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®)JLL H ADVISORY R CBA.0001.0318.0922 ®)JLL h ADVISORY 25 July 2013 R CBA.0001.0318.0923 Contents Executive Summary 4 Why JLL? 5 How Will We Maximise the Price? 6 Unrivalled Experience - 2014 Pub Sales 8 Unrivalled Experience - 2013 Pub Sales 10 Asset Overview 12 Liquor Licence Overview 13 Gaining Performance Analysis 14 Estimated Realisation 15 Pre Marketing / Due Diligence 16 Method of Sale 17 Marketing Timings & Process 18 Marketing Strategy & Budget 19 Draft Marketing Material 20 Basis of Appointment and Fees 21 Reporting & Probity 22 Annexures 23 Biography Marketing Schedule National Property Source Insert Nambucca Hotel, Macksville 2 _R CBA.0001.0318.0924 R CBA.0001.0318.0925 Executive Summary Address: 2-4 Wallace Street, Macksville NSW 2447 Method of Sale: Expressions of Interest Project Team: ■ Sam Handy, Vice President - Pub Investment Sales ■ Charlie Laverty, Analyst - Pub Investment Sales ■ Stephanie Gregory, Associate - Marketing ■ Natalie Davey, Executive Assistant - Investment Sales ■ David Turner, NSW City & Country Hotel Brokers Indicative Pricing $2,800,000 - $3,000,000 Target Market ■ Entry level publicans ■ Qualified bidders from previous comparable campaigns ■ Existing Sydney and regional NSW publicans ■ Existing Brisbane and regional QLD publicans ■ Existing operators of liquor retailers on the NSW Mid North Coast ■ Owners of land/buildings within Macksville ■ Parties seeking a lifestyle and seachange Timing: ■ Agency appointment Monday 4 August 2014 ■ Due Diligence information collection Monday 4 August 2014 ■ Marketing material production Monday 11 August 2014 ■ EOI campaign commencing Saturday 16 August 2014 ■ EOI campaign closes Thursday 18 September 2014 ■ Second stage shortlist close Thursday 25 September 2014 ■ Exchange Friday 26 September 2014 ■ Settlement Monday 03 October 2014 Marketing Budget: $15,619.13 Basis of Appointment Exclusive Agent period of 120 days Fees 2.75% ex. GST Nambucca Hotel, Macksville 4 R CBA.0001.0318.0926 Why JLL? Track Record JLL Hotels & Hospitality Group have a comprehensive and unrivalled track record in the sale of pub assets. This track record not only represents the number and size of transactions but also maximised price outcomes for our vendors. We have unparalleled market knowledge and this will provide Hayes Advisory with the strongest platform to ensure all potential buyers are canvassed and entered into a competitive process which will generate robust negotiations and ultimately lead to a successful outcome. Building value into a transaction JLL Hotels & Hospitality Group have a proven track record in building value into transactions for both purchasers and vendors alike. We are highly adept at ensuring that purchasers look past traditional net profit/yield valuation metrics and have a very clear understanding of a pub assets investment highlights and various upside opportunities. This leads to maximised price outcomes for our vendors. Outstanding Sales & Marketing Strategy JLL Hotels & Hospitality Group have built a specific sales and marketing strategy that will generate Hayes Advisory the highest and best price for the Nambucca Hotel. Our ‘best in class’ marketing communications combined with our integrated sales strategy will add true value to the process. Integrated Team JLL Hotels & Hospitality Group consider that there will be interest in the hotel from both Queensland and New South Wales given Macksville’s location between Brisbane and Sydney. Subsequently, we believe that it is imperative that Hayes Advisory seek to appoint an agency that has an office, market knowledge, database, recent transactional experience and most importantly existing relationships in both states. In terms of local experience and serviceability, we would seek to appoint David Turner of NSW Hotel Brokers in a conjunctional capacity. David is very experienced, based in Port Macquarie and brings recent and comparable transactional experience to the team. He will also accompany all prospective purchasers on all inspections throughout the course of the campaign. Nambucca Hotel, Macksville 5 R CBA.0001.0318.0927 How Will We Maximise the Price? The Nambucca Hotel represents a compelling opportunity for an owner-operator to acquire an entry-level freehold pub on the mid north coast of New South Wales. Whilst we expect that there will be some interest from prospective purchasers seeking to acquire the hotel and run it under management, we consider that the highest and best sale price outcome is going to be achieved via an owner operator from either Queensland or New South Wales. The purchaser that is going to pay the highest and best price will need to be someone that is willing to take into account a combination of the hotel’s current earnings, its upside and the underlying land, building and PME value as opposed to someone that is just going to apply unsophisticated net profit/yield valuation metrics. Substantiate historical and current earnings and highlight the relative underperformance of the business We have conducted a detailed review of the historical profit and loss statements and consider that the hotel demonstrated an approximate EBITDA of $475,000 for the F14 financial year. We have benchmarked the Nambucca Hotel’s revenues, cost of sales, gross profit percentages and expenses against other comparable hotels and consider it to be a relatively underperforming business. There appears to be excessive expenditure in overheads such as: wages, repairs and maintenance, advertising, entertainment, staff meals, legal costs etc. In an attempt to substantiate the historical earnings at this level, we will provide purchasers with a detailed add-back and adjustment schedule based on industry averages. We will also use the post-receiver appointment revenues to substantiate the fact the pre-receiver appointment revenues. Demonstrate the hotels investment highlights and various upside opportunities The Nambucca Hotel boasts excellent core trading attributes, well balanced revenue streams and compelling upside in the bar, food, gaming, accommodation and bottleshop departments. JLL Hotels & Hospitality Group will very clearly articulate the hotels investment highlights and various upside opportunities, which include: ■ Capitalising upon the planned $780 million Pacific Highway upgrade between Warrell Creek & Nambucca Heads ■ Creating an outdoor smoking solution for all 12 PMEs and upgrading the gaming machine hardware/ software ■ Creating a stronger public bar and sports bar proposition ■ Upgrading the existing TAB facility with improved ■ Seeking to negotiate a preferred food/beverage/accommodation provider agreement with contractors working on the upgrade ■ Leasing the kitchen out to improve the overall bistro offering and saving approximately $150,000 pa in wages overheads ■ Leasing the bottle shop out improve the retail iiquor offering, receive a passive rent and saving approximately $165,000 in wages overheads ■ Improving the layout and retailing standards of the bottle shop ■ Exploring the possibility of erecting a large signboard on top of the hotel and deriving a passive income for advertising Nambucca Hotel, Macksville 6 R CBA.0001.0318.0928 How We Will Maximise the Price? (cont.) Demonstrate the underlying land, building & PME value The Nambucca Hotel occupies a prominent 1,686sqm site on the Pacific Highway. There is a nearby vacant development site in Wallace Street that is 1,502sqm and is being offered for sale at $750,000. This represents approximately $500 per square metre. On the basis of a similar square metreage metric, the Nambucca Hotel site alone would be worth $850,000 and this doesn’t take into account the value of the building, furniture, fixtures and fittings etc. There are 12 Poker Machine Entitlements (PMEs) attached to the hotel. These are classified as regional PMEs (as opposed to metropolitan) and would achieve approximately $200,000 per block of three in a ‘country to country' PME transaction. This would mean the underlying PME value would be $800,000. However, a purchaser could achieve a price of $235,000 per block of three in a ‘country to city’ PME transaction which would mean the underlying PME value would be $940,000. Note, that regional hotels are only allowed one ‘country to city’ PME transaction per calendar year and this sell down would therefore take four years to complete. Nambucca Hotel, Macksville 7 R CBA.0001.0318.0929 Unrivalled Experience - Pub Sales_________2014 JLL Hotels & Hospitality Group have been dominant in the disposal of a diverse range of Hotels in the NSW sector, hav­ ing already brokered 20 pub transactions in the first half of 2014. Crest Hotel, Sylvania Palms Hotel, Chullora Date of Sale: July Date of Sale: July Date of Sale: June Sale Price: $19,200,000 Sale Price: $25,120,000 Sale Price: $22,000,000 Yield: 5.58% Yield: 10.35% Yield: 10.45% Vendor: Reserve Hotels Vendor: Redmond Family Vendor: Coles Myer Property Developments Purchaser: ISPT Purchaser: Private Investor Purchaser; Iris Hotel Group Beach Palace Hotel, Coogee Buena Vista Hotel, Mosman Hotel Centennial, Woollahra Date of Sale: April Date of Sale: March Date of Sale: February Sale Price: $37,000,000 Sale Price: $13,000,000 Sale Price: $6,000,000 Yield: N/A Yield: 8.00% Yield: 9.16% Vendor: Jomaring Pty Ltd & Ardilo Pty Ltd Vendor: Newhaven Hotels Limited Vendor: Diakofti Pty Ltd Purchaser: Merivale Purchaser: Medich Corporation Purchaser: Medich Corporation Wiley Park Hotel, Wiley Park Waterworks Hotel Patonga Beach Hotel, Patonga Date of Sale: May Date of Sale: July Date of Sale:
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