Hotel Joint Venture

[Tangible Fixed Assets anyone? 0]

Hotel Joint Venture

 

Source : note 8, foot of page 15 of NCFC Plc Accounts to 31/5/09

 

Interest re Joint Venture - Bank loans  and overdraft        £214k

 

 

 

If the interest rate is 7% this implies NCFC''s share of the debt is £3,050k

 

Assume £9m of overall debt (including JV partners share) relates to the building.

Depreciation over 50 years, i.e. 2% per year = £180k

NCFC share of depreciation (30%) = £54k per year

 

NCFC''s share of likely cashflow  = £65k (profit per note 14 on page 21) + £54k (re assumed deprecistion) = £119k.*

* Assuming a neutral position regarding the working capital

 

 

At that rate of cash generation, it ''s  going to take a long time to pay off that £3m share of the hotel debt!

 

[morty 0]

I think that something like this was always going to be a slow burning, long term investment, we were never going to make millions immediately.

[The Walking Man 13]

Plus the fact that the last accounted year we were in a recession...

[The Fish Seller 0]

[quote user="Tangible Fixed Assets anyone"]

 

 

At that rate of cash generation, it ''s  going to take a long time to pay off that £3m share of the hotel debt!

 

[/quote]What we have also to take into account in future are the periodic interior refurbishments the cost of which will skew these figures drastically. I''ve no idea what sort of refurb cycle Holiday Inn implement 7-10 years before a total refurb would be about normal, some chains try for a five year cycle. Nobody wants to stay in a grubby hotel but being new build we''ve been able to avoid any significant maintenance or refurbishment outlay to date.

[Tangible Fixed Assets anyone? 0]

[quote user="The Walking Man walking to Yeovil"]Plus the fact that the last accounted year we were in a recession...[/quote]

So how much would you expect this hotel to make in profit before interest (before the 70:30 split)?

 

[The Walking Man 13]

[quote user="Tangible Fixed Assets anyone"]

[quote user="The Walking Man walking to Yeovil"]Plus the fact that the last accounted year we were in a recession...[/quote]

So how much would you expect this hotel to make in profit before interest (before the 70:30 split)?

 

[/quote]

Not a clue, but I would expect the occupancy levels to be down, do we know what the occupancy levels were?

[Tangible Fixed Assets anyone? 0]

Our share of the profit post interest = £65k

Add back interest                          = £214k

Our share of pre interest profit       = £279k

£279k / 3  x 10                            = £930k pre interest profit - does that sound a reasonable (pre interest) profit for a Holiday Inn?

[vos 155]

Just to add to TFAa''s assessment after a lot of digging around I think the position, so far as our share is concerned, is more or less as follows:

Profit before interest 254000

Nett Interest (214k-25k) 189000

Nett Profit 65000

Bank Loan is £2.588 million (Page 24)

There are further liabilities - probably including bank overdrafts - totalling 740k.

Unfortunately there has been a revaluation of the hotel enterprise whereby our share has decreased by £1 million so our stake is £640000.

So the venture is making a contribution which surprises me because the hotel always appears fairly empty.

[Tangible Fixed Assets anyone? 0]

[quote user="vos"]Just to add to TFAa''s assessment after a lot of digging around I think the position, so far as our share is concerned, is more or less as follows: Profit before interest 254000 Nett Interest (214k-25k) 189000 Nett Profit 65000 Bank Loan is £2.588 million (Page 24) There are further liabilities - probably including bank overdrafts - totalling 740k. Unfortunately there has been a revaluation of the hotel enterprise whereby our share has decreased by £1 million so our stake is £640000. So the venture is making a contribution which surprises me because the hotel always appears fairly empty.[/quote]

Thanks Vos.

Its made a contribution and the cash being generated is probably being used to slowly work down the debt. However as Buckethead pointed  out theres a regular refurb to consider so will it make a cash contribution over the five - seven year cycle?

 

[gazzathegreat 0]

Vos, allow me to make a contribution. While not understanding accounting or indeed the thinking behind our involvement in the venture with Holiday Inn I can tell you it''s as busy as an city hotel could expect to be, traffic at all hours, coaches continually coming and going picking up and dropping off parties. Added to that are taxis ferrying business types all the while. So I would say they are more than happy with their occupancy (and they must love the custom pre match). In fact it never appears to be shut!!

[nutty nigel 7,509]

[quote user="Tangible Fixed Assets anyone"]

[quote user="vos"]Just to add to TFAa''s assessment after a lot of digging around I think the position, so far as our share is concerned, is more or less as follows: Profit before interest 254000 Nett Interest (214k-25k) 189000 Nett Profit 65000 Bank Loan is £2.588 million (Page 24) There are further liabilities - probably including bank overdrafts - totalling 740k. Unfortunately there has been a revaluation of the hotel enterprise whereby our share has decreased by £1 million so our stake is £640000. So the venture is making a contribution which surprises me because the hotel always appears fairly empty.[/quote]

Thanks Vos.

Its made a contribution and the cash being generated is probably being used to slowly work down the debt. However as Buckethead pointed  out theres a regular refurb to consider so will it make a cash contribution over the five - seven year cycle?

 

[/quote]

So is it a good thing or a bad thing Tangie. Cuz you lost me!

 

[Tangible Fixed Assets anyone? 0]

Anybody have a clue as to how many rooms there are in that hotel?

[Tangible Fixed Assets anyone? 0]

oops I meant bedrooms

[Attleborough_Canary 65]

[quote user="Tangible Fixed Assets anyone"]

oops I meant bedrooms

[/quote]

I would say after looking at the following link either 148 or 158 depending on if the accessability rooms are included in the other figures but that sounds too many.

http://www.ichotelsgroup.com/h/d/hi/1/en/hotel/NWICR/at-a-glance?start=1&rpb=hotel&crUrl=/h/d/hi/1/en/hotelsearchresults

[vos 155]

Thanks Gazza, my view that the hotel was fairly empty was because I have only really looked at it from the N & P stand. Very rarely seen any lights on etc. Not a very professional assessment !!!

If it is bringing in £65k p.a. with little outlay, apart from the commitment of yet another loan, it is working out well. Without this development the area would be returning virtually nothing. I believe that if the ground capacity needs to be increased there is scope for a double decker. Don''t ask me how we will pay for it !!!

I would rather the hotel had not been built there, but beggars can''t be chosers.

[BBFF 0]

The old chairman told us that we get no profit from the hotels every day running. The other two partners use the profit to pay off the loan they took out to build it. We should get a pay out once a year something to do with valuation? It was always going to be a long term investment and to be sold at some time. I think it was a waste time, money and land. It should have been a normal stand how ever many seats it would have had.

 

FOOTBALL MUST COME FIRST

[Carlos Valderrama 0]

Lets not forget that the hotel can contribute directly to other forms of revenue generation. Conferencing, Yellows Restaurant and the various theme nights.

I would be interested to know how much snakepit generates as an individual entity and how much an additional corner infill would have generated.

[Tangible Fixed Assets anyone? 0]

Thanks to the person who posted about their being 150 rooms

------------------------------------------------------------------

Assume the hotel catering and bar break even

 

Here''s a back of the envelope calculation:

Take the £930k profit before interest and divide it by the number of days in the year:  930/365 = £2.5k profit before interest per day

Assume £100 per room net of costs --> 25 rooms occupied per day on average.

So IF they get the occupancy rate up to say 75 per day (on average at the same £ rate) then they are really going to make some money over time:

£930k  x 3 (25 to 75 rooms per day) =  £2790k per year

NCFC share = £837k

£837k - £189k net interest = £648k + depreciation of £54k --> likely cashflow of £702k.

Generate £702k per year for say 6 years and they will have enough money for a refurb and clear most of NCFCs share of the hotel related debt.  So can they triple the occupancy rate?

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

 

 

 

[Tangible Fixed Assets anyone? 0]

[quote user="BBFF"]

The old chairman told us that we get no profit from the hotels every day running. The other two partners use the profit to pay off the loan they took out to build it. We should get a pay out once a year something to do with valuation? It was always going to be a long term investment and to be sold at some time. I think it was a waste time, money and land. It should have been a normal stand how ever many seats it would have had.

 

FOOTBALL MUST COME FIRST

[/quote]

 There would have to be a gap between the Barclay and the away fans. So how many useable seats would there be assuming NCFC had the money to build another corner stand.

 

 

[nutty nigel 7,509]

[quote user="Tangible Fixed Assets anyone"]

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

 

[/quote]

Well Gazza reckons it''s pretty busy now but I guess there''s always room for improvement although we probably need that occupied too[:S]

Now Tangie, if I remember rightly you were against the corner infill between the South Stand and River End (old money!) so the hotel corner, with obviously a much smaller capacity would surely be a non-starter. What do you think would have been a good use for that space?

 

[Tangible Fixed Assets anyone? 0]

[quote user="nutty nigel"][quote user="Tangible Fixed Assets anyone"]

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

 

[/quote]

.....so the hotel corner, with obviously a much smaller capacity would surely be a non-starter. What do you think would have been a good use for that space?

[/quote]

The space between the Barclay and the Jarrold stand could be used for the police and stewards to stand in!  lol!

[Tangible Fixed Assets anyone? 0]

As somebody was posting (on another thread) about having a corner stand in the hotel corner and the hotel....I thought I would give this a bump.

[Tangible Fixed Assets anyone? 0]

Tangy:

Thanks to the person who posted about their being 150 rooms

------------------------------------------------------------------

Assume the hotel catering and bar break even

 

Here''s a back of the envelope calculation:

Take the £930k profit before interest and divide it by the number of days in the year:  930/365 = £2.5k profit before interest per day

Assume £100 per room net of costs --> 25 rooms occupied per day on average.

So IF they get the occupancy rate up to say 75 per day (on average at the same £ rate) then they are really going to make some money over time:

£930k  x 3 (25 to 75 rooms per day) =  £2790k per year

NCFC share = £837k

£837k - £189k net interest = £648k + depreciation of £54k --> likely cashflow of £702k.

Generate £702k per year for say 6 years and they will have enough money for a refurb and clear most of NCFCs share of the hotel related debt.  So can they triple the occupancy rate?

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

 

 

----------------------------------------------------------

If Norwich became the European City of Culture in 2013 that would give the occupancy rate a boost.

[lappinitup 629]

[quote user="Tangible Fixed Assets anyone"]If the interest rate is 7% this implies NCFC''s share of the debt is £3,050k

 

Assume £9m of overall debt (including JV partners share) relates to the building.

 

NCFC''s share of likely cashflow  = £65k (profit per note 14 on page 21) + £54k (re assumed deprecistion) = £119k.*

* Assuming a neutral position regarding the working capital

 

Anybody have a clue as to how many rooms there are in that hotel?

 

Assume the hotel catering and bar break even...

 

Here''s a back of the envelope calculation:

Take the £930k profit before interest and divide it by the number of days in the year:  930/365 = £2.5k profit before interest per day

Assume £100 per room net of costs --> 25 rooms occupied per day on average.

So IF they get the occupancy rate up to say 75 per day (on average at the same £ rate) then they are really going to make some money over time:

£930k  x 3 (25 to 75 rooms per day) =  £2790k per year

NCFC share = £837k

£837k - £189k net interest = £648k + depreciation of £54k --> likely cashflow of £702k.

Generate £702k per year for say 6 years and they will have enough money for a refurb and clear most of NCFCs share of the hotel related debt.  So can they triple the occupancy rate?

So to answer Nutty, I really don''t have a clue!

 

[/quote]I have to hand it to you Tangy, this is fag packet accounting at it''s very finest and in keeping with tradition. you''ve now bumped it all up as FACT.

MEGA LOL!

[The Butler 0]

[quote user="lappinitup"][quote user="Tangible Fixed Assets anyone"]If the interest rate is 7% this implies NCFC''s share of the debt is £3,050k

 

Assume £9m of overall debt (including JV partners share) relates to the building.

 

NCFC''s share of likely cashflow  = £65k (profit per note 14 on page 21) + £54k (re assumed deprecistion) = £119k.*

* Assuming a neutral position regarding the working capital

 

Anybody have a clue as to how many rooms there are in that hotel?

 

Assume the hotel catering and bar break even...

 

Here''s a back of the envelope calculation:

Take the £930k profit before interest and divide it by the number of days in the year:  930/365 = £2.5k profit before interest per day

Assume £100 per room net of costs --> 25 rooms occupied per day on average.

So IF they get the occupancy rate up to say 75 per day (on average at the same £ rate) then they are really going to make some money over time:

£930k  x 3 (25 to 75 rooms per day) =  £2790k per year

NCFC share = £837k

£837k - £189k net interest = £648k + depreciation of £54k --> likely cashflow of £702k.

Generate £702k per year for say 6 years and they will have enough money for a refurb and clear most of NCFCs share of the hotel related debt.  So can they triple the occupancy rate?

So to answer Nutty, I really don''t have a clue!

 

[/quote]I have to hand it to you Tangy, this is fag packet accounting at it''s very finest and in keeping with tradition. you''ve now bumped it all up as FACT.

MEGA LOL!

[/quote]

If you read what he says Lapp

Here''s a back of the envelope calculation:

 

Then he already says it''s guestimation.

 

What point are you trying to make?

[lappinitup 629]

[quote user="The Butler"]If you read what he says Lapp

Here''s a back of the envelope calculation:

 

Then he already says it''s guestimation.

 

What point are you trying to make?

[/quote]He doesn''t say it''s a guestimation in his OP Buttles, he opens with.....

"Hotel Joint Venture

Source : note 8, foot of page 15 of NCFC Plc Accounts to 31/5/09"

So, anyone skimming over the thread would assume all his "facts" were from the accounts. His "guestimation" came much later in the thread.

He concludes the thread by stating........

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

Not bad for someone who admitted he didn''t even know how many rooms there were.

My point? Just pointing out how unreliable and often misleading fag packet accounting can be!

 

[Crafty Canary 495]

[quote user="lappinitup"][quote user="The Butler"]If you read what he says Lapp

Here''s a back of the envelope calculation:

 

Then he already says it''s guestimation.

 

What point are you trying to make?

[/quote]He doesn''t say it''s a guestimation in his OP Buttles, he opens with.....

"Hotel Joint Venture

Source : note 8, foot of page 15 of NCFC Plc Accounts to 31/5/09"

So, anyone skimming over the thread would assume all his "facts" were from the accounts. His "guestimation" came much later in the thread.

He concludes the thread by stating........

So to answer Nutty, it will be a good asset providing they can get the occupancy rate significantly up.

Not bad for someone who admitted he didn''t even know how many rooms there were.

My point? Just pointing out how unreliable and often misleading fag packet accounting can be!

 

[/quote]Is there any part of it that you think is completely wrong, given it''s an estimation? By your reasoning it would seem that businesses should make no progress as to launch a new product they have to estimate what the costs are likely to be, what selling price they could make sales at, what units of sales there would be, what marketing and sales costs there are likely to be etc, etc. There is nothing wrong with management accounting provided the assumptions made are realistic. Which assumptions if any do you disagree with and why? Or is this a bitch for the sake of it?

[lappinitup 629]

[quote user="crafty canary"]Is there any part of it that you think is completely wrong, given it''s an estimation?[/quote]I have no idea whether those figures are right or wrong. Have you? I''m simply pointing out that fag packet accountancy is mostly guesswork and yet, in most cases, is presented as fact.

Now, I''m glad you dropped in Crafty, reminded me that Big Brother is on tonight! [;)]

[Tangible Fixed Assets anyone? 0]

[quote user="The Butler"]

If you read what he says Lapp

Here''s a back of the envelope calculation:

 

Then he already says it''s guestimation.

 

What point are you trying to make?

[/quote]

Thats Capt. Ludd for you........

 

[Tangible Fixed Assets anyone? 0]

[quote user="lappinitup"]

Not bad for someone who admitted he didn''t even know how many rooms there were.

[/quote]

Capt. Ludd

If you took the time to read the thread, somebody answered my question about room numbers. Thus I was able to use that bit of data and come to a reasonable conclusion in order to answer Nutty''s question.