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SAMPLE REPORT

Asset Performance Review for Healthier Profits

A JOINT INITIATIVE BETWEEN AL TAMIMI & COMPANY AND

COLLIERS INTERNATIONAL HOSPITALITY KSA

SAMPLE REPORT (POSSIBLE VARIATION IN FINAL REPORT) 1

Colliers International

This document is not a prospectus and does not constitute any part of an offer or contract. All

information, analysis and recommendations made by Colliers International are made in good

faith and represent Colliers’ professional judgment on the basis of information obtained from

the client and elsewhere during the course of the assignment.

However, since the achievement of recommendations, forecasts and valuations depends on

factors outside Colliers’ control, no statement made by Colliers may be deemed in any

circumstances to be a representation, undertaking or warranty, and Colliers cannot accept any

liability should such statements prove to be in accurate or based on incorrect premises. In

particular, and without limiting the generality of the foregoing, any projections, financial and

otherwise, in this report are intended only to illustrate particular points of argument and do

not constitute forecasts of actual performance.

Likewise, indications of potential selling prices are indicative and intended primarily to enable

easier comparison between the different options that are reviewed in this report. Those figures

do not constitute formal valuations and they have not been prepared in accordance with the

RICS ‘Red Book’.

Al Tamimi & Company

The legal aspects of this Report are based on Al Tamimi & Company’s legal review of certain

documents presented to Al Tamimi & Company. The scope of Al Tamimi & Company’s

engagement in relation to the legal review is set out in our engagement letter and

accompanying terms of engagement, as supplemented by this Report. Please see schedule 3 for

further details of the scope of work carried out by Al Tamimi & Company, the reliance that may

be placed on the legal content of this Report and Al Tamimi & Company’s liability for this

Report.

This Report is addressed only to the addressee. This Report may not be relied upon by any

other person and we have no responsibility or liability whatsoever in respect of, or arising out

of, or in connection with, the contents of this Report to any person other than the addressee.

The benefit of this Report may not be assigned or transferred and if others choose to rely in any

way on the contents of this Report, they do so at their risk.


CONTENTS

CONTENTS 2

EXECUTIVE SUMMARY 3

RECOMMENDATIONS 3

LEGAL SUMMARY 3

COMMERICAL SUMMARY 3

PERFORMANCE GROWTH STRATEGY TIPS 4

LEGAL STRATEGY TIPS 4

PROPERTY SUMMARY 5

OVERVIEW 5

LOCATION & SURROUNDINGS ANALYSIS 5

PHYSICAL ASSET & FACILITIES –TRAFFIC LIGHT ANALYSIS 7

TRADING PERFORMANCE ANALYSIS 8

MARKET PERFORMANCE 9

COMPARATIVE ANALYSIS 9

COMMERCIAL CONCLUSIONS 12

THE PROPERTY 12

COLLIERS HOTEL WORTH INDEX 12

LEGAL OVERVIEW 13

POTENTIAL CLAIMS AGAINST THIRD PARTIES 13

OVERVIEW OF BANK’S SECURITY PACKAGE 13

KEY MANAGEMENT AGREEMENT TERMS 14

POTENTIAL BREACHES OF MANAGEMENT AGREEMENT 15

POTENTIAL RIGHTS UNDER MANAGEMENT AGREEMENT 16

NON-DISTURBANCE AGREEMENT 16

CONTRACTOR AND DEVELOPMENT DOCUMENTS 16

EMPLOYEES 16

CAPITAL STRUCTURE 17

DEBT SERVICE COVERAGE (DSC) RATIO FORECAST 17

DEBT ON EBITDA 17

LOAN TO VALUE RATIO 17

GLOSSARY OF TERMS 18

SCHEDULE 1-P&L US$ 19

SCHEDULE 2 20

SCHEDULE 3 24

SCHEDULE 4- PRACTICES PROFILE 25


Full Legal Overview

Full Commercial Overview

EXECUTIVE SUMMARY

RECOMMENDATIONS

Further to our asset review we concluded the following:

LEGAL SUMMARY

The Hotel is freehold and operated as a Brand under

an HMA between An Hotel Company and Hotel Owner

and a separate Trade Mark Licence granted by An Hotel

Company. The HMA is lacking in a number of

protections for Hotel Owner and is very one sided in

favour of a Hotel Company.

The Hotel Owner also entered into a Non-Disturbance

Agreement with a Hotel Company and the Bank as well

as a Facility Agreement with the Bank. As part of the

Facility Agreement, Hotel Owner granted a full security

package to the Bank over the assets of the Hotel and

shares in Hotel Owner.

The Hotel was opened in 1995 as a new build.

COMMERICAL SUMMARY

The Hotel is running below its market and competitive set

position due principally to poor ARR performance, though

there is also evidence that occupancy is also beginning

to drop against market benchmarks.

As a result of falling top-line revenue Rooms and Food

Gross Profits are very low indeed which suggests that

management have not made the necessary cuts in their

cost model to accommodate falling revenue resulting in

proportionately high Administrative & General, and Wage

levels at 16.7% and 36% of total revenue respectively.

The main revenue generating areas of the Hotel are

generally in poor condition, particularly the bedrooms,

and are in need of some capital expenditure to bring the

product into line with its competitive set.

Through our analysis we envisage four scenarios which

will assist in driving better revenues and net profits and

will strengthen the debt service coverage position as

follows:

Scenario 1- Current trading

172,300 + 3,700 +10,300+14,600

Current Hotel Worth- Scenario 1

Property Value Scenario 2



Hotel Worth Index


Scenario 2- Increasing Rooms Profitability by 2% will

add SAR3.7m to asset worth

Scenario 3- Increasing Rooms Profitability by 2% +

Increase F&B Profitability to 30% will add

SAR10.3m to asset worth


Increase F&B Profitability to 30% + Decrease in

Undistributed Payroll by 2% will add SAR14.6m to

the asset worth

PERFORMANCE GROWTH STRATEGY TIPS

Recommendation 1- Revenue Strategy

Recommendation 2- Cost Strategy

Recommendation 3- Staff Strategy

Recommendation 4- Sales & Marketing Strategy

LEGAL STRATEGY TIPS

HMA: Strategy

Licenses: Strategy

Ownership Structure: Strategy from a legal prospective

Litigation : Strategy

Risk mitigation : Strategy

6,000

7,000

8,000

9,000

10,000

11,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Effect of Strategic Performance Management on Cash Flow

EBITDA Scenario 1 EBITDA Scenario 2 EBITDA Scenario 3 EBITDA Scenario 4


PROPERTY SUMMARY

OVERVIEW

The Hotel was purpose built in 1995 and is well located off a

major thoroughfare in King Fahad Road Riyadh and within

minutes of KAFD and Kingdom Centre. The Hotel is

currently operated under an HMA with An Hotel Company

but would be suitable for alternative branding or

repositioning.

The Hotel benefits from high visibility in a prominent location

and is well sign posted with good complementary amenities

within the immediate locale supporting the needs of both

business and leisure guests.

LOCATION & SURROUNDINGS ANALYSIS

Since the hotel opening, the neighbourhood has grown from

few residential buildings to micro economy, characterised by

a large number of new hotels, and retail outlets. Our Site

econometric analysis has produced the following results:

1. Suitability for Re-Development: The current market

demand is high for service apartment. The asset in

its current status allow for the re-configuration of the

bedroom stock, hence the opportunity to convert 20

units into serviced apartments which will add an

extra SAR 15,000 or room revenue per annum per

room sold.


2. Visibility: Despite the number of residential buildings

been built around the asset, visibility still good.

However, we strongly recommend reviewing

signage and information on the hotel website.

3. Accessibility: Major work around the site has led to

traffic been diverted and therefore accessibility to

the hotel have been restricted. This could affect

business in short to medium term.

4. Proximity to Demand Generators: New companies

have occupied the adjacent building and this put the

hotel in a stronger position when compared with

direct competitors.

5. Market Growth Potential: Macro market growth is

limited as the main tourism source markets are still

suffering from economic downturn. GCC and Egypt

are the markets which we have identified as catalyst

for the growth. Micro market growth is limited to the

new tenants in adjacent office building and meeting

business from existing clients.

6. Barriers to Entry for New Hotel Supply: Barriers

are very low and as there are quite few plots

available in the surroundings and the threat from

new supply still very high.


KPI

Requires

immediate

attention

Will require

attention if ignored

Is operationally

sound

PHYSICAL ASSET & FACILITIES –TRAFFIC LIGHT ANALYSIS

The table below summarises the Hotel's facilities and

amenities

The Hotel is generally in poor condition having received little

capital expenditure over recent years. The reception, lounge

and bedrooms are in need of a soft refurbishment to

maintain the Hotel's competitive position within its market

place and against its competitive set. This could seriously

threat the room revenue achievable and therefore a negative

impact on net profit and worsening of debt service coverage.

The food and beverage facilities are however well

maintained and are popular amongst both Hotel guests and

the public. The Hotel bar in particular has a cachet within the

immediate locale and trades strongly on weekday evenings.

The meeting and conference facilities are largely operable,

though the smaller meeting rooms could use some

Facility Number Condition

Bedrooms 200

FF&E are poor, Bathrooms

Tired

Reception N/A Fair

Lounge 100 Fair

Bar 75 Good

Restaurant 120 Good

Meeting Room 1 500 Good

Meeting Room 2 300 Fair

Meeting Room 3 100 Fair

Boardroom 18 Excellent

Leisure & Spa N/A

Changing rooms tired. M&E

good

Back of House 8 Generally poor

Exterior N/A

Generally good. – signage

poor

Grounds N/A Generally good


Full Profit & Loss Accounts

improvements to the soft furnishings and wall coverings

which are tired. The leisure areas are in fair condition though

the changing rooms would appear to have a damp issue and

the shower areas are in need of some improvements.

The back of house areas are generally in very poor condition

with the kitchens and staff facilities in particular requiring

immediate attention and investment.

The exterior of the building is generally good though a

freshen up of the façade and better maintenance of the trees

and shrubs would improve appearances immediately. In

addition, the lighting of the Hotel as well as night and

general signage requires attention.

TRADING PERFORMANCE ANALYSIS

The Hotel is trading reasonably well with a good mix of

Corporate and Leisure business. Average room rate and

occupancy are broadly in line with the Hotel's competitive

set (see Appendix 1) though ARR has shown some decline

in recent months.

FINANCIAL ANALYSIS, 2010-11 (FULL P&L IN

SCHEDULE 1)

HISTORIC & CURRENT

The Hotel has historically traded well though the recent

credit crunch has had a detrimental effect on the Hotel's

trading performance.

Current & Historic Hotel Performance

Year 2011* (SAR)

% 2010 (SAR)

% 2009 (SAR)

%

TRevPAR SAR48,974 SAR53,885 SAR56,578

GOPPAR SAR13,249 27% SAR18,095 34% SAR23,676 42%

EBITDA PR

SAR6,173 13% SAR10,194 19% SAR14,741 26%

Key Performance Indicators

ARR SAR SAR116.00 SAR122.50 SAR126.00

Occ 69% 72% 74%

RevPAR SAR80.27 SAR88.32 SAR92.74

* 6 month actual and 6 month forecast accounts


MARKET PERFORMANCE

The Hotel's competitive set as an average performed

relatively well over the previous three years, though with the

recent economic downturn, the Meetings, Incentives,

Conferences and Events (MICE) segment has been hit

which has had an adverse effect on all the Hotels in the

sector.

Current & Historic Market Performance

Year 2011* (SAR)

% 2010 (AED)

% 2009 (AED)

%

TRevPAR SAR52,326 SAR57,623 SAR59,652

GOPPAR SAR21,001 40% SAR23,596 41% SAR25,556 43%

EBITDA PR SAR16,232 31% SAR17,554 30% SAR19,658 33%


ARR SAR128 SAR132 SAR136

Occ 72% 72% 76%

RevPAR SAR92.16 SAR95.04 SAR103.36


We have aggregated the market data to show performance

on a ‘per room’ basis to ensure fair comparisons are being

made.

COMPARATIVE ANALYSIS

As illustrated below, the Hotel has performed badly against

its competitive set, particularly in terms of ARR which has

fed through the Profit and Loss accounts to show very poor

conversion to EBITDA.

Comparative Analysis

Year 2011* (SAR)

% 2010 (SAR)

% 2009 (SAR)

%

TRevPAR -6.41% -6.49% -5.15%

GOPPAR -36.91% 35% -23.31% 38% -7.36% 42%

EBITDA PR -61.97% 19% -41.93% 24% -25.01% 28%


ARR -9.38% -7.20% -7.35%

Occ -3.89% 0.14% -3.16%

RevPAR -12.90% -7.07% -10.28%



Our detailed P&L analysis, as summarised above, indicates

that the Hotels performance has suffered particularly in the

past two years with top line figures down both in real and

comparative terms.

ROOMS DEPARTMENT-MARGINS

• Rooms Revenue @ 35.7% of 2011’s Forecast

• Rooms Profit @ 36.3% of 2011’s Forecast

• Rooms Margin should be constant and increasing

with good cost management approaches

• Hotel rooms should have a room’s profit margin in

excess of 80%, but currently the hotel is achieving

below this threshold. To achieve annual target the

hotel needs to achieve profits at 75.9%

ROOMS DEPARTMENT COSTS- BENCHMARK

• Hotel 1 has the Ideal Cost / Profitability Mix.

• Hotel 2 is a Normal hotel operating at a higher cost

base due to guest turnover

• The subject hotel has an Opportunity cost of 3%

points reduction on the Rooms Costs to reach the

optimum scenario.

FOOD & BEVERAGE DEPARTMENT-MARGINS

• F&B Revenue @ 26.8% of 2011’s Forecast

• F&B Profit @ 16.7% of 2011’s Forecast

• F&B Margin is at 5.7%, Cost of Sale is at 25%,

Payroll is at 60% and other costs at 9%.

An opportunity lies in improving Payroll through multitasking

and skills training.

7410

1335

2

2076

2

5773

10

14

0

1591

3

May Year to Date Rest of Year Full Year 2011

Rooms Department

Rooms Revenue Rooms Profit

1041

2841

38

82

60

299

359


F&B Department

F&B Rev F&B Profit

20

%

29

%

23

%

0%

5%

10%

15%

20%

25%

30%

35%

Hotel 1 Hotel 2 Hotel Analyzed

Rooms Expenses

77

.9%

75

.9%

76

.6%

74%

75%

76%

77%

78%

79%


Rooms Margin

Rooms Margin

Rooms Margin Trend


FOOD & BEVERAGE DEPARTMENT-COST

BENCHMARK

• Hotel 1 has a high F&B Profitability Margin of 48%.

• Hotel 2 is operating at a good F&B Profitability Margin

of 41%

• The subject hotel is forecasted to trade at a poor cost

/ profitability mix, and has a Departmental

Profitability Margin of just 9%.

OTHER DEPARTMENT-MARGINS

• Other Revenue @ 20.9% of 2011’s Forecast

• Other Profit @ 21.5% of 2011’s Forecast

• Other Margin is at 69.1%, with a yearend target of

67.2%

The Analysis concluded that it is below the line costs where

there have been some mismanagement with conversion to

EBITDA dropping significantly.

This in itself implies that insufficient measures were taken by

the Hotel's management to reduce their fixed costs in the

preceding years. Immediate remedies can be taken in this

area to reduce costs, some of which can be affected by the

operator themselves (procurement, staffing, management

fees) whilst other, property based costs, should be dealt with

by the Owners.

Whilst the mismanagement of the cost model is important,

top line figures could have been maintained in line with the

market and it is our opinion that the Hotel has performed

below competitors in this area due to insufficient expenditure

on FF&E, hence less marketable.

5.7%

10.5

%

9.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

12%


F&B Margin

F&B Margin

F&B Margin Trend

69

6

26

34 3

32

9

48

1 17

57 22

38


Other Department

Other Revenue Other Profit

69

.1%

66

.7%

67.2

%

65%

66%

67%

68%

69%

70%


Other Margin

Other Margin

Others Margin Trend

52

%

59

%

91

%

0%

20%

40%

60%

80%

100%

Hotel 1 Hotel 2 Hotel Analyzed

Food & Beverage Expenses


COMMERCIAL CONCLUSIONS

THE PROPERTY

The Hotel is generally in fair condition though we feel it has

been underinvested in over the past few years and would

benefit greatly from a soft refurbishment. Additional works

should be carried out on the exterior of the building to

improve the façade, landscaping signage and lighting

around the building.

If reinvestment takes place the Hotel should claw back its

position within the market and re-establish its market

penetration to bring profits back up to historic levels. This will

enable the owner to have a healthier business and better

service coverage of its interests in the property and business

at the best possible exit value

COLLIERS HOTEL WORTH INDEX

EFFECT OF STRATEGIC PERFORMANCE ON NET

PROFIT AND ASSET VALUE

Scenario 1- Current trading

Scenario 2- Increasing Rooms Profitability by 2% will add

SAR3.7m to asset worth


Increase F&B Profitability to 30% will add SAR10.3m to

asset worth


Increase F&B Profitability to 30% + Decrease in

Undistributed Payroll by 2% will add SAR14.6m to the asset

worth

6,000

7,000

8,000

9,000

10,000

11,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Effect of Strategic Performance Management on Cash Flow

EBITDA Scenario 1 EBITDA Scenario 2 EBITDA Scenario 3 EBITDA Scenario 4

172,300 + 3,700 +10,300+14,600

Current Hotel Worth- Scenario 1




Hotel Worth Index


LEGAL OVERVIEW

POTENTIAL CLAIMS AGAINST THIRD PARTIES

Our initial review of the documents indicate that the Bank is

unlikely to have a claim against either the original valuer or

the solicitors who advised on the grant of the loan facility at

the start of the Bank's loan. However, this should be

reviewed in more detail if the Bank's loss crystallises

(subject to any limitation issues). In the event that a more

detailed review indicates that the Bank does have a claim

against a third party in relation to its loss, Al Tamimi &

Company would like to discuss with the Bank options for

funding such claims.

OVERVIEW OF BANK’S SECURITY PACKAGE

The Bank’s security package includes a number of

shareholder (i.e. borrower group) guarantees, a fixed charge

over the Property and an assignment of the borrower's

interest in: (a) the Hotel agreements including the non-

disturbance and management agreements; and (b) the

income, retentions, sale proceeds and any insurance

proceeds relating to the Hotel. A pledge by the borrower

provides the Bank with security over the shares of [Holding

Company].

The recommended restructuring option in this case is to

threaten to exercise the lender's rights under the facility

agreements (although not any rights of appropriation in the

pledge), including the rights under guarantees granted in its

favour, so as to illicit sufficient funds from Hotel Owner's

group of companies for Hotel Owner to bring the facility back

from default without the necessity of enforcement of security.

If, as seems likely, this threat results in a satisfactory

compromise it will be appropriate to amend and restate the

loan to extend its term (and potentially, at the same time,

relax certain financial covenants) in return for:

a charged cash deposit;

an equity injection into the borrower from its

shareholders/guarantors;

additional security from other members of the

borrowing group;


Schedule of HMA

Terms

Hotel Owner using the monies available within

the FF&E reserve account to carry out the

proposed refurbishment works (i.e. against the

background of the above improved security

package),

such that, if the restructured facility does not result in Hotel

Owner being able to meet its commitments, the Hotel can, in

any event, be sold in a much improved position.

KEY MANAGEMENT AGREEMENT TERMS

The full version of this analysis can be found in Schedule 2

but we below have highlighted the pertinent points from our

analysis.

If retaining the HMA, the onerous terms which the Bank

should consider renegotiating with the Operator are as

follows:

PERFORMANCE TESTS

We have concerns about the existing performance test.

That test provides that if in any two consecutive fiscal years

the GOP is less than:

85% of the budgeted GOP in any fiscal year from

the 4th fiscal year up to and including the 10th fiscal

year of the term; and

90% of the budgeted GOP in any fiscal year from

the 11th fiscal year onwards and including the end

of term;

then the Owner shall have the right to terminate the HMA by

notice, to be effective between 90 to 180 days afterwards.

A more effective test would be to compare the performance

of the Hotel against revenue (as fees (apart from the

Incentive Fee) are paid by reference to this) or the REVPAR

of the comparable hotels, at not less than 90% rate.

FEES

The Base Fee and Incentive Fee are both high compared to

the current market norm. In particular, the Incentive Fee of

12% of GOP is very high and a figure of 8% - 10% of GOP

or AGOP would be far more reasonable.


OWNERS' PRIORITY

The HMA does not provide for any Owners' priority return or

for any deferral of the Operator's Incentive Fee. It would be

preferable for the Owner if the Operator's Incentive Fee was

subordinated to an agreed amount of debt service on the

Hotel.

EXCLUSIVITY

The HMA does not provide for any exclusivity or area of

protection for the benefit of the Owner. The Operator is

therefore free to operate other brand hotels within the vicinity

of the Hotel.

POTENTIAL BREACHES OF MANAGEMENT AGREEMENT

[Identify any likely breaches of Hotel Management

Agreement and implications]

It is often the case that purported breaches of the HMA are

not clear-cut. Depending on the position of the Operator,

there is likely to be a risk in seeking to terminate the HMA

which may lead to a costly and time consuming legal

dispute. Once the relevant documentation have been

reviewed and considered, Al Tamimi & Company will be in a

position to advise in more detail as to the strength of the

Bank's position under the HMA and whether it is likely to be

cost and time effective to seek to terminate the HMA in the

context of the overall commercial position.

Alternatively, often allegations of mismanagement rely on

allegations of numerous failings. Therefore, Hotel Owner

should look to see whether there is a mechanism within the

HMA that enables it to terminate on the basis of such an

aggregation.

Hotel Owner should also be aware that if it decides to

terminate the HMA, it may face the threat of An Hotel

Company counterclaiming for damages, possibly equal to

the entire remaining term of the HMA.

If the Hotel Owner can demonstrate that An Hotel Company

has not delivered upon the obligations that were agreed

between the parties, the Hotel Owner may be able to bring a

claim against An Hotel Company for compensation based on

claims of mismanagement.


POTENTIAL RIGHTS UNDER MANAGEMENT AGREEMENT

[Identify Hotel Owner’s/Bank’s Rights under HMA]

There are a number of concerns in relation to the

mismanagement of the Hotel such as to justify Hotel Owner

in exercising its right to inspect financial records. If a review

of those records will support an allegation of

mismanagement, we believe it is likely that it will be

appropriate to seek to renegotiate the terms of the HMA.

The first step, however, is to obtain copies of the relevant

records by exercising the contractual right of inspection.

The audit terms are standard form and allow the Owner to

inspect the relevant records on reasonable notice.

NON-DISTURBANCE AGREEMENT

The Hotel is encumbered by a NDA but it would seem

unlikely that the NDA materially impacts upon the above

recommended strategy as it seems probable that, in a forced

sale scenario, the asset could be sold subject to the existing

HMA.

CONTRACTOR AND DEVELOPMENT DOCUMENTS

Not applicable.

EMPLOYEES

The employees in the Hotel are all employed by the Hotel

Owner, with the exception of the General Manager who is

employed by the Hotel Operator.


CAPITAL STRUCTURE

DEBT SERVICE COVERAGE (DSC) RATIO FORECAST

From the analysis of the hotel historic trading projections

we foresee the debt service coverage to be in line

with the minimum required by the bank.

A 10% fall in Average Room Rate it is likely to have a

6.1% negative impact on the EBITDA, consequently

bring the DSC ratio below the required 1.25X

In order to maintain a robust DSC ratio the hotel is

required to achieve a Gross Operating Profit

constant at 60%. Any shortfall in GOP will threaten

the compliance with the minimum DSC required by

the lender

DEBT ON EBITDA

The hotel debt finance position stands at 17x times

EBITDA which in our view is very risky

Assuming the hotel will implement the strategies

recommended in this report we envisage the total

debt to reach 13x times EBITDA by 2015

LOAN TO VALUE RATIO

Senior Debt-The current loan amount stands at 50% of

value

Mezzanine Debt- The current loan amount stand at 85%

of value

Junior Debt – The current loan amount stands at 70% of

value.

We have noticed an abnormal distribution of debts

which we would suggest to consolidate all in one

senior debt. The structure of the new debt needs to

reflect the forecasted trading projections in order to

provide overall debt service coverage supportable

by the property.


GLOSSARY OF TERMS

ARR – Average Room Rate

EBITDA – Earnings Before Interest Tax Depreciation &

Amortisation

FF&E – Fixtures Fittings & Equipment

GOPPAR – Gross Operating Profit Per Available Room

HMA – Hotel Management Agreement

NDA – Non-Disturbance Agreement

OM&E – Operating Machinery & Equipment

POR – Per Occupied Room

PAR – Per Available Room

RevPAR – Revenue Per Available Room


SCHEDULE 1-P&L US$


SCHEDULE 2

Provision Summary

1. Parties (1) [ ● ] (Owner)

(2) [ ● ] (Operator)

2. Term 25 years from the Opening Date. The Operator can

choose to extend the term for a further five years on 12

months prior written notice before the expiry of the initial

term.

3. Technical Services The Owner shall perform Technical Services which entail

consultation with the Owner's contractors in respect of

operational matters, design matters, IT planning and Brand

Standards matters.

4. Pre-Opening Activities

Programme

The Operator shall prepare and carry out a Pre-Opening

Activities Programme prior to the Projected Opening Date,

including activities such as recruitment, marketing,

obtaining licences and permits, arranging for amenities

provision, and preparation of the first year's operating

Budget.

5. Technical Services Fee $100,000

Onerous/Scope for renegotiation

Operator Friendly

Market Standard/Reasonable


Provision Summary

6. Base Fee

3% of Total Revenue each Year.

7. Incentive Fee 12% of Gross Operating Profit each Year.

8. Marketing, Central Sales

and Licensing Fees

Sales and Marketing Fee: [ ]% of Total Revenue.

TM Licensing Fee: [ ]% of Total Revenue.

9. Owner’s Priority/Deferral

of Incentive Fee

There is no Owner’s priority return or deferral of incentive

fee.

10. FF&E Reserve A Reserve Fund shall be held in a segregated account and

each year the following percentages of Total Revenue will

be transferred to this account:

First Year: 1%

Second Year: 2%

Third Year: 3%

Fourth Year, and thereafter: 4%

The Reserve Fund shall be used to make replacements

and renewals of and additions to FF&E only.

11. Alterations/Brand

Standards

The Operator can make alterations to the Hotel which are

customarily made in the operation of first-class Hotels or

are required to maintain the Hotel in accordance with the

brand standards (such standards are set by the Operator).

The cost of this shall be borne by the Owner.

12. Performance Test If in any two consecutive fiscal years GOP is less than:

(a) 85% of the budgeted GOP in any fiscal year from the

4th fiscal year up to and including the 10

th fiscal year of

the term; and

(b) 90% of the budgeted GOP in any fiscal year from the

11th fiscal year onwards,

then Owner may terminate this Agreement.


Provision Summary

The Operator can cure the breach by paying an amount

equal to shortfall in respect of either one of the two relevant

fiscal years. There is no limit to the number of times that

the Operator can cure.

13. Employees Persons hired to work at the Hotel shall be employees of

the Owner and not of the Operator, except that the General

Manager and other executive personnel may be employed

by the Operator.

14. Early termination by the

Owner

The Owner can terminate if the Operator:

(i) fails to observe a material term of the Agreement and

such default continues for 60 days after receiving

notice specifying the breach requiring it to be

remedied;

(ii) becomes insolvent or ceases to carry on its business.

15. Early termination by the

Operator

The Operator can terminate if Hotel Owner:

(i) fails to observe a material term of the Agreement and

such default continues for 60 days after receiving

notice specifying the breach requiring it to be remedied

or 10 days after such notice in the case the default

relates to failure to pay any monies and/or fees due

under the Agreement;

(ii) does not commence construction by [ ] or open

Hotel by [ ];

(iii) becomes insolvent or ceases to carry on business.

16. Right of First Offer The Operator has a right of first offer if the Owner wishes to

sell the Hotel.

17. Exclusivity No restrictions

19. Assignment The Operator can assign any of its rights to any person,

without consent of the Owner, provided the assignee


Provision Summary

enjoys the benefits of the Brand organisation in the same

degree as the Operator.

The Owner may not, without the consent of the Operator,

such consent not to be unreasonably withheld, assign any

of its obligations under this Agreement or dispose of the

Hotel.

The Owner may not assign/dispose of the Hotel to:

(a) any entity considered by the Operator to be a

competitor; or

(b) any entity of ill repute;

The Owner may not create any security over Hotel where

the aggregate indebtedness exceeds 75% LTV.

20. Disputes The Agreement is governed by English law. Disputes

under the Agreement are dealt with as follows: [expert

determination/mediation/arbitration/ court of law]


SCHEDULE 3 The scope of Al Tamimi & Company’s engagement

expressly excludes any responsibility to investigate, advise,

comment or report on, or otherwise have any responsibility

for, the affairs of the Bank in relation to taxation,

accounting, financial matters, fiscal compliance with

environmental law and regulation, valuation of any asset or

liability of the Hotel, any actuarial matters, the adequacy

or enforceability of any insurance arrangement, or to

review, comment, advise or report on any documents other

than those we have identified in Schedule 4. The Bank is

responsible for determining whether the scope of work

which we have been asked to carry out is sufficient for the

purposes of this Report.

Al Tamimi & Company has not undertaken any independent

verification of any of the documents or information

supplied to us and makes no representation or warranty

and gives no undertakings to the accuracy, reasonableness

or completeness of the information contained in any

document or information supplied to us for the purpose of

completing this Report. No liability is accepted by Al

Tamimi & Company to the extent that any information

supplied by or on behalf of the Bank is, or proves to be in

due course, untrue, incomplete or inaccurate in any

respect. This Report should not be regarded as a

comprehensive or formal legal opinion or legal audit. The

legal sections of this Report have been prepared solely to

identify what, on the basis of the review of the documents

provided, we consider in our professional judgment to be

the major legal issues relating to the Hotel, for further

investigation and advice.

This Report is limited to matters of UAE law as are in force

and applied by the UAE courts at the date of the Report

and should be construed accordingly. Al Tamimi &

Company has made no investigation of and expressed no

statement or opinion with respect to the laws of any other

jurisdiction.

The submission of this Report and any further explanations

are subject to our engagement letter to the Bank dated

[ ] and the conditions and limitations contained

in that letter and in our standard terms and conditions of

engagement.


SCHEDULE 4- PRACTICES

PROFILE

AL TAMIMI & COMPANY

With a focus on the Middle East, we have a strong understanding of the business

environment that our clients operate in. This, combined with our full range service

offering, ensures that our clients receive sound and strategic legal advice.

With lawyers in 10 offices across 6 countries in the Middle East who are dedicated to

working together interactively, we can respond knowledgeably and efficiently on any legal

aspect across the region.

Our unified approach illustrates our ability to work together with our clients, address their

issues and identify commercial solutions by building close relationships with them. We

recognise the importance of being easily accessible, commercially aware and at the

leading forefront of market developments.

We employ a diverse group of talented individuals from varied backgrounds and with

differing perspectives. They are each familiar with international and local business

customs and are capable of addressing issues in a collaborative manner. By having the

ability to look at matters from every angle, we can apply our expertise confidently and

decisively – providing integrated solutions to legal and commercial issues throughout the

Middle East.

OUR HOSPITALITY PRACTICE

We provide a comprehensive range of legal services across the MENA region, covering all

areas relevant to the hospitality and leisure industry.

The Hospitality practice comprises a team of experienced lawyers who work across the

entire range of legal disciplines within the firm. Together they form a specialist industry

practice created specifically to cater to all parties involved with the hotel and leisure

business. Our team has in-depth knowledge of the hospitality and leisure industry gained

from advising on all manner of hospitality and leisure related issues. The team also draws

on the invaluable experience of its members who have previously held in-house counsel

roles within the hotel industry.

We advise on all matters applicable to a hotel/leisure project, whether your interest is as

an owner, investor, developer, operator or financier. Our expertise ranges from

site/property acquisition, corporate structuring and long-term strategy planning, joint

venture arrangements, project and operational licensing, project finance, equity and debt

financing, hotel development and construction, hotel operator appointment (including

negotiation of hotel management agreements), day to day operational matters,

employment related advice, property refurbishment/renovation, dispute resolution,

intellectual property protection and disposal options.


COLLIERS INTERNATIONAL

Colliers is a global, leading real estate services organisation defined by its spirit of

enterprise. Through a culture of service excellence and a shared sense of initiative, Colliers

has integrated the resources of real estate specialists worldwide to accelerate the success

of its clients.

COLLIERS HOSPITALITY

Colliers International has a dedicated hospitality team specialized in Hotels, Resorts,

Marina, Golf and Spa with offices in Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo working

with major developers and investors across all stages of planning and delivery for major

real estate projects.

Within the GCC Colliers International have achieved the following:-

-Strategic Advisory and Hospitality Capital Valuation for more than 20,000 keys with a total

asset value in excess of AED 12 Billion

-Hotel Operator Search, Selection and Contract Negotiation in excess of 2,500 keys with

client savings in excess of AED 11 million

-In excess of 4,200 keys proposed within Highest & Best Use, Market & Financial

Feasibility Studies for Hotels & Serviced Apartments

-Highest & Best Use, Market & Financial Feasibility Studies for Hotels & Serviced

Apartments with a total estimated net asset value in excess of AED 6 Billion

WHAT WE DO

Business

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