Malcolm McCrae, a specialist motel broker, provides suggestions for prospective moteliers. He notes that tourism to New Zealand is forecast to grow significantly. When looking to purchase a motel, buyers will need to consider securing a mortgage, the purchase price breakdown, GST returns, financial statements, location, lease terms, employment laws, and typical expense ratios. McCrae recommends joining the Motel Association of New Zealand for assistance on industry issues.

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. 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. 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. PURCHASE PRICE Land & Improvements (Going Concern) Land Value Value of Improvements Leasehold Interest (Motel Business) Chattel Value ( Tangible Assets ) Goodwill Value ( Intangible Assets ) Stock Intangible Assets may split into two divisions Intangible Assets of the Business (Goodwill) Intangible Assets Value for the Lease years left in the lease (Goodwill) Looking to purchase a Motel Leasehold or Going Concern?

5. GST Returns GST Returns help to confirm turnover. GST Registration to be in place by point of supply in accordance to Goods & Services Tax Act. (Settlement day) Leasehold Interest: should be zero rated transaction. Going Concern check GST. (Land & Improvements + Business). Looking to purchase a Motel LOOKING AT THE FINANCIAL STATEMENT One – Two – Three Years financial statements (if possible). Check the figures for GST (exclusive or inclusive). Accommodation allowance (Domestic Establishment fee this is taxable).

6. Looking to purchase a Motel LOCATION Check the location & configuration of units. Number of Studio, One & Two Bedroom units, Conference venue . Handy to entertainment (café,bars,restaurants, sports arena’s, conference venues etc). MANAGERS ACCOMMODATION Is the home suitable for your requirements? Remember you will be working from the environment seven days a week.

7. LEASEHOLD INTEREST (Motel Business) Lease documents are not standard. Years left on the lease. Understand the lease terms (obtain advice if necessary). Rent reviews (when is the next review due and how often). Which party is liable for expenses incurred. Deed of Lease (unable to be registered). Memorandum of Lease (This form of lease may be registered at the Land Transfer Office). Looking to purchase a Motel Leasehold

8. ABOVE PURCHASE PRICE COSTS Monthly rental (paid in advance). Advertising (Jason’s, A.A., other promotions). Rates & Insurance (apportioned). Working capital. Cost of Shifting, pay the Solicitor etc. Credit given to guests for accommodation(invoice sent to company) Looking to purchase a Motel

9. Employment Relations Amendment Act (2) 2004 Staff Option to transfer to the Purchaser. Vendor pay all liabilities due to the staff up to settlement day. 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. (MOTEL BUSINESS) Expressed as a % of income Total Income (ex gst) $350,000 Expenses = 39% (to run the motel) $136,500 Rental = say 33% $115,500 Total expenses = 72% $252,000 Net for motelier = 28% $ 98,000 Looking to purchase a Motel Leasehold

11. (COST OF RUNNING THE MOTEL COMPLEX) Expressed as a % of income Total Income (ex gst) $350,000 Expenses = 48% (to run the motel) $168,500 Net for motelier = 52% $181,500 Looking to purchase a Motel Freehold

12. The Reality Unfortunately we don’t live in a perfect world, often some terms may need to be negotiated. The Motel industry offers the opportunity to meet people from all around the world. MANZ: Motel Association of New Zealand offers assistance to members on most issues that effect the motel industry. Telephone 04 499 6415 Purchase Green & Blue books. Attend Annual Conference.

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