129 39,268 37,241 39,103 35,123 43,226 45,387 47,657

182014

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8.4 Consolidated Cash FlowMezzanine Investment Decision


• The resulting NPV is positive (at discount rate of 20%) and the IRR indicate a positive expected returns of 21.33%.

• If management fee (base fee and incentive fee) is taken into account, the investment could have positive NPV and the

IRR indicate a positive expected return of 24.9%

Investment Decision Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

Initial Investment (Hotel) 0 0 (1,500) (1,500) 0 0 0 0 0 0 0 0

Initial Investment (Residential) 0 0 (1,045) (1,045) 0 0 0 0 0 0 0 0

Initial Investment (Residential fitting out) 0 0 0 (480) 0 0 0 0 0 0 0 0

Hotel Cash Flow ( 25% of Net Profit) 0 0 0 0 318 89 404 539 831 835 183 12,782

Rental Net Revenue 0 0 0 0 161 289 334 335 352 316 389 429

Residential Sale(10.5% cap rate) 0 0 0 0 0 0 0 0 0 0 0 4,085

Loan Use 0 0 0 0 0 0 0 0 0 0 0 0

Residential Sale(10.5% cap rate) 0 0 0 0 0 0 0 0 0 0 0 0

Annual Debt Service 0 0 0 0 0 0 0 0 0 0 0 0

Total Cash Flows Net to Mezzanine Lender 0 0 (2,545) (3,025) 479 379 738 874 1,183 1,152 573 17,295

Cumulative Cash Flow 0 0 (2,545) (5,569) (5,090) (4,711) (3,973) (3,099) (1,917) (765) (192) 17,103

Discount Factor @ 20% Mezz Hurdle Rate 1.00 0.9595 0.80 0.66 0.55 0.46 0.38 0.32 0.27 0.22 0.19 0.15

Discounted Cash Flow 0 0 (2,026) (2,007) 265 174 283 280 315 256 106 2,669

NPV @ 20% 316 = Sum of discounted cash flow

ROE ( Excluding management fee) 21.33%

Base Fee 79 116 151 166 201 205 171 205

Incentive Fee 79 143 211 242 308 309 168 290

Total Management Fee 0 0 0 158 259 362 408 508 514 339 495

Total Cash Flows Net to Mezzanine Lender 0 (2,545) (3,025) 637 638 1,100 1,282 1,691 1,666 912 17,790

Cumulative Cash Flow 0 0 (2,545) (5,569) (4,932) (4,294) (3,194) (1,912) (221) 1,445 2,356 20,146

Discount Factor @ 20% Mezz Hurdle Rate - 0.9595 0.7962 0.6635 0.5529 0.4608 0.3840 0.3200 0.2666 0.2222 0.1852 0.1543

Discounted Cash Flow 0 0 (2,026) (2,007) 352 294 422 410 451 370 169 2,745

NPV 1,181 = Sum of discounted cash flow

IRR (including management fee) 24.90%

Unit: $1,000

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2014

9.0 ConclusionInvestment Feasibility Analysis and Development Recommendations Sample

20

Thank You

Disclaimer: This document has been prepared in good faith and for general informational purposes only. Nothing herein contains investment, legal, tax

and/or other advice and investors should seek independent professional advice before making any investment decision. While reasonable care has been

taken to ensure that the sources of information herein are reliable, no guarantee is provided to the accuracy or completeness of such information (and

the same may not be independently verified or audited) and no liability is accepted for any inaccuracy or omission.

Alternaty Feasibility Study & Development Recommendations_Report Sample_EN

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