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14/01/04 Zafrica Property Investment Great American Lodge, Watford City q Serviced Hotel Development for the Oil Industry Zafrica Logo
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Transcript of Zafrica property investment
14/01/04
Zafrica Property Investment
Great American Lodge, Watford Cityq Serviced Hotel Development for the Oil Industry
Zafrica Logo
14/01/04
Investment Highlightsü Fully serviced workforce accommodation
ü Up to 38% rental yield in year 1
ü Average annual rental yield over 10 years of 51%
ü Invest from $33,950 for a fraction and $59,950 for a studio
ü Strong rental demand - 15,000 oil and service sector workers, and rising
ü Rental income supported by the worlds largest oil companies
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• Modern technology is creating opportunities in the US property market
• Government, political and economic influences are creating property investment
opportunities in some regions of the USA
• To understand this we must first look what has happened to the US Oil & Gas Industry
Why North Dakota?
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USA was largely self sufficient in oil up to 1949
The Oil & Gas Industry
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From 1949 Oil Demand Skyrocketed in the US
But Oil Production peaked in 1969 …and then declined whilst demand kept on rising
The Oil & Gas Industry
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The USA became dependent on massive oil and gas imports.
The Oil & Gas Industry
It also meant they were dependent on good relations with OPEC countries.
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5 years ago, America struck oil again!
The Oil & Gas Industry
q Oil production has increased dramatically since 2006
q US to end some oil imports from as early as 2014, due to soaring domestic production levels
q US crude oil exports exceeding imports for the first time in 65 years
q Global energy demand to rise 35% by 2035 (International Energy Agency)
q US will become less dependent on other countries
q US Economy is already benefitting
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There is a huge: POLITICAL, ECONOMIC and COMMERCIAL WILL to increase oil and gas production
The Oil & Gas Industry
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New drilling techniques mean oil can be hit in nearly 100% of drillings
Hydraulic Fracturing has been around for over 20 years but only recently has technology helped make this commercially viable
The game changer is horizontal drilling will allows extraction of oil and gas from the shale layer from up to 8 horizontal wells, up to 2 miles long each
New Technology
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America’s bread basket
Once Upon a Time in North Dakota…
q Thriving farming state over 60 years ago
q Increasing automation in farming
q Changing global landscape
q Leads to…Declining population and declining jobs
q Always oil in North Dakota, the Bakken Formation was discovered in the 1950’s…but very little was recoverable
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Bakken Formation Region
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North Dakota by numbers
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North Dakota by numbers
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North Dakota by numbers
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In Summary
q The Bakken has become a game-changer for U.S. oil production
q Accounts for 10% of US oil production
q New oil wells increasing by 20% in 2013
q North Dakota oil industry to remain for at least 60 years (Williston EDC)
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The Problemq Dire lack of housing and infrastructure
q Tens of thousands of oil and service sector workers and increasing
q Over 15,000 without suitable accommodation
q If you can get a hotel room Mon-Thurs in the limited number of hotels in the west of the state, you will be paying over $300 per night
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What is holding North Dakota housing supply back?
q Housing growth has not kept pace with demand
q Several barriers to entry that create unique issues within the Bakken
1. Lengthy and challenging entitlement process2. Lack of infrastructure (roads, water/sewer, electricity)3. Lack of workforce to build new homes4. Difficult to get materials for new construction: virtually all raw materials diverted to
oil field
Creating the Perfect Opportunity to solve a real need as demand still keeps on increasing
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The OpportunityØ The developer we represent are building and managing housing for
Oil Workers
Ø Major oil companies such as Haliburton, Whiting, Continental Resources all require these types of lodging for their workers
Ø Using Modular Construction Technology to build these Serviced Hotel Developments
Ø High levels of facilities – creating a real community
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The OpportunityØ An Independent Market Study has been carried out which recommends we charge $135 to
$160 per night for GAL Watford City
Ø They project occupancy of 100% in summer and 85% in winter – averaging 90%
Ø A severe lack of supply existing in McKenzie County for this type of accommodation
Ø Other accommodation available is vastly inferior whereas comparable types are achieving up to $160 in some cases
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Great American Lodge, Watford Cityq Executive Hotel Studios – 195 sq ft
q $59,950
q Booking Fee $2,908
q Purchasing costs up to $2,350
q Range of management options – including a
company associated with the developer
q Hands-free
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Great American Lodge, Watford CityThe 50% fee covers everything from all utilities bills, cleaning, labour, upkeep of the suite in which the studio sits, tenant management and placement and other additional services associated with managing a fully serviced hotel studio.
Plus the lease payments on the buyer’s sub lease and repairs & maintenance and Furniture, Fixtures & Equipment (FF&E) and insurance are included.
Other deductions are $450 pa marketing fee and $5 per night held back in a reserve fund. The estimated Property Tax is $800 per studio.
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Payment Process1. Complete booking form, and pay the booking fee. A receipt will be issued when funds have cleared. Provide copies
of passport and recent utility bill showing home address.
2. Legal pack will be sent within one week of receipt of the booking fee and relevant paperwork.
3. Upon signing the purchase agreement and relevant documents in the legal pack, the balance of the purchase price*
(plus purchasing costs) is paid into a US escrow account and then released to NDD upon completion of the following
stages:
1. 35% of contract price (plus purchasing costs) on signing of purchase contract.
2. 35% on confirmation that the studio is ready to ship from the factory.**
3. 30% on confirmation that the building is complete and ready for occupation.
*Escrow transfer fees of $32 per transaction. Investors are responsible for their own bank’s transfer fees.
**Suites will be shipped to site before all the studios are sold.
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Investment StructureThe ownership structure is straightforward and provides more control for you as well as more security The documents in the contract pack are:⁻ Purchase & Sale Agreement⁻ Sub-lease Agreement⁻ NDDPM Management Agreement⁻ Escrow Agreement⁻ Closing Pack The purchase:You purchase the actual physical studio – handled by the Purchase & Sale Agreement which is between you and North Dakota Developments LLC
A bill of sale is issued which is a legal document made by the seller stating a parcel of real property is the purchasers lawful possession
The sub-lease agreement is signed with NDD LLC granting you rights on the land for 60 years – this relates to the land upon which your studio is sited
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Investment StructureThe Management:
We strongly recommend you choose NDD Property Management LLC to take over the full management and maintenance of your unit
You enter into the NDD PM Management agreement which is signed between you and NDD PM direct
This is like any landlord – management company arrangement in principle except NDD PM terms include all services and costs like a hotel management contract and it is full service management not a simple buy to let management service The Terms:
Importantly NDD PM pay the sub lease rent of $2000 per monthThe 50% fee is based on the gross revenue of the room and covers, utilities, full management, cleaning, maintenance, all repairs to the studio and its structure (via on site workshop if needed), sourcing of tenants, liability insurance etc.
All repairs and damage are covered by the security deposit and management contractA marketing fee of $450 is payable annually and $5 per night reserve fund payment (holdback) is required as wellThe contracts states that the studio(s) are allocated on a strict rotational basis – least used next used basisClauses also state that Management accounts related to the income and costs for their studio are made available
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In Summary
q Total of 650 studios in current project
q Phase 1 complete and now opening (sold out)
q Phase 2 on track to open in 2013 (sold out)
q Phase 3 due to open March / April 2014 - Selling Fast!
