Sheraton Yilan Resort Hotel, Taiwan - Investment Memorandum 2010 - Private Equity Capital Funding - Thomas R Hofer & Associates LLC

1. SHERATON YILAN RESORT
YILAN, TAIWAN
JANUARY 2010
CONFIDENTIAL INFORMATION MEMORANDUM

2. SHERATON YILAN RESORT
An opportunity to participate in the Preferred Equity Investment of the 182-key
international 5-star Sheraton Yilan Resort development in Yilan County, Taiwan.
Transaction Overview two fitness centres and 26,000 square ft. spa managed by Banyan Tree’s
In 2009, Sky Line International Entertainment Limited (“Skyline”) and Angsana Spa, 44 oriental and family hot spring houses, as well as a 17,800
Thomas R Hofer & Associates entered into an Alliance Agreement for square ft. outdoor hot spring pool and an indoor heated swimming pool.
obtaining funding to develop the Sheraton Yilan Resort, Taiwan (the
“Resort” or the “Property”).
The Property is currently over 50% completed is expected to become the
top resort hotel in Taiwan with consummate design and construction,
comprehensive amenities, professional hotel and spa operators including
Sheraton and Banyan Tree. The total development cost is approximately
NT$3.5 billion (US$ 107 million).
Skyline is currently seeking additional equity investment in the amount of
US$25.7million (NT$835million) and US$53.8million (NT$1,750million)
in senior debt finance. Assuming the new investor injects NT$835million
of new equity, the new investor will own 47.7% of Skyline. Recently
valued at market value of NT$5.532‐5.685 billion based on DTZ valuation
report dated 09.10.2008.
(Note: USD/NTD exchange rate of US$1=NT$32.5045) The Resort features 5 separate blocks: The Main Hotel, Hot Springs,
Resort, Villa, and the Administrative block1. Each block is catered towards
Property Information different customer groups, and is designed with the appropriate facilities.
Block Purpose Key Count Facilities & Amenities
Meeting & function space,
Family Vacation,
fusion-style buffet
Hotel Meetings & 90
Restaurant, indoor and
Conventions
outdoor swimming pool
Angsana Spa, 44 hot spring
Spa and Hot
Hot Springs --- houses, public bathhouse,
Springs Visitors
roof pool
Japanese kaiseki restaurant,
Resort Couples Retreat 65 all suite hotel, outdoors hot
spring pool
Provides privacy Private swimming & hot
Villa 27
and exclusiveness spring pool
The blocks can be roughly grouped into 2 zones, with Zone 2 being more
family friendly, while Zone 1 is geared towards adults and commands
premium prices.
The site covers approximately 1 million sq. ft. on a hilltop and has a GFA
Architect rendering of the Resort (above), and recent photos of Main of 510,000 sq. ft.. Due to its high altitude of 200 to 280 meters above sea-
Hotel Tower (bottom) level, the Property offers unobstructed panoramic views of the Yilan
Plains, Pacific Ocean, and the surrounding landscapes and tea plantations.
The Property will be branded as a Sheraton franchised hotel, utilising the
Sheraton name, logo, reservation systems, marketing programs, as well as
operating procedures.
The hotel interior is designed by Hong Kong designer John Chan who
specializes in hotel interiors and whose previous assignments include
Grand Hyatt Taipei, Grand Hyatt Hong Kong, Sheraton Hong Kong, St.
Regis International Club Beijing and many other hotels in China.
Business Plan
The construction of the Hotel commenced in Nov 2007 and has since
finished the construction of the majority of structural works in July 2008.
The final completion of the interior and exterior of the Project is
estimated early 2010.
The Resort features a top-notch design team, which includes renowned
architect firm I-Connect Architect & Associates and interior fit-out firm
Dynasty Design Corp. Leeming, one of the largest construction
The Sheraton Yilan Resort will provide 182 spacious guest rooms and companies in Taiwan, is contracted to build the Resort.
suites (ranging from 360 sq. ft. to 3384 sq. ft.) all enjoying beautiful views
from private balconies. It will also feature over 10,000 square ft. of highly 1
flexible meeting and function space, eight dining and entertainment outlets, Administrative Block is for back office use only. Hotel guests are off limits.
CONFIDENTIAL INFORMATION MEMORANDUM

3. NT$6,800 for the past 2 years. The Resort’s hotel block targets similar
customers, and thus comparable results can be reasonably expected.
Lalu Resort at Sun Moon Lake, which Zone 1 of the Resort is
benchmarked to, has averaged an outstanding 81% occupancy rate with an
excellent NT$10,119 avg. room rate.
5 more hotels/resorts are scheduled to open within the next few years.
The clustering effect shall further enhance Yilan’s image as a major tourist
destination.
Sponsor
Sky Line International Entertainment Limited (“Skyline”) owns the
Property and acts as the operating partner in charge of development of
the Resort.
Skyline is currently 48% owned by its founders Willy Chang and his wife
Teresa Liao and 38% owned by Mr. M. Chen, a major shareholder of
Posiflex Technologies, Inc, a Taiwan OTC-traded company.
Mr. Chang devoted himself to the Sheraton Yilan Project since 1995. He
has successfully assembled the land title of the Property and obtained all
Expected soft opening early 2010 and grand opening in May 2010. The the development rights and permits for the Development of the Resort.
resort would be operated under a management agreement with Starwood From 1998 to 2000, Mr. Chang was involved in the development of
Hotels & Resorts under the Sheraton brand and has an initial term of 10 Hibiscus Resort, a 210-room resort hotel in Tainan, Taiwan. Mr. Chang is
years from the opening with 2 renewal options of 5 years each. a board member of the Association for Construction and Investment of
The general manager appointed by Sheraton will be principally responsible Taipei County and a member of the Council for Industrial and
for the operation of the hotel and the senior managers will be appointed Commercial Development of Taiwan.
by the general manager as well as the board of Skyline. In August 2008, an
experienced GM candidate was recruited and commenced September, Transaction Merits
2008. The only international-brand resort hotel in Taiwan operated by highly
With such world-class facilities and management, the Resort features experienced operators: this Property represents Starwood’s fourth hotel in
premium room rates, ranging from NT$7,000/night for a standard room Taiwan and Banyan Tree’s second spa management contract in Taiwan.
up to NT$88,000/night for the Presidential suite. Rare location advantages: located only 60 kilometers away from Taipei, the
Banyan Tree Hotels & Resorts will operate the SPA facility in the resort as Property is easily accessible after the opening of Taipei-Yilan Highway.
a world-class spa facility and conduct operations under the Angsana Spa The Property is situated in an exclusive, scenic and attractive location with
brand for an initial term of 15 years. numerous scenic attractions within a 20-minute radius in Yilan county.
Angsana Spa is Banyan Tree’s first resort spa and first non-exclusive, open- Strong leisure traveller demand for resort hotels in Taiwan, especially after
to-general public spa in Taiwan. Banyan Tree views this as a value-added the recent liberalisation of China tourists visit and charter flights
service to the hotel and hotel guests. A total of 12 treatment rooms are permitting influx of mainland tourists for the first time in large number.
planned. Low development risk: the resort is being constructed by reputable
Angsana Spa Yilan features exclusive hot springs treatment packages, not contractor and the majority of structural works works completed in 2008
found in any other Banyan Tree Spa worldwide. with final completion and opening scheduled for late 2010.
Location / Market Sheraton Yilan Resort
The site is located on a rural hilltop, against a mountainous backdrop in Amount USD$ %
Development Costs
Yilan County on the northeast coast of Taiwan. It is 60 kilometers from
Description
Taipei and around 70 minutes drive via the Taipei-Yilan tunnel.
Land cost $25,227,276 23.43%
Structural works $24,367,395 22.63%
Interior furbishing $16,841,360 15.64%
Electrical & mechanical works $17,219,462 15.99%
Capital machinery & equipment $4,225,261 3.92%
Landscaping $3,207,556 2.98%
Planning design $3,025,427 2.81%
Initial revolving fund $4,820,871 4.48%
There is good accessibility to highways and a multitude of nearby scenic
attractions and offering including the Dongshan River Water Park, Taiping Preparatory & opening expenses $863,573 0.80%
Mountain, hot springs, golf courses, whale watching all within a half-hour
drive from the Project. Loan interest costs $3,527,512 3.28%
The landmark Mainland China Tourists Direct Charter flights to Taiwan
scheme bodes well for the demand of hotel accommodation in Taiwan. Grading $1,434,878 1.33%
Starting from July 2008, 3,000 China tourists to visit Taiwan via direct
flight (from China) per day / 1 million tourists per annum to visit Taiwan, Project management $2,916,827 2.71%
mostly for sight-seeing purposes.
Total USD$107,677,399 100.00%
Currently, Hotel Royal Chiao Hsi, the only 5-star hotel competitor in the
Yilan region, has averaged 75% occupancy rate at an average room rate of
CONFIDENTIAL INFORMATION MEMORANDUM