Some suggestions for mma may 2011 #2

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  • The motel industry is very interesting meeting different people every day. They come from throughout New Zealand and the world. The Tourism Research Council forecast Tourist numbers will increase 5.8% a year to reach 3.1million in six years (2010) A long with this growth will be an increase in tourist spending. Lets be part of this growth. WHAT TO LOOK FOR WHEN PURCHASEING A MOTEL LEASEHOLD OR GOING CONCERN
  • The property Main road location Central city Handy to entertainment (café,bars,restaurants etc) Number of Studio, One & Two Bedroom units, Conference venue
  • Items I am often asked by clients When making the decision to purchase you may need to make some compromises as we do not live in a perfect world
  • The motel industry is very interesting meeting different people every day. They come from throughout New Zealand and the world. The Tourism Research Council forecast Tourist numbers will increase 5.8% a year to reach 3.1million in six years (2010) A long with this growth will be an increase in tourist spending. Lets be part of this growth. WHAT TO LOOK FOR WHEN PURCHASEING A MOTEL LEASEHOLD OR GOING CONCERN
  • Some suggestions for mma may 2011 #2

    1. 1. Suggestions for Prospective Moteliers Presented by Specialist Motel Broker Malcolm McCrae AREINZ Licensed Agent REAA 2008 Mobile: 0274 462 987 Tele: 06 357 7743 Email: [email_address] Web: www.motelmover.co.nz Malcolm McCrae, Principal
    2. 2. New Zealand Tourism Forecast that 3.1 million overseas visitors will visit New Zealand per year by 2016 For year ending March 2010 New Zealand received $9.5 billion from international visitor spending. Total Tourism contributes $22.4 billion each year Lets be part of this Industry
    3. 3. Looking to purchase a Motel Purchaser’s borrowings by way of mortgages. Leasehold Interest 30% - 35%. Freehold Going Concern 50% - 60%. If Purchaser’s have other property they may be able to secure a mortgage against that property, using the equity as collateral. How much money do I need?
    4. 4. <ul><li>PURCHASE PRICE </li></ul><ul><li>Land & Improvements (Going Concern) </li></ul><ul><li>Land Value </li></ul><ul><li>Value of Improvements </li></ul><ul><li>Leasehold Interest (Motel Business) </li></ul><ul><li>Chattel Value ( Tangible Assets ) </li></ul><ul><li>Goodwill Value ( Intangible Assets ) </li></ul><ul><li>Stock </li></ul><ul><li>Intangible Assets may split into two divisions </li></ul><ul><ul><li>Intangible Assets of the Business (Goodwill) </li></ul></ul><ul><ul><li>Intangible Assets Value for the Lease years left in the lease (Goodwill) </li></ul></ul>Looking to purchase a Motel Leasehold or Going Concern?
    5. 5. <ul><li>GST Returns </li></ul><ul><li>GST Returns help to confirm turnover. </li></ul><ul><li>GST Registration to be in place by point of supply in accordance to Goods & Services Tax Act. (Settlement day) </li></ul><ul><li>Leasehold Interest: should be zero rated transaction. </li></ul><ul><li>Going Concern check GST. (Land & Improvements + Business). </li></ul>Looking to purchase a Motel <ul><li>LOOKING AT THE FINANCIAL STATEMENT </li></ul><ul><li>One – Two – Three Years financial statements (if possible). </li></ul><ul><li>Check the figures for GST (exclusive or inclusive). </li></ul><ul><li>Accommodation allowance (Domestic Establishment fee this is taxable). </li></ul>
    6. 6. Looking to purchase a Motel <ul><li>LOCATION </li></ul><ul><li>Check the location & configuration of units. </li></ul><ul><li>Number of Studio, One & Two Bedroom units, Conference venue . </li></ul><ul><li>Handy to entertainment (café,bars,restaurants, sports arena’s, conference venues etc). </li></ul><ul><li>MANAGERS ACCOMMODATION </li></ul><ul><li>Is the home suitable for your requirements? </li></ul><ul><li>Remember you will be working from the environment seven days a week. </li></ul>
    7. 7. <ul><li>LEASEHOLD INTEREST (Motel Business) </li></ul><ul><li>Lease documents are not standard. </li></ul><ul><li>Years left on the lease. </li></ul><ul><li>Understand the lease terms (obtain advice if necessary). </li></ul><ul><li>Rent reviews (when is the next review due and how often). </li></ul><ul><li>Which party is liable for expenses incurred. </li></ul><ul><li>Deed of Lease (unable to be registered). </li></ul><ul><li>Memorandum of Lease (This form of lease may be registered at the Land Transfer Office). </li></ul>Looking to purchase a Motel Leasehold
    8. 8. <ul><li>ABOVE PURCHASE PRICE COSTS </li></ul><ul><li>Monthly rental (paid in advance). </li></ul><ul><li>Advertising (Jason’s, A.A., other promotions). </li></ul><ul><li>Rates & Insurance (apportioned). </li></ul><ul><li>Working capital. </li></ul><ul><li>Cost of Shifting, pay the Solicitor etc. </li></ul><ul><li>Credit given to guests for accommodation(invoice sent to company) </li></ul>Looking to purchase a Motel
    9. 9. <ul><li>Employment Relations Amendment Act (2) 2004 </li></ul><ul><li>Staff Option to transfer to the Purchaser. </li></ul><ul><li>Vendor pay all liabilities due to the staff up to settlement day. </li></ul>RESTRAINT OF TRADE This is a restriction placed on the vendor when they sell. It covers a period of time and a distance from the property from which they should not trade as a motelier. Looking to purchase a Motel Employees
    10. 10. <ul><li>(MOTEL BUSINESS) Expressed as a % of income </li></ul><ul><li>Total Income (ex gst) $350,000 </li></ul><ul><li>Expenses = 39% (to run the motel) $136,500 </li></ul><ul><li>Rental = say 33% $115,500 </li></ul><ul><li>Total expenses = 72% $252,000 </li></ul><ul><li>Net for motelier = 28% $ 98,000 </li></ul>Looking to purchase a Motel Leasehold
    11. 11. <ul><li>(COST OF RUNNING THE MOTEL COMPLEX) Expressed as a % of income </li></ul><ul><li>Total Income (ex gst) $350,000 </li></ul><ul><li>Expenses = 48% (to run the motel) $168,500 </li></ul><ul><li>Net for motelier = 52% $181,500 </li></ul>Looking to purchase a Motel Freehold
    12. 12. The Reality <ul><li>Unfortunately we don’t live in a perfect world, often some terms may need to be negotiated. </li></ul><ul><li>The Motel industry offers the opportunity to meet people from all around the world. </li></ul><ul><ul><li>MANZ: Motel Association of New Zealand offers assistance to members on most issues that effect the motel industry. Telephone 04 499 6415 </li></ul></ul><ul><ul><li>Purchase Green & Blue books. </li></ul></ul><ul><ul><li>Attend Annual Conference. </li></ul></ul>
    13. 13. Suggestions for Prospective Moteliers Presented by Specialist Motel Broker Malcolm McCrae AREINZ Licensed Agent REAA 2008 Mobile 0274 462 987 Tele 06 357 7743 Email [email_address] Web: www.motelmover.co.nz Malcolm McCrae, Principal

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