Executive Summary for a Luxury Business Stay Hotel BP 2011.

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STEMGART VENTURES

Executive Summary
Proposed Business Stay Hotel Development, Ikeja, Lagos

Prepared By Stemgart Ventures

August 2011

Intellectual Property Restrictions:

CONFIDENTIALITY AGREEMENT The information in this report shall not be disclosed outside and shall not be duplicated, used or disclosed in whole or in part for any purpose other than to evaluate the proposal, provided that if an agreement with the Client is signed as a result of or in connection with the submission of this proposal, the client shall have the right to duplicate, use or disclose the information to the extent provided by the contract.
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The undersigned reader acknowledges that the information provided by Stemgart Ventures in this report is confidential; therefore, reader agrees not to disclose it without the express written permission of Stemgart Ventures. It is acknowledged by reader that information to be furnished in this report is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader may cause serious harm or damage to Stemgart Ventures Upon request, this document is to be immediately returned to Stemgart Ventures.

___________________ Signature ___________________ Name (typed or printed) ___________________ Date This is a business case report. It does not imply an offering of securities.

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DOCUMENT CONTROL Document Control Within ISO 9002 control: Owner Date Originated in August 2011 Copy Issued To Format Notes 1 File Original 2 3

CONTACT LIST All communication or enquiries regarding the proposal or any related matters should be addressed to: Ebube Chukwujekwu Managing Consultant, Stemgart Ventures, 5c Mobolaji Bank Anthony Way, Maryland, Lagos State Phone: +234-805-641-6008 Email: ebubecster@gmail.com

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Table of Contents
Table of Contents....................................................................................................... 4 1 EXECUTIVE SUMMARY..............................................................................................6 1.1 THE LOCATION...................................................................................................6 1.2 PROJECT CONCEPT............................................................................................6 1.3 PROJECT FINANCE..............................................................................................7 1.4 FINANCIAL ANALYSIS.........................................................................................8

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SECTION 1 EXECUTIVE SUMMARY

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1 EXECUTIVE SUMMARY
In the following section we present an executive summary of our findings, results and recommendations

1.1 THE LOCATION

The site proposed for the business stay hotel is Ikeja. It is proposed that a site of approximately 2,600 square meters, located, within a low density area in Ikeja would be appropriate for this development. Also key to locating the hotel should be proximity to the airport Once access to and from the site is good it is anticipate that there will be sufficient demand generated by companies located in and around Ikeja and Oregun the hotel can also draw on demand generated by the traffic through the International and Local Airports. During our pre project survey several airlines have indicated interest in patronizing such a hotel on long term basis, to accommodate their cabin crew. The following table shows our analysis of the site, using the SWOT model: Proposed Extended

1.2 PROJECT CONCEPT

The Sponsors intention is to develop a lodging facility designed for and targeted at the business stay market, the international traveler who is staying for a week or more in Lagos, and is seeking more business services than is available in the confines of a normal hotel. We have based our projections on a hotel with 60 keys and ancillary facilities, as summarized in the table below:
Table 1 Project Concept

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Executive Summary for a Luxury Business Stay Hotel BP 2011.H4

P ropos Ik H ed eja otel P roject C oncept 55 Rooms 5 Studio Suites 6 0 LettingUnits Restaurant (c 25seats) Lounge Bar Smoking Bar Pool Bar Conference Room (c100 square metres) MeetingRoom(c40square metres) Swimm Pool ing Tennis Court Gym Business Centre Parkingfor visitors and staff (c30 cars) Computer term inals in the caf for internet access. Wireless internet access throughout the building. Virtual mini-shop for essentials.

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B edroom s T l room a S ota s nd uites

F ooda B era e nd ev g

MeetingF cilities a L ure eis B usines S ices s erv P rk a ing Other

This range and mix of facilities makes best use of the existing space and represents a coherent product which will enable the hotel to establish a strong niche position within the market, most notably in the domestic and international corporate sectors. It is evident that a clear market opportunity exists for more international quality hotels in Ikeja, if the hotel is sited in an excellent location with proximity to demand generators it will be able to leverage on the shortage of quality hotel rooms to accommodate growing levels of domestic and international commercial demand in Lagos, especially in Ikeja.

1.3 PROJECT FINANCE

The proposed hotel is expected to have a turnkey cost of US$ 15.49 million including interest during construction. A provision has been made for running capital of US$ 0.5 million bringing total project costs to US$ 15.99 million. The costs are broken-down as follows:
Table 2 Project Cost

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De cription s La nd Construc tion Furniture Fittings & Equipme , nt Fitne Ce ss ntre(Equipme nt& Se e rvic s) Fixe Asse d ts Construc tion Consulta y nc Working Ca l pita Pre -ope ning Expe s nse Continge y nc Inte st Expe re nditure Profe ssiona Fe s l e Custom Dutie a Ta s s nd xe Tota Proje Cos l ct t Cos t N 368,214,137 1,350,000,000 135,000,000 33,000,000 35,100,000 120,504,305 75,000,000 49,500,000 135,000,000 240,000,000 72,421,421 25,125,000 2 3 ,8 4 6 ,6 8 6 ,8 3 % of Tota l 13.95 51.16 5.12 1.25 1.33 4.57 2.84 1.88 5.12 9.09 2.74 0.95 10 0 0 .0

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1.4 FINANCIAL ANALYSIS

The hotels Net Sales Revenue, after making provision for 5% VAT, is expected to rise from N1.42 billion in the first year to N1.84 billion in the fifth year. Similarly, annual Net Profit is expected to improve from N10.4 million in the first year to N470.50 million in the fifth year. Closing cash balance is expected to rise from N519.93 million in the first year to N1.7 billion in the fifth year. Find below a summary of our projections (The scenario below assumes 50% equity and 50% debt)
Table 3 Summary of Financial Projections

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Ye r of Ope tion a ra Num r of Rooms be Occupa Ra ncy te Annua Room l nights Minim Ra Ra ($ um ck te ) Tota RoomRe nue ($ l ve s ) Tota RoomRe nue (N0 0 l ve s 0) Tota Re nue (N '0 0 l ve s 0) Profit Afte Ta (N '0 0 r x 0) Ca h Ba nce(N '0 0 s la 0) Ye r of Ope tion a ra Gros Ma s rgin Profit Ma rgin Re turn on Equity Ea rningsPe S re r ha Curre Ra nt tio Quick Ra tio Ge ring a De Se bt rviceCove Ra r tio 1 60 60% 12,045 250 3,011,250 586,110 1,418,364 10,354 519,928 1 82% 0.73% 0.74% 0.00 15.46 15.02 0.95 1.62 2 60 65% 13,049 250 3,262,188 647,651 1,525,707 306,126 821,581 2 83% 20% 19% 0.12 7.51 7.35 0.70 3.21 3 60 70% 14,053 275 3,864,438 771,728 1,673,966 413,531 1,107,487 3 84% 25% 21% 0.16 6.42 6.31 0.49 4.16 4 60 70% 14,053 275 3,864,438 787,163 1,686,825 392,898 1,295,710 4 84% 23% 18% 0.15 5.21 5.13 0.32 5.21 5 60 75% 15,056 300 4,516,875 927,483 1,841,986 470,495 1,697,784 5 84% 26% 19% 0.18 3.99 3.94 0.16 8.22

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