hotel invest01

Sale & Lease BackA financial tool to support hotel development: 

Sale & Lease Back A financial tool to support hotel development

Accor Group in Hungary: 

Accor Group in Hungary Novotel since 1982, Pannonia Hotels since privatisation in 1993 Accor Services 4 Novotel 6 Mercure 4 Ibis 1 Etap 1 Sofitel (7/2003) 4 Hôtels

Investing in the hotel industry Financing issues : 

Investing in the hotel industry Financing issues Hotel development is both A capital intensive development Like other real estate development project Optimization of construction costs Well balanced financial scheme to ensure profitability A marketing intensive development Brand requirements / Identity and positioning of the hotel during conception phase Client satisfaction and efficient daily operation require hotel expertise at building stage

Traditional Operating schemes / Hotel: 

Traditional Operating schemes / Hotel Several classic schemes to operate an hotel (1/2) Build, own and operate an hotel Lease an hotel from a real estate developer and operate it Manage an hotel owned by a private investor (or family) A great tool for private hotels to benefit from Accor world class marketing & sales experience and improve results Support of an experienced hotel manager delegated by Accor

Traditional Operating schemes / Hotel: 

Several classic schemes to operate an hotel (2/2) Franchise an hotel Franchisor is taking care of developing strong brand marketing and reservation tools Franchisee is operating the property, including daily hotel management, complying with the brand requirements Accor is proposing a full set of services to improve hotel’s performance Traditional Operating schemes / Hotel

Sale & Lease Back - A tool for development: 

Sale & Lease back is a generic term which can cover several type of transactions For new developments (Construction/Sale/Lease) For existing assets Parties involved : Hotel operator Construction company if new development Leasing company Funding banks Key to success Clear track records on profitability of assets Integrated financial partners (Leasing/Banks) Sale & Lease Back - A tool for development

Sale & Lease Back - A tool for development: 

New developments Project planning and construction Creation of a SPC to bear the construction project Technical assistance of hotel operator during construction Commitment to sell the SPC to the leasing company upon take-over of construction work Bank financing in SPC during construction Upon take-over « Sale » of SPC to the leasing company Lease agreement for long terms (20 years) Sale & Lease Back - A tool for development

Sale & Lease Back - A tool for development: 

Existing hotels Strategic objective : re-allocate cash for new developments Be an hotel operator more than managing a portfolio of real estate Advantage : Historical data available for the properties Track records and long history can ensure good leasing conditions (lower risk than with a new development) Process : Organize a proper legal structure to be able to sell the real estate separately from the operation of the hotels Sale of the hotel and, simultaneously, signature of lease agreement for long term Sale & Lease Back - A tool for development

Legal Scheme: 

Legal Scheme Before Sale & Lease Back Hotel Operator Project company (Hotel real estate) International Bank Leasing Company Syndication partners Ownership link (capital) Contractual link (debt financing, lease agreement)

Legal Scheme: 

Legal Scheme After Sale & Lease Back Hotel Operator Project company (Hotel real estate) International Bank Leasing Company Syndication partners Ownership link (capital) Contractual link (debt financing, lease agreement) Lease Agreement

Conclusion: 

Hotel network will be growing fast in Central and Eastern Europe New destination for tourism ; better « visibility » with EU More intensive intra-european business travel Necessity to improve infrastructure for developing some regions, both to tourism and business Accor, and other international hotel operators, are likely to develop their networks with a wide set of financial and operational schemes : From management & franchise support to independant hotels To financial investments in new construction and structured financial schemes (Sale & Lease Back) Conclusion

Slide12: 

Accor-Pannonia Hotels David Sylberg Chief Financial Officer E-mail : sylberg_david@accor-hotels.com Tel : 00 36 1 48 55 651