a useful report

1. SAMPLE REPORT
Asset Performance Review for
Healthier Profits
A JOINT INITIATIVE BETWEEN AL TAMIMI & COMPANY AND
COLLIERS INTERNATIONAL HOSPITALITY KSA

2. Colliers International
This document is not a prospectus and does not constitute any part of an offer or contract. All
information, analysis and recommendations made by Colliers International are made in good
faith and represent Colliers’ professional judgment on the basis of information obtained from
the client and elsewhere during the course of the assignment.
However, since the achievement of recommendations, forecasts and valuations depends on
factors outside Colliers’ control, no statement made by Colliers may be deemed in any
circumstances to be a representation, undertaking or warranty, and Colliers cannot accept any
liability should such statements prove to be in accurate or based on incorrect premises. In
particular, and without limiting the generality of the foregoing, any projections, financial and
otherwise, in this report are intended only to illustrate particular points of argument and do
not constitute forecasts of actual performance.
Likewise, indications of potential selling prices are indicative and intended primarily to enable
easier comparison between the different options that are reviewed in this report. Those figures
do not constitute formal valuations and they have not been prepared in accordance with the
RICS ‘Red Book’.
Al Tamimi & Company
The legal aspects of this Report are based on Al Tamimi & Company’s legal review of certain
documents presented to Al Tamimi & Company. The scope of Al Tamimi & Company’s
engagement in relation to the legal review is set out in our engagement letter and
accompanying terms of engagement, as supplemented by this Report. Please see schedule 3 for
further details of the scope of work carried out by Al Tamimi & Company, the reliance that may
be placed on the legal content of this Report and Al Tamimi & Company’s liability for this
Report.
This Report is addressed only to the addressee. This Report may not be relied upon by any
other person and we have no responsibility or liability whatsoever in respect of, or arising out
of, or in connection with, the contents of this Report to any person other than the addressee.
The benefit of this Report may not be assigned or transferred and if others choose to rely in any
way on the contents of this Report, they do so at their risk.
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3. CONTENTS
CONTENTS 2
EXECUTIVE SUMMARY 3
RECOMMENDATIONS 3
LEGAL SUMMARY 3
COMMERICAL SUMMARY 3
PERFORMANCE GROWTH STRATEGY TIPS 4
LEGAL STRATEGY TIPS 4
PROPERTY SUMMARY 5
OVERVIEW 5
LOCATION & SURROUNDINGS ANALYSIS 5
PHYSICAL ASSET & FACILITIES –TRAFFIC LIGHT ANALYSIS 7
TRADING PERFORMANCE ANALYSIS 8
MARKET PERFORMANCE 9
COMPARATIVE ANALYSIS 9
COMMERCIAL CONCLUSIONS 12
THE PROPERTY 12
COLLIERS HOTEL WORTH INDEX 12
LEGAL OVERVIEW 13
POTENTIAL CLAIMS AGAINST THIRD PARTIES 13
OVERVIEW OF BANK’S SECURITY PACKAGE 13
KEY MANAGEMENT AGREEMENT TERMS 14
POTENTIAL BREACHES OF MANAGEMENT AGREEMENT 15
POTENTIAL RIGHTS UNDER MANAGEMENT AGREEMENT 16
NON-DISTURBANCE AGREEMENT 16
CONTRACTOR AND DEVELOPMENT DOCUMENTS 16
EMPLOYEES 16
CAPITAL STRUCTURE 17
DEBT SERVICE COVERAGE (DSC) RATIO FORECAST 17
DEBT ON EBITDA 17
LOAN TO VALUE RATIO 17
GLOSSARY OF TERMS 18
SCHEDULE 1-P&L US$ 19
SCHEDULE 2 20
SCHEDULE 3 24
SCHEDULE 4- PRACTICES PROFILE 25
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4. EXECUTIVE SUMMARY
RECOMMENDATIONS
Further to our asset review we concluded the following:
LEGAL SUMMARY
 The Hotel is freehold and operated as a Brand under
an HMA between An Hotel Company and Hotel Owner
Full Legal Overview and a separate Trade Mark Licence granted by An Hotel
Company. The HMA is lacking in a number of
protections for Hotel Owner and is very one sided in
favour of a Hotel Company.
 The Hotel Owner also entered into a Non-Disturbance
Agreement with a Hotel Company and the Bank as well
as a Facility Agreement with the Bank. As part of the
Facility Agreement, Hotel Owner granted a full security
package to the Bank over the assets of the Hotel and
shares in Hotel Owner.
 The Hotel was opened in 1995 as a new build.
COMMERICAL SUMMARY
 The Hotel is running below its market and competitive set
position due principally to poor ARR performance, though
there is also evidence that occupancy is also beginning
to drop against market benchmarks.
Full Commercial Overview
 As a result of falling top-line revenue Rooms and Food
Gross Profits are very low indeed which suggests that
management have not made the necessary cuts in their
cost model to accommodate falling revenue resulting in
proportionately high Administrative & General, and Wage
levels at 16.7% and 36% of total revenue respectively.
 The main revenue generating areas of the Hotel are
Hotel Worth Index
generally in poor condition, particularly the bedrooms,
+14,600
+ 3,700 +10,300
172,300 and are in need of some capital expenditure to bring the
product into line with its competitive set.
 Through our analysis we envisage four scenarios which
will assist in driving better revenues and net profits and
will strengthen the debt service coverage position as
Current Hotel Property Value Property Value Property Value
Worth- Scenario 1 Scenario 2 Scenario 3 Scenario 4 follows:
 Scenario 1- Current trading
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5. Effect of Strategic Performance Management on Cash  Scenario 2- Increasing Rooms Profitability by 2% will
Flow add SAR3.7m to asset worth
11,000
 Scenario 3- Increasing Rooms Profitability by 2% +
10,000
9,000 Increase F&B Profitability to 30% will add
8,000
SAR10.3m to asset worth
7,000
6,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020  Scenario 4- Increasing Rooms Profitability by 2% +
Increase F&B Profitability to 30% + Decrease in
EBITDA Scenario 1 EBITDA Scenario 2 EBITDA Scenario 3 EBITDA Scenario 4
Undistributed Payroll by 2% will add SAR14.6m to
the asset worth
PERFORMANCE GROWTH STRATEGY TIPS
 Recommendation 1- Revenue Strategy
 Recommendation 2- Cost Strategy
 Recommendation 3- Staff Strategy
 Recommendation 4- Sales & Marketing Strategy
LEGAL STRATEGY TIPS
 HMA: Strategy
 Licenses: Strategy
 Ownership Structure: Strategy from a legal prospective
 Litigation : Strategy
 Risk mitigation : Strategy
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6. PROPERTY SUMMARY
OVERVIEW
The Hotel was purpose built in 1995 and is well located off a
major thoroughfare in King Fahad Road Riyadh and within
minutes of KAFD and Kingdom Centre. The Hotel is
currently operated under an HMA with An Hotel Company
but would be suitable for alternative branding or
repositioning.
The Hotel benefits from high visibility in a prominent location
and is well sign posted with good complementary amenities
within the immediate locale supporting the needs of both
business and leisure guests.
LOCATION & SURROUNDINGS ANALYSIS
Since the hotel opening, the neighbourhood has grown from
few residential buildings to micro economy, characterised by
a large number of new hotels, and retail outlets. Our Site
econometric analysis has produced the following results:
1. Suitability for Re-Development: The current market
demand is high for service apartment. The asset in
its current status allow for the re-configuration of the
bedroom stock, hence the opportunity to convert 20
units into serviced apartments which will add an
extra SAR 15,000 or room revenue per annum per
room sold.
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7. 2. Visibility: Despite the number of residential buildings
been built around the asset, visibility still good.
However, we strongly recommend reviewing
signage and information on the hotel website.
3. Accessibility: Major work around the site has led to
traffic been diverted and therefore accessibility to
the hotel have been restricted. This could affect
business in short to medium term.
4. Proximity to Demand Generators: New companies
have occupied the adjacent building and this put the
hotel in a stronger position when compared with
direct competitors.
5. Market Growth Potential: Macro market growth is
limited as the main tourism source markets are still
suffering from economic downturn. GCC and Egypt
are the markets which we have identified as catalyst
for the growth. Micro market growth is limited to the
new tenants in adjacent office building and meeting
business from existing clients.
6. Barriers to Entry for New Hotel Supply: Barriers
are very low and as there are quite few plots
available in the surroundings and the threat from
new supply still very high.
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8. PHYSICAL ASSET & FACILITIES –TRAFFIC
LIGHT ANALYSIS
The table below summarises the Hotel's facilities and
amenities
KPI Facility Number Condition
FF&E are poor, Bathrooms
Bedrooms 200
Requires Tired
immediate
Reception N/A Fair
attention
Lounge 100 Fair
Will require
attention if ignored Bar 75 Good
Restaurant 120 Good
Is operationally
sound Meeting Room 1 500 Good
Meeting Room 2 300 Fair
Meeting Room 3 100 Fair
Boardroom 18 Excellent
Changing rooms tired. M&E
Leisure & Spa N/A
good
Back of House 8 Generally poor
Generally good. – signage
Exterior N/A
poor
Grounds N/A Generally good
The Hotel is generally in poor condition having received little
capital expenditure over recent years. The reception, lounge
and bedrooms are in need of a soft refurbishment to
maintain the Hotel's competitive position within its market
place and against its competitive set. This could seriously
threat the room revenue achievable and therefore a negative
impact on net profit and worsening of debt service coverage.
The food and beverage facilities are however well
maintained and are popular amongst both Hotel guests and
the public. The Hotel bar in particular has a cachet within the
immediate locale and trades strongly on weekday evenings.
The meeting and conference facilities are largely operable,
though the smaller meeting rooms could use some
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9. improvements to the soft furnishings and wall coverings
which are tired. The leisure areas are in fair condition though
the changing rooms would appear to have a damp issue and
the shower areas are in need of some improvements.
The back of house areas are generally in very poor condition
with the kitchens and staff facilities in particular requiring
immediate attention and investment.
The exterior of the building is generally good though a
freshen up of the façade and better maintenance of the trees
and shrubs would improve appearances immediately. In
addition, the lighting of the Hotel as well as night and
general signage requires attention.
TRADING PERFORMANCE ANALYSIS
The Hotel is trading reasonably well with a good mix of
Corporate and Leisure business. Average room rate and
occupancy are broadly in line with the Hotel's competitive
set (see Appendix 1) though ARR has shown some decline
in recent months.
FINANCIAL ANALYSIS, 2010-11 (FULL P&L IN
SCHEDULE 1)
HISTORIC & CURRENT
The Hotel has historically traded well though the recent
credit crunch has had a detrimental effect on the Hotel's
trading performance.
Full Profit & Loss Accounts
Current & Historic Hotel Performance
2011* 2010 2009
Year % % %
(SAR) (SAR) (SAR)
TRevPAR SAR48,974 SAR53,885 SAR56,578
GOPPAR SAR13,249 27% SAR18,095 34% SAR23,676 42%
EBITDA
SAR6,173 13% SAR10,194 19% SAR14,741 26%
PR
Key Performance Indicators
ARR SAR SAR116.00 SAR122.50 SAR126.00
Occ 69% 72% 74%
RevPAR SAR80.27 SAR88.32 SAR92.74
* 6 month actual and 6 month forecast accounts
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10. MARKET PERFORMANCE
The Hotel's competitive set as an average performed
relatively well over the previous three years, though with the
recent economic downturn, the Meetings, Incentives,
Conferences and Events (MICE) segment has been hit
which has had an adverse effect on all the Hotels in the
sector.
Current & Historic Market Performance
2011* 2010 2009
Year % % %
(SAR) (AED) (AED)
TRevPAR SAR52,326 SAR57,623 SAR59,652
GOPPAR SAR21,001 40% SAR23,596 41% SAR25,556 43%
EBITDA PR SAR16,232 31% SAR17,554 30% SAR19,658 33%
Key Performance Indicators
ARR SAR128 SAR132 SAR136
Occ 72% 72% 76%
RevPAR SAR92.16 SAR95.04 SAR103.36
* 6 month actual and 6 month forecast accounts
We have aggregated the market data to show performance
on a ‘per room’ basis to ensure fair comparisons are being
made.
COMPARATIVE ANALYSIS
As illustrated below, the Hotel has performed badly against
its competitive set, particularly in terms of ARR which has
fed through the Profit and Loss accounts to show very poor
conversion to EBITDA.
Comparative Analysis
2011* 2010 2009
Year % % %
(SAR) (SAR) (SAR)
TRevPAR -6.41% -6.49% -5.15%
GOPPAR -36.91% 35% -23.31% 38% -7.36% 42%
EBITDA PR -61.97% 19% -41.93% 24% -25.01% 28%
Key Performance Indicators
ARR -9.38% -7.20% -7.35%
Occ -3.89% 0.14% -3.16%
RevPAR -12.90% -7.07% -10.28%
* 6 month actual and 6 month forecast accounts
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11. Our detailed P&L analysis, as summarised above, indicates
that the Hotels performance has suffered particularly in the
past two years with top line figures down both in real and
comparative terms.
Rooms Department
ROOMS DEPARTMENT-MARGINS
Rooms Revenue Rooms Profit
20762 • Rooms Revenue @ 35.7% of 2011’s Forecast
15913 • Rooms Profit @ 36.3% of 2011’s Forecast
7410
13352
5773
10140
• Rooms Margin should be constant and increasing
with good cost management approaches
May Year to Date Rest of Year Full Year 2011
• Hotel rooms should have a room’s profit margin in
Rooms Margin
excess of 80%, but currently the hotel is achieving
79%
below this threshold. To achieve annual target the
78%
hotel needs to achieve profits at 75.9%
77.9%
77%
76.6%
Rooms Margin
76% Rooms Margin Trend
ROOMS DEPARTMENT COSTS- BENCHMARK
75.9%
75%
74% 35%
May Year to Date Rest of Year Full Year 2011
30%
25%
20%
29%
23%
20%
15%
10%
5%
0%
Hotel 1 Hotel 2 Hotel Analyzed
Rooms Expenses
• Hotel 1 has the Ideal Cost / Profitability Mix.
• Hotel 2 is a Normal hotel operating at a higher cost
base due to guest turnover
• The subject hotel has an Opportunity cost of 3%
points reduction on the Rooms Costs to reach the
optimum scenario.
FOOD & BEVERAGE DEPARTMENT-MARGINS
F&B Department
F&B Rev F&B Profit • F&B Revenue @ 26.8% of 2011’s Forecast
• F&B Profit @ 16.7% of 2011’s Forecast
3882
2841
• F&B Margin is at 5.7%, Cost of Sale is at 25%,
1041
Payroll is at 60% and other costs at 9%.
359
299
60
May Year to Date Rest of Year Full Year 2011 An opportunity lies in improving Payroll through multitasking
and skills training.
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12. FOOD & BEVERAGE DEPARTMENT-COST
BENCHMARK
12%
F&B Margin 100%
11%
80%
91%
10%
10.5%
9%
9.2%
8%
7% 60%
52%
59%
6% F&B Margin
5.7%
5%
4%
F&B Margin Trend
40%
3%
2%
1% 20%
0%
May Year to Date Rest of Year Full Year 2011 0%
Hotel 1 Hotel 2 Hotel Analyzed
Food & Beverage Expenses
• Hotel 1 has a high F&B Profitability Margin of 48%.
• Hotel 2 is operating at a good F&B Profitability Margin
of 41%
• The subject hotel is forecasted to trade at a poor cost
/ profitability mix, and has a Departmental
Profitability Margin of just 9%.
Other Department OTHER DEPARTMENT-MARGINS
Other Revenue Other Profit
• Other Revenue @ 20.9% of 2011’s Forecast
3329
2634
• Other Profit @ 21.5% of 2011’s Forecast
2238
1757
696
481
• Other Margin is at 69.1%, with a yearend target of
May Year to Date Rest of Year Full Year 2011 67.2%
The Analysis concluded that it is below the line costs where
Other Margin
70% there have been some mismanagement with conversion to
69% EBITDA dropping significantly.
69.1%
68%
Other Margin
This in itself implies that insufficient measures were taken by
67%
67.2%
Others Margin Trend
the Hotel's management to reduce their fixed costs in the
66.7%
66%
preceding years. Immediate remedies can be taken in this
65%
May Year to Date Rest of Year Full Year 2011 area to reduce costs, some of which can be affected by the
operator themselves (procurement, staffing, management
fees) whilst other, property based costs, should be dealt with
by the Owners.
Whilst the mismanagement of the cost model is important,
top line figures could have been maintained in line with the
market and it is our opinion that the Hotel has performed
below competitors in this area due to insufficient expenditure
on FF&E, hence less marketable.
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13. COMMERCIAL CONCLUSIONS
THE PROPERTY
The Hotel is generally in fair condition though we feel it has
been underinvested in over the past few years and would
benefit greatly from a soft refurbishment. Additional works
should be carried out on the exterior of the building to
improve the façade, landscaping signage and lighting
around the building.
If reinvestment takes place the Hotel should claw back its
position within the market and re-establish its market
penetration to bring profits back up to historic levels. This will
enable the owner to have a healthier business and better
service coverage of its interests in the property and business
at the best possible exit value
COLLIERS HOTEL WORTH INDEX
EFFECT OF STRATEGIC PERFORMANCE ON NET
PROFIT AND ASSET VALUE
Hotel Worth Index Scenario 1- Current trading
+14,600
+ 3,700 +10,300
172,300 Scenario 2- Increasing Rooms Profitability by 2% will add
SAR3.7m to asset worth
Scenario 3- Increasing Rooms Profitability by 2% +
Increase F&B Profitability to 30% will add SAR10.3m to
asset worth
Current Hotel Property Value Property Value Property Value
Worth- Scenario 1 Scenario 2 Scenario 3 Scenario 4
Scenario 4- Increasing Rooms Profitability by 2% +
Increase F&B Profitability to 30% + Decrease in
Undistributed Payroll by 2% will add SAR14.6m to the asset
worth
Effect of Strategic Performance Management on Cash
Flow
11,000
10,000
9,000
8,000
7,000
6,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EBITDA Scenario 1 EBITDA Scenario 2 EBITDA Scenario 3 EBITDA Scenario 4
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14. LEGAL OVERVIEW
POTENTIAL CLAIMS AGAINST THIRD PARTIES
Our initial review of the documents indicate that the Bank is
unlikely to have a claim against either the original valuer or
the solicitors who advised on the grant of the loan facility at
the start of the Bank's loan. However, this should be
reviewed in more detail if the Bank's loss crystallises
(subject to any limitation issues). In the event that a more
detailed review indicates that the Bank does have a claim
against a third party in relation to its loss, Al Tamimi &
Company would like to discuss with the Bank options for
funding such claims.
OVERVIEW OF BANK’S SECURITY PACKAGE
The Bank’s security package includes a number of
shareholder (i.e. borrower group) guarantees, a fixed charge
over the Property and an assignment of the borrower's
interest in: (a) the Hotel agreements including the non-
disturbance and management agreements; and (b) the
income, retentions, sale proceeds and any insurance
proceeds relating to the Hotel. A pledge by the borrower
provides the Bank with security over the shares of [Holding
Company].
The recommended restructuring option in this case is to
threaten to exercise the lender's rights under the facility
agreements (although not any rights of appropriation in the
pledge), including the rights under guarantees granted in its
favour, so as to illicit sufficient funds from Hotel Owner's
group of companies for Hotel Owner to bring the facility back
from default without the necessity of enforcement of security.
If, as seems likely, this threat results in a satisfactory
compromise it will be appropriate to amend and restate the
loan to extend its term (and potentially, at the same time,
relax certain financial covenants) in return for:
 a charged cash deposit;
 an equity injection into the borrower from its
shareholders/guarantors;
 additional security from other members of the
borrowing group;
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15.  Hotel Owner using the monies available within
the FF&E reserve account to carry out the
proposed refurbishment works (i.e. against the
background of the above improved security
package),
such that, if the restructured facility does not result in Hotel
Owner being able to meet its commitments, the Hotel can, in
any event, be sold in a much improved position.
KEY MANAGEMENT AGREEMENT TERMS
The full version of this analysis can be found in Schedule 2
but we below have highlighted the pertinent points from our
analysis.
If retaining the HMA, the onerous terms which the Bank
should consider renegotiating with the Operator are as
Schedule of HMA follows:
Terms
PERFORMANCE TESTS
We have concerns about the existing performance test.
That test provides that if in any two consecutive fiscal years
the GOP is less than:
 85% of the budgeted GOP in any fiscal year from
the 4th fiscal year up to and including the 10th fiscal
year of the term; and
 90% of the budgeted GOP in any fiscal year from
the 11th fiscal year onwards and including the end
of term;
then the Owner shall have the right to terminate the HMA by
notice, to be effective between 90 to 180 days afterwards.
A more effective test would be to compare the performance
of the Hotel against revenue (as fees (apart from the
Incentive Fee) are paid by reference to this) or the REVPAR
of the comparable hotels, at not less than 90% rate.
FEES
The Base Fee and Incentive Fee are both high compared to
the current market norm. In particular, the Incentive Fee of
12% of GOP is very high and a figure of 8% - 10% of GOP
or AGOP would be far more reasonable.
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16. OWNERS' PRIORITY
The HMA does not provide for any Owners' priority return or
for any deferral of the Operator's Incentive Fee. It would be
preferable for the Owner if the Operator's Incentive Fee was
subordinated to an agreed amount of debt service on the
Hotel.
EXCLUSIVITY
The HMA does not provide for any exclusivity or area of
protection for the benefit of the Owner. The Operator is
therefore free to operate other brand hotels within the vicinity
of the Hotel.
POTENTIAL BREACHES OF MANAGEMENT
AGREEMENT
[Identify any likely breaches of Hotel Management
Agreement and implications]
It is often the case that purported breaches of the HMA are
not clear-cut. Depending on the position of the Operator,
there is likely to be a risk in seeking to terminate the HMA
which may lead to a costly and time consuming legal
dispute. Once the relevant documentation have been
reviewed and considered, Al Tamimi & Company will be in a
position to advise in more detail as to the strength of the
Bank's position under the HMA and whether it is likely to be
cost and time effective to seek to terminate the HMA in the
context of the overall commercial position.
Alternatively, often allegations of mismanagement rely on
allegations of numerous failings. Therefore, Hotel Owner
should look to see whether there is a mechanism within the
HMA that enables it to terminate on the basis of such an
aggregation.
Hotel Owner should also be aware that if it decides to
terminate the HMA, it may face the threat of An Hotel
Company counterclaiming for damages, possibly equal to
the entire remaining term of the HMA.
If the Hotel Owner can demonstrate that An Hotel Company
has not delivered upon the obligations that were agreed
between the parties, the Hotel Owner may be able to bring a
claim against An Hotel Company for compensation based on
claims of mismanagement.
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17. POTENTIAL RIGHTS UNDER MANAGEMENT
AGREEMENT
[Identify Hotel Owner’s/Bank’s Rights under HMA]
There are a number of concerns in relation to the
mismanagement of the Hotel such as to justify Hotel Owner
in exercising its right to inspect financial records. If a review
of those records will support an allegation of
mismanagement, we believe it is likely that it will be
appropriate to seek to renegotiate the terms of the HMA.
The first step, however, is to obtain copies of the relevant
records by exercising the contractual right of inspection.
The audit terms are standard form and allow the Owner to
inspect the relevant records on reasonable notice.
NON-DISTURBANCE AGREEMENT
The Hotel is encumbered by a NDA but it would seem
unlikely that the NDA materially impacts upon the above
recommended strategy as it seems probable that, in a forced
sale scenario, the asset could be sold subject to the existing
HMA.
CONTRACTOR AND DEVELOPMENT
DOCUMENTS
Not applicable.
EMPLOYEES
The employees in the Hotel are all employed by the Hotel
Owner, with the exception of the General Manager who is
employed by the Hotel Operator.
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18. CAPITAL STRUCTURE
DEBT SERVICE COVERAGE (DSC) RATIO
FORECAST
 From the analysis of the hotel historic trading projections
we foresee the debt service coverage to be in line
with the minimum required by the bank.
 A 10% fall in Average Room Rate it is likely to have a
6.1% negative impact on the EBITDA, consequently
bring the DSC ratio below the required 1.25X
 In order to maintain a robust DSC ratio the hotel is
required to achieve a Gross Operating Profit
constant at 60%. Any shortfall in GOP will threaten
the compliance with the minimum DSC required by
the lender
DEBT ON EBITDA
 The hotel debt finance position stands at 17x times
EBITDA which in our view is very risky
 Assuming the hotel will implement the strategies
recommended in this report we envisage the total
debt to reach 13x times EBITDA by 2015
LOAN TO VALUE RATIO
 Senior Debt-The current loan amount stands at 50% of
value
 Mezzanine Debt- The current loan amount stand at 85%
of value
 Junior Debt – The current loan amount stands at 70% of
value.
We have noticed an abnormal distribution of debts
which we would suggest to consolidate all in one
senior debt. The structure of the new debt needs to
reflect the forecasted trading projections in order to
provide overall debt service coverage supportable
by the property.
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19. GLOSSARY OF TERMS
ARR – Average Room Rate
EBITDA – Earnings Before Interest Tax Depreciation &
Amortisation
FF&E – Fixtures Fittings & Equipment
GOPPAR – Gross Operating Profit Per Available Room
HMA – Hotel Management Agreement
NDA – Non-Disturbance Agreement
OM&E – Operating Machinery & Equipment
POR – Per Occupied Room
PAR – Per Available Room
RevPAR – Revenue Per Available Room
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20. SCHEDULE 1-P&L US$
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21. SCHEDULE 2
 Onerous/Scope for renegotiation
 Operator Friendly
 Market Standard/Reasonable
Provision Summary
1. Parties (1) [ ● ] (Owner)
(2) [ ● ] (Operator)
2. Term 25 years from the Opening Date. The Operator can
choose to extend the term for a further five years on 12
months prior written notice before the expiry of the initial
term.
3. Technical Services The Owner shall perform Technical Services which entail
consultation with the Owner's contractors in respect of
operational matters, design matters, IT planning and Brand
Standards matters.
4. Pre-Opening Activities The Operator shall prepare and carry out a Pre-Opening
Programme Activities Programme prior to the Projected Opening Date,
including activities such as recruitment, marketing,
obtaining licences and permits, arranging for amenities
provision, and preparation of the first year's operating
Budget.
5. Technical Services Fee $100,000
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22. Provision Summary
6. Base Fee 3% of Total Revenue each Year.
7. Incentive Fee 12% of Gross Operating Profit each Year.
8. Marketing, Central Sales Sales and Marketing Fee: [ ]% of Total Revenue.
and Licensing Fees
TM Licensing Fee: [ ]% of Total Revenue.
9. Owner’s Priority/Deferral There is no Owner’s priority return or deferral of incentive
of Incentive Fee fee.
10. FF&E Reserve A Reserve Fund shall be held in a segregated account and
each year the following percentages of Total Revenue will
be transferred to this account:
First Year: 1%
Second Year: 2%
Third Year: 3%
Fourth Year, and thereafter: 4%
The Reserve Fund shall be used to make replacements
and renewals of and additions to FF&E only.
11. Alterations/Brand The Operator can make alterations to the Hotel which are
Standards customarily made in the operation of first-class Hotels or
are required to maintain the Hotel in accordance with the
brand standards (such standards are set by the Operator).
The cost of this shall be borne by the Owner.
12. Performance Test If in any two consecutive fiscal years GOP is less than:
(a) 85% of the budgeted GOP in any fiscal year from the
th th
4 fiscal year up to and including the 10 fiscal year of
the term; and
(b) 90% of the budgeted GOP in any fiscal year from the
th
11 fiscal year onwards,
then Owner may terminate this Agreement.
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23. Provision Summary
The Operator can cure the breach by paying an amount
equal to shortfall in respect of either one of the two relevant
fiscal years. There is no limit to the number of times that
the Operator can cure.
13. Employees Persons hired to work at the Hotel shall be employees of
the Owner and not of the Operator, except that the General
Manager and other executive personnel may be employed
by the Operator.
14. Early termination by the The Owner can terminate if the Operator:
Owner
(i) fails to observe a material term of the Agreement and
such default continues for 60 days after receiving
notice specifying the breach requiring it to be
remedied;
(ii) becomes insolvent or ceases to carry on its business.
15. Early termination by the The Operator can terminate if Hotel Owner:
Operator
(i) fails to observe a material term of the Agreement and
such default continues for 60 days after receiving
notice specifying the breach requiring it to be remedied
or 10 days after such notice in the case the default
relates to failure to pay any monies and/or fees due
under the Agreement;
(ii) does not commence construction by [ ] or open
Hotel by [ ];
(iii) becomes insolvent or ceases to carry on business.
16. Right of First Offer The Operator has a right of first offer if the Owner wishes to
sell the Hotel.
17. Exclusivity No restrictions
19. Assignment The Operator can assign any of its rights to any person,
without consent of the Owner, provided the assignee
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24. Provision Summary
enjoys the benefits of the Brand organisation in the same
degree as the Operator.
The Owner may not, without the consent of the Operator,
such consent not to be unreasonably withheld, assign any
of its obligations under this Agreement or dispose of the
Hotel.
The Owner may not assign/dispose of the Hotel to:
(a) any entity considered by the Operator to be a
competitor; or
(b) any entity of ill repute;
The Owner may not create any security over Hotel where
the aggregate indebtedness exceeds 75% LTV.
20. Disputes The Agreement is governed by English law. Disputes
under the Agreement are dealt with as follows: [expert
determination/mediation/arbitration/ court of law]
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25. SCHEDULE 3
The scope of Al Tamimi & Company’s engagement
expressly excludes any responsibility to investigate, advise,
comment or report on, or otherwise have any responsibility
for, the affairs of the Bank in relation to taxation,
accounting, financial matters, fiscal compliance with
environmental law and regulation, valuation of any asset or
liability of the Hotel, any actuarial matters, the adequacy
or enforceability of any insurance arrangement, or to
review, comment, advise or report on any documents other
than those we have identified in Schedule 4. The Bank is
responsible for determining whether the scope of work
which we have been asked to carry out is sufficient for the
purposes of this Report.
Al Tamimi & Company has not undertaken any independent
verification of any of the documents or information
supplied to us and makes no representation or warranty
and gives no undertakings to the accuracy, reasonableness
or completeness of the information contained in any
document or information supplied to us for the purpose of
completing this Report. No liability is accepted by Al
Tamimi & Company to the extent that any information
supplied by or on behalf of the Bank is, or proves to be in
due course, untrue, incomplete or inaccurate in any
respect. This Report should not be regarded as a
comprehensive or formal legal opinion or legal audit. The
legal sections of this Report have been prepared solely to
identify what, on the basis of the review of the documents
provided, we consider in our professional judgment to be
the major legal issues relating to the Hotel, for further
investigation and advice.
This Report is limited to matters of UAE law as are in force
and applied by the UAE courts at the date of the Report
and should be construed accordingly. Al Tamimi &
Company has made no investigation of and expressed no
statement or opinion with respect to the laws of any other
jurisdiction.
The submission of this Report and any further explanations
are subject to our engagement letter to the Bank dated
[ ] and the conditions and limitations contained
in that letter and in our standard terms and conditions of
engagement.
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26. SCHEDULE 4- PRACTICES
PROFILE
AL TAMIMI & COMPANY
With a focus on the Middle East, we have a strong understanding of the business
environment that our clients operate in. This, combined with our full range service
offering, ensures that our clients receive sound and strategic legal advice.
With lawyers in 10 offices across 6 countries in the Middle East who are dedicated to
working together interactively, we can respond knowledgeably and efficiently on any legal
aspect across the region.
Our unified approach illustrates our ability to work together with our clients, address their
issues and identify commercial solutions by building close relationships with them. We
recognise the importance of being easily accessible, commercially aware and at the
leading forefront of market developments.
We employ a diverse group of talented individuals from varied backgrounds and with
differing perspectives. They are each familiar with international and local business
customs and are capable of addressing issues in a collaborative manner. By having the
ability to look at matters from every angle, we can apply our expertise confidently and
decisively – providing integrated solutions to legal and commercial issues throughout the
Middle East.
OUR HOSPITALITY PRACTICE
We provide a comprehensive range of legal services across the MENA region, covering all
areas relevant to the hospitality and leisure industry.
The Hospitality practice comprises a team of experienced lawyers who work across the
entire range of legal disciplines within the firm. Together they form a specialist industry
practice created specifically to cater to all parties involved with the hotel and leisure
business. Our team has in-depth knowledge of the hospitality and leisure industry gained
from advising on all manner of hospitality and leisure related issues. The team also draws
on the invaluable experience of its members who have previously held in-house counsel
roles within the hotel industry.
We advise on all matters applicable to a hotel/leisure project, whether your interest is as
an owner, investor, developer, operator or financier. Our expertise ranges from
site/property acquisition, corporate structuring and long-term strategy planning, joint
venture arrangements, project and operational licensing, project finance, equity and debt
financing, hotel development and construction, hotel operator appointment (including
negotiation of hotel management agreements), day to day operational matters,
employment related advice, property refurbishment/renovation, dispute resolution,
intellectual property protection and disposal options.
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27. COLLIERS INTERNATIONAL
Colliers is a global, leading real estate services organisation defined by its spirit of
enterprise. Through a culture of service excellence and a shared sense of initiative, Colliers
has integrated the resources of real estate specialists worldwide to accelerate the success
of its clients.
COLLIERS HOSPITALITY
Colliers International has a dedicated hospitality team specialized in Hotels, Resorts,
Marina, Golf and Spa with offices in Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo working
with major developers and investors across all stages of planning and delivery for major
real estate projects.
Within the GCC Colliers International have achieved the following:-
-Strategic Advisory and Hospitality Capital Valuation for more than 20,000 keys with a total
asset value in excess of AED 12 Billion
-Hotel Operator Search, Selection and Contract Negotiation in excess of 2,500 keys with
client savings in excess of AED 11 million
-In excess of 4,200 keys proposed within Highest & Best Use, Market & Financial
Feasibility Studies for Hotels & Serviced Apartments
-Highest & Best Use, Market & Financial Feasibility Studies for Hotels & Serviced
Apartments with a total estimated net asset value in excess of AED 6 Billion
WHAT WE DO
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