144 & tab W 8 E R caps lock T cal 3. for Wo 312 CHAPTER 10 . THE INVESTMENT PACKAGE 4. 6 Year Pro Forma Year 5 6 Revenues Rooms 3 2,252,500 $ 2.388.776 $ 2,557,424 $ 2,737,978 $ 2,902,257 $ 3,076.392 Concept $ 9,500 $ 9,713 $ 9,461 $ 9,733 $ 10,317 Telephone $ 141.750 $ 107,625 $ 120,927 tex's Home $ 129,386 $ 10,936 Restaurant Lease $ 86,258 $ 80 , 815 $ 128, 183 $ 85,664 $ 135,874 Tex's Hom Other Income $ 96,250 $ 118,913 $ 90, 804 This is an Gross Income $ 5,500,000 $ 5.720,000 $ 6,063,200 $ 6,245,096 $ 6,682,253 $ 7,216,833 high-rise Direct Costs and enter Rooms $ 765,850 $ 804,062 $ 852,221 $ 903, 263 $ 947 , 885 Telephone $ 28,310 $ 28,654 $ 27,631 $ 28, 143 $ 29, 534 $ 994 , 710 $ 30,993 owned by Restaurant Utilities $ 49,613 $ 37,292 $ 44, 384 $ 41,068 $ 43,096 $ 45 , 225 by Brad Other $ 1,444 $ 1,766 $ 1,268 $ 1, 176 $ 1, 234 $ 1, 295 United Total Direct $ 845,216 $ 871,774 $ 925,504 $ 973,651 $ 1,021,749 $ 1,072,223 erations Gross Operating Income $ 4,654,784 $ 4,848,226 $ 5, 137,696 $ 5,271,445 $ 5,660,504 $ 6, 144,610 Thi ited par Indirect Costs Administrative and General $ 720,500 $ 741,827 $ 778, 473 $ 793,809 $ 840 , 882 $ 899,071 Once Franchise Fee $ 167,200 $ 172, 149 $ 180,653 $ 184,212 $ 195, 136 will be Marketing $ 430,650 $ 452, 355 $ 484,291 $ 503,808 $ 544, 465 $ 208,639 $ 593, 903 their i Energy $ 304, 150 $ 319,479 $ 342, 034 $ 355,818 $ 384, 533 $ 419,449 cash f Repairs and Maintenance $ 352,000 $ 362,419 $ 380, 323 $ 387 , 815 $ 410,812 $ 439,241 Total Indirect $ 1,974,500 $ 2,048,229 $ 2,165,774 $ 2,225,462 $ 2,375,828 $ 2,560,302 steak Gross Operating Profit $ 2,680,284 $ 2,799,997 $ 2,971,922 $ 3,045,983 $ 3,284,675 $ 3,584,307 jecte Fixed Charges sales Management Fee $ - $ 171,600 $ 181,896 $ 187, 353 $ 200,468 $37 Real Estate Taxes $ 245, 300 $ 227,656 $ 216,456 $ 214,831 $ 216,505 Insurance $ 245,300 $ 229, 869 $ 227, 656 $ 216, 456 $ 214,831 $ 248, 259 Reserve for Replacement $ 229, 869 part $ - $ 248, 259 Total Fixed $ 171,600 $ 181,896 $ 187 , 353 $ 200, 468 rem $ 490,600 $ 798,512 $ 796,704 $ 804, 368 $ 216,505 $ 860, 674 $ 929, 528 Net Available for Debt $ 2, 189,684 $ 2,001,485 $ 2, 175,217 $ 2,241,615 $ 2,424,001 $ 2,654,779 QUESTIONS 1. Is any information missing that should go into an equity investment package? If so, list the information missing. 2. project cost. Calculate the return on investment in Year 1 for an equity investor who provides 45% of the totalurtian works m that specializes in market studies, Ben gives the first study to Courtian and him to fix it for him. Ben promises Courtlan that if the results are good, he will give him a 1% ownership position in the proposed restaurant as a friendly gesture, Is Ben ethical of the project or venture. in doing so? What should Courtian do in terms of being ethical? ibing what your project is all about 10. EXPLORING THE WEB Search the Internet for firms that perform market studies and appraisals for the hospitality industry. Contact them to find the approximate cost for a market study and appraisal for a 200-room full-service hotel in a major metropolitan city. g hard costs, soft costs, and cash Concept Check party, that estimates the future The Right Hotel for the Right Market d by a professional appraiser. Nicole Sharp, director of acquisitions for Sahara Hotels Corp., has discovered a promising lo- cation for a future hotel. The subject property is located in a densely populated urban setting rvice. and borders the business district in Shepard City. Ms. Sharp is in the process of developing an appraised value. investment package for potential equity investors and has put together the following fact outline: return of capital to the equity The location of the proposed hotel is excellent, as it is located in one of the fastest-growing market areas in Shepard. Businesses have been readily moving to Shepard because of favorable tax incentives. Along with increased business development, local hotels have experienced an increase in ADR and revenue per available room. The acquisition price of the land will be $3.5 million, with an additional $15 million needed for construction costs for the proposed 197-room property. In total, the project will cost $18.6 million. act sheet in an investment The city is currently in the process of building a major freeway in front of the proposed build site, which will increase land values and traffic. The hotel competition in the immediate area consists of two major branded hotels and one independently operated property. Competitor A is a budget hotel, Competitor B is a midmarket vestment package? property without food and beverage facilities, and Competitor C is an upscale independent prop- ment team? Explain the erty with food and beverage facilities. you for your personal Ms. Sharp is proposing to build a 197-room upscale full-service property to meet t would your lender need derserved business travelers currently visiting the area. The following is a pro forma for six years of operation. Ms. Sharp has projected six years because she has set a timelin you are requesting an the property in Year 6 at an 11% cap rate. es of this loan being