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FOUR POINTS BY SHERATON, BENIN CITY

INFORMATION MEMORANDUM

Information Memorandum Four Points


By

Sheraton Benin City


2012

1 COPYRIGHT HUDSON CONSULTING GROUP 2012

FOUR POINTS BY SHERATON, BENIN CITY


INFORMATION MEMORANDUM
CONFIDENTIALITY&SECURITY
This document contains confidential information of Hudson Consulting, which is provided for the sole purpose of permitting the recipient to evaluate the proposal submitted herewith. In consideration of receipt of this document, the recipient agrees to maintain such information in confidence and to not reproduce or otherwise disclose this information to any person outside the group or the evaluation committee directly responsible for evaluation of its contents, except that there is no obligation to maintain the confidentiality of any information which was known to the recipient prior to receipt of such information from Hudson Consulting , or becomes publicly known through no fault of recipient, from Hudson Consulting , or is received without obligation of confidentiality from a third party owing no obligation of confidentiality to Hudson Consulting . The information contained herein is proprietary to Hudson Consulting and may not be used, reproduced or disclosed to others except as specifically permitted in writing by Hudson Consulting. The recipient of this document, by its retention and use, agrees to protect the same and the information contained therein from loss or theft.

Financial Consulting Provided by:

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INFORMATION MEMORANDUM
C O N F I D E N T I A L I T Y & S E C U R I T Y................................................................................................... 2 1 Executive Summary ............................................................................................................................... 4 2 Project Overview ................................................................................................................................... 5 2.1 Location......................................................................................................................................... 5 2.2 Facilities......................................................................................................................................... 6 2.3 Project Status ................................................................................................................................ 7 2.4 The Manager Starwood.............................................................................................................. 7 2.5 Value Proposition .......................................................................................................................... 8 3 Hospitality Industry Overview............................................................................................................. 10 3.1 The Global Overview ................................................................................................................... 10 3.2 Nigeria Hospitality Market .......................................................................................................... 10 3.3 The Benin City Hospitality Market. ............................................................................................. 11 3.4 The Opportunity.......................................................................................................................... 12 3.5 The Competition ......................................................................................................................... 13 4 Financials ............................................................................................................................................. 15 4.1 Room Revenue Assumptions ...................................................................................................... 15 4.2 Other Revenues Assumptions ..................................................................................................... 16 4.3 Operating Expenses Assumptions ............................................................................................... 16 4.4 Depreciation................................................................................................................................ 16 4.5 Taxes ........................................................................................................................................... 16 4.6 Finance Plan ................................................................................................................................ 17 4.7 Exit Assumptions ......................................................................................................................... 17 4.8 Estimated Profit and Loss Statement.......................................................................................... 18 4.9 Estimated Cash Flow Statement ................................................................................................. 19 4.10 Estimated Balance Sheet Statement ........................................................................................... 20 5 Key Investment Highlights .................................................................................................................. 21 6 RISK FACTORS AND MITIGANTS .......................................................................................................... 22 6.1. Market Risk ................................................................................................................................. 22 6.2. Management Risk ....................................................................................................................... 22 6.3. Regulatory risks ........................................................................................................................... 22 6.4. Political Risk ................................................................................................................................ 22 6.5 Risk Assessment .......................................................................................................................... 22 7 WHO WE ARE ...................................................................................................................................... 23 7.1 THE BOARD ................................................................................................................................. 23 7.2 Strategic Partners & Development Team Members ................................................................... 24 8 CONCLUSION ....................................................................................................................................... 26

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FOUR POINTS BY SHERATON, BENIN CITY


INFORMATION MEMORANDUM
1 Executive Summary
The project is the development of an upscale 10 floors- 192 bedrooms and suites hotel with on an 8,656.096m2 property situated on Plot 7, Central Road, ( otherwise known as No. 1 Commercial Avenue) Old GRA, Benin City Nigeria. Central Road is off the major Sapele Road from the famous Ring Road at the City centre. The hotel will operate under the brand name Four Points by Sheraton which shall offer consistent service levels with good security that are not available anywhere in the region at the moment. It will be the first upper scale internationally-branded hotel in the city. All government approvals have been obtained including the approval for the change of use from residential to commercial. The planning permit has been granted by the Town Planning Authority of Edo State. The assessed fees for the planning approval have been paid. The project cost is NGN8.3 billion with a funding structure of 33% equity and 70% debt. The projects forecasted internal rate return (IRR) is 33%, while return on equity (ROE) is 45% at proposed exit year. A 24 (twenty four) months construction period has been estimated. Nigeria is an emerging economy in Sub-Saharan Africa with a forecasted growth of 7% in 2012. It is the 12th largest petroleum producer, has the 10th largest proven oil reserves and supplies 8% of U.S. Oil imports. Although oil currently dominates the economy, there are many other emerging and unexploited opportunities that could drive continued rapid growth. The city of Benin is an old city with historical and cultural importance. It is the capital of Edo State, Southern Nigeria. It has an estimated population of 1,147,188 (2006 Census figures). It is the center of the Nigerias Rubber Industry. Benineses are known for bronze sculpture, its casting skills and their arts and craft. The hospitality industry generates the second highest revenue after Federal government allocation for Edo State. The old GRA area of Benin is regarded as the heart of the city as it houses and is not far from the State Command Head Quarters of the Nigerian Police Force, the State Government Secretariat, the State House of Assembly, the Business District where the Central Bank of Nigeria and major Banks have their main branches in the State capital, and the Palace of the Oba of Benin. We believe given this forecasted return, the countrys rapid economic growth, the lack of upper scale international branded hotels and the propertys strategic location, the Benin market opportunity is ripe for an upscale luxury hotel facility.

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INFORMATION MEMORANDUM
2 Project Overview
Floors Facilities: Rooms Facilities: Food and Beverage Facilities: Meetings and Business Facilities: Leisure and Other 10
192 Main Restaurant Sports bar, pool bar Business Centre Caf 800 meters2 conference and banqueting facilities Swimming pool Gym Lobby shops fitness centre spa Covered and open

Facilities: Parking Land Area

8,656.096m2

2.1 Location
The property is located at Plot 7, Central Road, (otherwise known as No. 1 Commercial Avenue) Old GRA, Benin City Nigeria. The Commercial Avenue is off the major Sapele Road from the famous Ring Road that leads to Warri in Delta State. It is a short distance from: The State Command Head Quarters of the Nigerian Police Force. the State Government Secretariat the State House of Assembly, the Business District where the Central Bank of Nigeria and a host of Banks have their main branches in the State capital, the Palace of the Oba of Benin, Akpakpava High Street which leads to Auchi/Okene/Abuja and Agbor/Asaba/Onitsha High Ways. This is the heart of Benin City and it is 5 minutes drive from the airport. The key surrounding roads are Okada Avenue, Benin- Sapele Road, Reservation Road and ikpokpan Road.

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INFORMATION MEMORANDUM
2.2 Facilities
2.2.1 Accommodation The hotel will offer Suites, Superior Bedrooms and Standard Bedrooms, which would be equipped with modern amenities including flat screen televisions, wireless internet, sufficient power points for the computers & other electronic appliances and differentiated areas for guests requiring a working environment and for those seeking relaxation. The suites will offer higher standards compared to the rooms, with higher quality of bathroom amenities. These higher categories of accommodation will attract companies executives, politicians and other VIPs who travel with their entourage. The interior design of the whole hotel will be in tune with the location, green/eco -friendly, incorporating sustainable design concepts, water and energy-saving devices, and much more. In addition to the social responsibility of this approach, it will contribute to the profitability of the venture as most international organization now specify that the hotels they use, be environmentally responsible. 2.2.2 Food and Beverage Outlets The hotel will capitalize on its high profile branding by offering quality restaurants and bars, not just for the hotel residents, but will also attract other visitors to Benin City, and the citys residents by offering the following outlets: A main three-meal restaurant, offering a varied menu, Pool bar/grill restaurant for outdoor dining Main lobby bar 2.2.3 Conference and Banqueting Facilities Hotels in Benin City are extremely popular venues for conferences, meetings and social events, offering better quality and wider-ranging than most stand-alone venues. As well as residential events, Benin City hotels experience strong demand for day meetings, generated primarily by the political activities in the state capital. To maximize this segment of the market, the hotel will have a main conference hall of approximately 800m2, with supporting meeting and break-out rooms. 2.2.4 Leisure Facilities The hotel will have an outdoor swimming pool, spa and a gym, not just for the benefit of guests but also for local residents, on a membership basis.

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INFORMATION MEMORANDUM
2.2.5 Other Facilities In addition to the main facilities listed above, the hotel will offer guest laundry and concierge services to its guests. As a 24-hour-a-day business, the hotel will be self-sufficient in electricity, drainage and water, with its own generators, bore hole, water treatment plant and waste treatment package.

2.3 Project Status


2.3.1 Title to the Landed Property The site is made up of two parcels of land; The first parcel measuring about 4,663.228m2 is vested on the company by the execution of the Deed of Assignment between Chief S. O. Agbareh on the one hand and S & F Panoramic Tourist Limited on the other. The Consent of the Governor of Edo State to the Assignment has been obtained. The second parcel measuring about 3,992.868m2 was a direct allocation to S & F Panoramic Tourist Limited by the government of Edo State. 2.3.2 Government Approval All government approvals have been obtained including the approval for the change of use from residential to commercial. The planning permit has been granted by the Town Planning Authority of Edo State. The assessed fees for the planning approval have been paid. 2.3.3 Architectural Design Architectural designs were done by renowned local architect Design Variation Limited. All architectural design plans, engineering, mechanical and technical plans, and geological surveys have been submitted. 2.3.4 Hotel Management Management services agreement has been executed with Starwood Hotels & Resorts (owners of the Fourpoints By Sheraton brand) one of the leading hotel and leisure companies in the world with more than 1,000 hotels reaching across over 100 countries through nine world-class brands, backed by the dedication of over 145,000 employees. Starwoods involvement and global reputation is expected to significantly enhance the occupancy rate that can be achieved for the development.

2.4 The Manager Starwood


Starwood Hotels and Resorts Worldwide, Inc. is one of the world's largest hotel companies, it owns, operates, franchises and manages hotels, resorts, spas, residences, and vacation ownership properties under its nine owned brands. It is a leading hotel management company with a portfolio of 1089 hotels with approximately 322,300 rooms across 100 countries under management (includes owned, leased, managed and franchise hotels.) as at December 2011.

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INFORMATION MEMORANDUM
2.4.1 Starwood Brands

2.4.2 The Fourpoints by Sheraton Brand Fourpoints by Sheraton facilities delights the self-sufficient traveler with what is needed for greater comfort and productivity, all at the honest value our guests deserve. Our guests start their day feeling energized and finish up relaxed. Its the little indulgences that make their time away from home special. Four Points by Sheraton: Great Hotels. Great Rates

2.5 Value Proposition


2.5.1 Investor 200% capital gains during the first 5 to 10 years of operation Investment in a pure play high-end lodging REIT The best investment proposition in the South South Nigerias hospitality industry Partnership with Industry leading hospitality management experts Low development costs/Less construction time Efficient, cost effective operating system System Occupancy, Average Daily Rate and Revenue Per Available Room (RevPAR) exceeding the high end segment average Competitive royalty Aggressive sales team targeting corporate, leisure and group business Investment in high-barrier-to-entry market Franchise support, training and quality assurance programs 2.5.2 Customer The highest quality at a fair price 100% consistent product and service in any room guests stay Value for every naira spent. Safety & Security: electronic locks on all doors, single after-hours entrance, superior lighting inside and outside the property

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INFORMATION MEMORANDUM
Satisfied Guests, with a Customer Intent to Return rating of 98.6% One stop facility for lodging, shopping, fitness and relaxation to make stay memorable Trend-setting design, with warm, engaging service and outstanding customer value A committed to unrelenting quality to give a personalized WOW experience.

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INFORMATION MEMORANDUM
3 Hospitality Industry Overview
3.1 The Global Overview
The tourism and hospitality industries are one of the world's largest sectors, amounting to about 9% of Gross Domestic Product (GDP) and employing huge numbers of people; both industries employ about 3% of the global workforce. The hospitality industry, with its roots in the centuries old tradition of Inn-keeping has experienced huge growth in recent years. However, global economic and political events, such as the Arab Spring, natural disasters in Asia, the European debt crisis and continuing signs of weakness in the US housing market destabilized the growth. Nonetheless, lodging performance indicators around the world continued to improve throughout 2011. According to Smith Travel Research (STR), the European market led the way with 13.7% growth in revenue per available room (RevPAR) through November 2011, while Asia Pacific and the Americas followed with RevPAR increases of 10.4% and 8.3%, respectively. According to the World Trade and Tourism Council (WTTC), travel and tourism (T&T) GDP growth was 3.2% in 2011, nearly the same rate as in 2010, when T&T increased by 3.3%. Total turnover generated by T&T was US$6.0 trillion in 2011, surpassing the previous peak of US$5.8 trillion achieved in 2008. International travel and tourism volumes, driven by the burgeoning BRIC and other emerging economies, are anticipated to increase. Furthermore, mega events in Europe and South America from 2012 through 2016 will impact the global hospitality sector.

3.2 Nigeria Hospitality Market


The hospitality industry in the country has developed tremendously over the last decade, with the opening of at least one hotel every other month, improved performance levels, influx of international hotel brands and high employment capacity; it is the only thriving sub-sector in the travel and tourism industry in Nigeria. The improved performance levels, however, has not translated into an overall improvement in profitability for hotels across the industry. Rising consumer inflation levels meant increased overhead costs for hotels resulting in lower margins. An overall increase in departmental and fixed expenses as a percentage of revenue led to a decline in net income percentage of approximately 6% in 2012. Increase in energy costs, and recent astronomical increase in security cost has also contributed to the reduction in profitability.

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INFORMATION MEMORANDUM
The PAR increase in property operations and maintenance costs, along with the increase in rooms division and food and beverage (F&B) expenses are responsible for the reduction in bottom lines. The WTTC produced projections of the contribution of the travel and tourism industry to the Nigerian economy. This included all elements of the industry, not just hotels, but also transportation, entertainment, retail, government income and other direct revenues, as well as indirect and induced contributions to GDP and employment. The direct contribution of Travel & Tourism (T&T) to GDP was N598.6 billion (1.6% of total GDP) in 2011, and is forecast to rise by 11% to N664.6 billion in 2012 and by 6.3% per annum to N1,223.8 billion (1.8% of GDP) by 2022. The total contribution of T&T to GDP was N1,232.2billion in 2011 (3.3% of GDP), and is forecast to rise by 10.8% to N1,365 billion (3.4% of GDP) in 2012, and to rise by 7% per annum to N2,690.8 billion (4% of GDP) in 2022. T&T investment was N251.5 billion in 2011. It is expected to rise by 2.3% in 2012 and by 6.5% per annum over the next 10 years to N484.4 billion in 2022. T&T share of total national investment is projected to fall from 7.0% in 2012 to 5.7% in 2022.

3.3 The Benin City Hospitality Market.


KEY FACTS 1. 139 Hotels in Benin City 2. 26,000 direct jobs attributed to the hotel industry 3. Provides the largest revenue to the state after the Federal Revenue allocation 4. . 22 hotels out of the 139 have more than 40 rooms 5. 33 more hotels expected to commence operations in the next year 6. 1 internationallybranded Hotel in operations The Benin hospitality industry has emerged as one of the key industries driving the growth of the services sector in the Edo State economy. The hospitality and entertainment industry generate the largest revenue after the Federal Government revenue allocation to the State Traffic at Benin domestic airports has witnessed considerable growth in the past few years, the total passenger traffic for 2011 was about 330,000 but for the first half of 2012 it was about 240,000.(Source FAAN). Benin kingdom/Edo State has become a year-round tourist attraction thanks to the many inland and riverside tourism option available to visitors. More than one hundred major festivals are celebrated in the state between September and March every year, all of which help to drive the hotel business. The main tourist attraction in Benin include the National Museum, the Obas Palace, Igun Street (famous for bronze casting and other metal works for centuries). Other attractions include various festivals and the Benin Moats (measuring about 20 to 40 Ft), the famous King's Square on Ring road and its traditional markets.. There is no official register of lodging establishments in Benin City, nor any comprehensive tourist information resource. Although all hotels are obliged to register with the Nigerian Tourism Development Corporation (NTDC).

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INFORMATION MEMORANDUM
3.3.1 Benin City Hotel Market Demand Characteristics Benin City is a tourist, business, government, leisure and transit town Tourists attraction spans the expanse of the city, it has a number of UNESCO heritage sites, and a good number of international festivals happen all year round in the city, it is estimated that up to 35% of demand for hotel accommodation is generated by the Tourist sector. The hotel industry is very fragmented with over 139 hotels in Benin. This means that there is room for a large hotel to consolidate the industry Occupancy ratios are usually high during the weekends. Given the extreme undersupply of high quality hotels, the supply of new hotels is unlikely to negatively impact rates or occupancy levels. Hotels are preferred locations for banquets and other entertainment activities.

3.4 The Opportunity


Benin City, the State capital of Edo State is predominately a civil service city dominated by the State Government. Edo State is one of the 36 State-Structure of the Federal Republic of Nigeria. Although the State governments have considerable powers in their own areas, the nature of the economy dominated by the oil sector renders the federal level of government extremely powerful, due to its control over financial and other resources. The main activity like in most states of the Federation and indeed the focus of much of the private sector is government business, both political and financial. This therefore drives the business of the hotels, implying as long as there is government business, hotels will continue to thrive. Another very important factor is the location of the City and therefore its role as a transit town in the south as one travels by road between geographical south east on the one hand and geographical south west on the other. There are also other numerous indicators that there is need for a 5 star upscale hotel/mixed use facility in Benin City. Such indicators include: Benin Citys recent upward turn in infrastructural development means that its business infrastructure is continually playing catch up to existing demand. Occupancy rates in Nigerias 4 and 5 star hotels are above 70% and Benin City does not have any. The current administration in Edo States drive to increase its IGR through tourism means there is going to be government incentives for hotel development. When compared to other locales, hotels are very expensive for the relative product quality The hotel industry is very fragmented with over 139 hotels in Benin. This means that there is room for a large hotel to consolidate the industry. There is one international brand in operation while the other one is still under construction. The international brand is the most popular hotel and achieves one of the highest occupancy rates at 60% during the week and 95% during the weekends

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INFORMATION MEMORANDUM
3.4.1 Sources Of Demand

Corporate
Business Individual Business group Government employees/ officials Contract Workers

Meetings
Government Corporate International Organizations Training Providers Business Schools

Leisure
Family Parties Offices parties Private Dinners

3.5 The Competition


There is no official register of lodging establishments in Edo State, nor any comprehensive tourist information resource. Although all hotels are obliged to register with the NTDC, it is known that their records are incomplete. The hotel supply of relevance in Benin City can be divided into two categories: Two internationally-branded hotels Best Western and Protea; Locally-managed hotels such as Constantial Hotel, Uyi Grand, Precious Palm Royal Hotel, etc.

3.5.1 Internationally Branded Hotels Protea Hotels Protea Hotels are managed by South African-based Protea Group. They have established major presence in Nigeria they currently have 10 operational hotels. Their hotels are mostly of small sizes, with few rooms in their total system. The Protea Select Hotels Emotan, Benin City, is under construction. The information pieced together says it is 100 rooms 3-Star hotel. It is to be opened late 2012 or early 2013. Best Western Homeville The Best Western Homeville is a 2 Star hotel situated at Evbuomwan Street, Etete GRA Benin City. It is ten minutes away from the Benin City Airport. The Best Western Homeville consists of 80 rooms, restaurant, lounge bar, pool bar, swimming pool, gym, business center and shopping facilities. Its rate ranges from 20,000 120,000 NGN

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3.5.2 OTHER HOTELS OF RELEVANCE

Tariffs NGN
Hotel
Randekhi Royal Royal Marble Motel Benin Plaza Vichi Gates & Suites The Sage Excalibur Precious Palm Royal Westview Constantial Uyi Grand Zafike

Location
New GRA New GRA Old GRA New GRA Old GRA New GRA Lagos-Benin Expressway New GRA Airport Road Benin-Auchi Expressway Benin-Auchi Expressway

Room
45 45 118 40 35 116 135 65 47 55 68

Low end Room (Min)


7,700 12,000 5,000 8,000 16,000 14,000 15,000 8,000 10,000 12,000 5,000

High end Room (Max)


66,000 40,000 31,000 40,000 32,000 40,000 98,000 32,500 60,000 25,000 30,000

The above is the list of the top locally managed hotels in Benin City. Apart from Precious Palm Royal, Uyi Grand and Zafike Hotels, these hotels are located within the city centre with most of them right inside the government reservation area (GRA) for obvious reasons; proximity to the seat of government of the state and some measure of security in the zone. 3.5.3 Future Supply There are several hotels under construction in Benin, many of them in the growing districts of the new GRA and south west of the city. Some of these new hotels are expected to have international affiliations including the Protea and Sheraton. Typically, the quality of the design, construction and finishing of new hotels in Benin are comparatively good. There is an increasing emphasis on bigger sizes of rooms and contemporary furnishing. 33 hotels are in various stages of approval and construction in Benin (source Edo State Ministry of Industry and Commerce). The Nigerian Government and the Edo State Government have embarked on various programs to boost the travel and tourism sectors of the economy. The Benin airport is getting a major facelift and various infrastructures in the state are being renovated or constructed to make Benin a viable tourist and travel destination.

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INFORMATION MEMORANDUM
4 Financials
Whilst hotels offer a variety of services to their guests, including overnight accommodation, food and drink, conference facilities, leisure activities and so on, it is from the first of these, the sale of overnight accommodation, that hotels make the majority of their profit. Rooms and suites generally occupy the largest part of a hotels built area, and therefore absorb most of the capital investment, yet their sale to guests incurs fewer expenses than other services, such as food and drink. The analysis of the hotels financial projections therefore focuses primarily on the opportunity to attract demand for the bedroom accommodation, whilst not ignoring the demand for, and therefore the potential of, other services, revenue from which can make a useful contribution to the fixed costs of a hotels operation.

4.1 Room Revenue Assumptions


4.1.1 Occupancy Projections We believe due to Quality product and service excellent, unique location and setting; Historically strong demand levels in the city (with projected future growth); International management and high profile branding; Good access to the main demand generators The average room occupancy for the hotel will be 65% .As typical of a new facility, we expect that it will be the preference, the hotel of choice especially for the discerning class and the categories of lodgers being targeted. Also, we expect that for the first five years of its operations and given the numerous factors enumerated above, the new hotel will be able to maintain a very high occupancy rate of 65%. 4.1.2 Published Room Tariff In order to calculate the revenue to be earned from overnight accommodation, we estimated the volume of demand, took into consideration the anticipated standard of services and facilities of the hotel, the envisaged markets and the location of the property. We also considered the current tariff levels at the existing hotels. On the average, room rates at 4-Star hotels are between 30 to 60% higher than room rates at 2-Star hotels. The table below shows the assumed net (i.e. excluding VAT and service charge) tariff structure for the hotel at current values

Room Type
Standard Bedrooms Superior Bedrooms Suites

Number of units
150 32 10 i.e. excluding tax and service charge

Rate NGN
28,500 68,500 142,500

We have assumed that an average discount off the published tariffs of 20% will be offered. This reflects the variable discounts offered to the different market sectors, and the market practice of presenting high published tariffs.

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4.2 Other Revenues Assumptions
4.2.1 Food and Beverage Revenue Our estimates of average spend at, and utilization of, the hotel's food and beverage outlets take into account its proposed facilities and the nature of the markets from which the hotel will derive demand. Prices and average spend have been based on menu prices at hotels of relevance. 4.2.2 Other Operated Departments (0OD) Our estimates of revenue to be generated by the conference centre, guest laundry, shop rental income, telephone and internet usage and other sources of revenue are based on prices and average spend at hotels of relevance.

4.3 Operating Expenses Assumptions


With the exception of salaries and wages, our projections of operating expenses are ratio driven, as a percentage either of departmental revenue or of total revenue. The ratios are based on the experience of similar properties in Benin City. Utility costs in Nigeria are high, due to the need to run on generator for much of the time as a result of the unreliable mains power supply. Should this improve, the cost of energy should reduce. The expenses in the operating departments (rooms, food and beverage etc) are expressed as a percentage of departmental revenue. Those for the undistributed departments (administration, marketing etc) are expressed as a percentage of total revenue. According to uniform accounting practice in the hotel industry, expenses are, where practical, allocated to the revenue-producing areas, in order to judge the performance of the operating departments. Payroll and related expenses have been estimated based on a detailed staffing schedule which we consider to be appropriate for the efficient operation of an international style and standard hotel and with regard to the levels of occupancy and utilization of food, beverage, conference and other facilities. Our estimates of payroll costs for the proposed hotels employees are based on general salary levels currently prevailing within hotels in Benin City. A basic management fee of 3 per cent of total revenue has been included in the projected statement of profit and loss, payable to the selected operator. This will, however, be subject to negotiation, and represents the maximum payable.

4.4 Depreciation
We assume 5.0% weighted average rate on a straight line basis over the total assets of the proposed hotel.

4.5 Taxes
We have assumed a company tax of 30% of Net profit and 2% educational tax level

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4.6 Finance Plan
4.6.1 Capital Cost We have assumed a total cost for the hotel of NGN 8.3 billion. It is a turnkey cost, including pre-opening expenses, working capital, fees and developers profit, but including financing costs during construction.

4.6.2 Debt/Equity Ratio We have assumed a debt: equity ratio of 70:30, based on the ability of the cash flows to service debt.
4.6.3 Interest We have assumed a dollar loan at 10% interest per annum. Twenty four months interest during construction has been capitalized and added to the principal. 4.6.4 Term of Loan and Capital Repayment We have assumed that the principal is converted into an eight year term loan, with principal repaid in eight equal annual installments, commencing in the first year of operation.

4.7 Exit Assumptions


Total Investment Available Assumed Exit Year(from operation year) Assumed Exit EBITDA Multiple EBITDA in Year 6 (NGN000,000) Implied Exit EV (NGN000,000) Net Cash / (Debt) (NGN000,000) Implied Exit Equity Value (NGN000,000) Internal Rate of Return on Capital Return on Equity Pay Back of Debt Period 747,000,000 Year 6 8.0 1,968 15,744 2,268 13,476 30% 45% 10 years

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INFORMATION MEMORANDUM
4.8 Estimated Profit and Loss Statement
Projected Revenue REVENUE Revenue Rental Income EXPENSES TOTAL OPEX Depreciation TOTAL OPERATING EXPENSES EARNINGS BEFORE INTEREST AND TAX Interest Expense PROFIT BEFORE TAX Provision for Tax PROFIT AFTER TAX Distributed As Follows Dividend Retained Earnings Return On Investment(%) 343,013,756 4.13% 523,930,223 6.31% 598,175,275 7.21% 765,654,698 9.22% 930,797,025 11.21% 1,121,815,982 13.52% 1,340,194,915 16.15% 1,580,280,509 19.04% 1,844,230,569 22.22% 2,047,557,626 24.67% 1,610,346,950 266,800,000 1,877,146,950 1,190,878,800 686,446,806 504,431,994 161,418,238 343,013,756 1,779,059,102 266,800,000 2,045,859,102 1,396,469,223 625,983,601 770,485,623 246,555,399 523,930,223 2,006,246,633 266,800,000 2,273,046,633 1,439,264,524 559,595,002 879,669,523 281,494,247 598,175,275 2,204,079,163 266,800,000 2,470,879,163 1,612,663,110 486,700,320 1,125,962,790 360,308,093 765,654,698 2,449,615,387 266,800,000 2,716,415,387 1,775,481,113 406,661,959 1,368,819,154 438,022,129 930,797,025 2,694,576,926 278,000,000 2,972,576,926 1,968,509,225 318,779,839 1,649,729,385 527,913,403 1,121,815,982 2,964,034,618 278,000,000 3,242,034,618 2,193,160,147 222,285,272 1,970,874,875 630,679,960 1,340,194,915 3,260,438,080 278,000,000 3,538,438,080 2,440,276,162 116,334,237 2,323,941,925 743,661,416 1,580,280,509 3,586,481,888 278,000,000 3,864,481,888 2,712,103,778 0 2,712,103,778 867,873,209 1,844,230,569 3,945,130,077 278,000,000 4,223,130,077 3,011,114,156 0 3,011,114,156 963,556,530 2,047,557,626 30-December Year 1 =N= 3,068,025,750 3,068,025,750 30-December Year 2 =N= 3,442,328,325 3,442,328,325 30-December Year 3 =N= 3,712,311,158 3,712,311,158 30-December Year 4 =N= 4,083,542,273 4,083,542,273 30-December Year 5 =N= 4,491,896,501 4,491,896,501 30-December Year 6 =N= 4,941,086,151 4,941,086,151 30-December Year 7 =N= 5,435,194,766 5,435,194,766 30-December Year 8 =N= 5,978,714,242 5,978,714,242 30-December Year 9 =N= 6,576,585,666 6,576,585,666 30-December Year 10 =N= 7,234,244,233 7,234,244,233

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INFORMATION MEMORANDUM
4.9 Estimated Cash Flow Statement
Construction Period 30-December Year 1 =N= 30-December Year 2 =N= 30-December Year 3 =N= 30-December Year 4 =N= 30-December Year 5 =N= 30-December Year 6 =N= 30-December Year 7 =N= 30-December Year 8 =N= 30-December Year 9 =N= 30-December Year 10 =N=

INFLOWS Equity Long Term Debt Revenue from Operations TOTAL INFLOWS

=N=

2,490,000,000 5,810,000,000 8,300,000,000

3,068,025,750 3,068,025,750

67,500,000 3,374,828,325 3,442,328,325

3,712,311,158 3,712,311,158

4,083,542,273 4,083,542,273

4,491,896,501 4,491,896,501

4,941,086,151 4,941,086,151

5,435,194,766 5,435,194,766

5,978,714,242 5,978,714,242

6,576,585,666 6,576,585,666

7,234,244,233 7,234,244,233

OUTFLOWS Capex 8,300,000,000 Direct Cost Indirect Cost (Operating Expenses) Debt Repayment TOTAL OUTFLOW 8,300,000,000 Net Cashflow Cumulative Net Cashflow
Debt Service Coverage Ratio GEARED VALUATION FCF Cumulative Net Cash Flow GEARED VALUATION First Year Cashflow Positive Payback Period NPV IRR UNGEARED VALUATION FCFE Cumulative Net Cash Flow UNGEARED VALUATION First Year Cashflow Positive Payback Period NPV IRR 6 5.79 years 23.39 Billion 33% Year 0 (2,490,000,000) 5 4.78 years 15.75 Billion 26% Year 0 (8,300,000,000)

859,047,210 751,299,740 1,303,418,284 2,913,765,234 154,260,516 154,260,516


1.69 1 1,457,678,800 (6,842,321,200)

963,851,931 815,207,171 1,303,418,284 3,082,477,386 359,850,939 514,111,454


1.90 2 1,663,269,223 (5,179,051,977)

1,039,447,124 966,799,509 1,303,418,284 3,309,664,918 402,646,240 916,757,694


2.05 3 1,706,064,524 (3,472,987,453)

1,143,391,837 1,060,687,326 1,303,418,284 3,507,497,447 576,044,826 1,492,802,520


2.26 4 1,879,463,110 (1,593,524,343)

1,257,731,020 1,191,884,367 1,303,418,284 3,753,033,671 738,862,829 2,231,665,349


2.48 5 2,042,281,113 448,756,771

616,000,000 1,383,504,122 1,311,072,804 1,303,418,284 4,613,995,210 327,090,940 2,558,756,290


2.26 6 1,630,509,225 2,079,265,996

1,521,854,534 1,442,180,084 1,303,418,284 4,267,452,903 1,167,741,863 3,726,498,153


3.00 7 2,471,160,147 4,550,426,143

1,674,039,988 1,586,398,092 1,303,418,284 4,563,856,365 1,414,857,878 5,141,356,030


3.30 8 2,718,276,162 7,268,702,305

1,841,443,987 1,745,037,902 3,586,481,888 2,990,103,778 8,131,459,809


9 2,990,103,778 10,258,806,084

2,025,588,385 1,919,541,692 3,945,130,077 3,289,114,156 11,420,573,965


10 3,289,114,156 13,547,920,240

1 154,260,516 (2,335,739,484)

2 359,850,939 (1,975,888,546)

3 402,646,240 (1,573,242,306)

4 576,044,826 (997,197,480)

5 738,862,829 (258,334,651)

6 327,090,940 68,756,290

7 1,167,741,863 1,236,498,153

8 1,414,857,878 2,651,356,030

9 2,990,103,778 5,641,459,809

10 3,289,114,156 8,930,573,965

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INFORMATION MEMORANDUM
4.10 Estimated Balance Sheet Statement
Projected Balance Sheet 30-December Year 1 =N= Net Book Value Of Assets Cash and Marketable Securities Total Assets Deffered tax Liabilities Short Term Debt Long-Term Debt Total Liabilities Net Total Assets Financed By Share Capital Share Premium Cummulative Retained Earnings Total Shareholders' Equity 2,490,000,000 0 (851,545,484) 1,638,454,516 2,490,000,000 67,500,000 (327,615,261) 2,229,884,739 2,490,000,000 67,500,000 270,560,015 2,828,060,015 2,490,000,000 67,500,000 1,036,214,712 3,593,714,712 2,490,000,000 67,500,000 1,967,011,737 4,524,511,737 2,490,000,000 67,500,000 3,088,827,719 5,646,327,719 2,490,000,000 67,500,000 4,429,022,635 6,986,522,635 2,490,000,000 67,500,000 6,009,303,144 8,566,803,144 2,490,000,000 67,500,000 7,853,533,713 10,411,033,713 2,490,000,000 67,500,000 9,901,091,339 12,458,591,339 8,033,200,000 154,260,516 8,187,460,516 161,418,238 0 6,387,587,761 6,549,005,999 1,638,454,516 30-December Year 2 =N= 7,766,400,000 514,111,454 8,280,511,454 407,973,637 0 5,710,153,077 6,118,126,715 2,162,384,739 30-December Year 3 =N= 7,499,600,000 916,757,694 8,416,357,694 689,467,885 0 4,966,329,795 5,655,797,679 2,760,560,015 30-December Year 4 =N= 7,232,800,000 1,492,802,520 8,725,602,520 1,049,775,978 0 4,149,611,830 5,199,387,808 3,526,214,712 30-December Year 5 =N= 6,966,000,000 2,231,665,349 9,197,665,349 1,487,798,107 0 3,252,855,505 4,740,653,612 4,457,011,737 30-December Year 6 =N= 7,304,000,000 2,558,756,290 9,862,756,290 2,015,711,510 0 2,268,217,060 4,283,928,570 5,578,827,719 30-December Year 7 =N= 7,026,000,000 3,726,498,153 10,752,498,153 2,646,391,470 0 1,187,084,048 3,833,475,518 6,919,022,635 30-December Year 8 =N= 6,748,000,000 5,141,356,030 11,889,356,030 3,390,052,886 0 0 3,390,052,886 8,499,303,144 30-December Year 9 =N= 6,470,000,000 8,131,459,809 14,601,459,809 4,257,926,096 0 0 4,257,926,096 10,343,533,713 30-December Year 10 =N= 6,192,000,000 11,420,573,965 17,612,573,965 5,221,482,625 0 0 5,221,482,625 12,391,091,339

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INFORMATION MEMORANDUM
5 Key Investment Highlights
Five star hotel product backed by a world class operator and the Four Points by Sheraton brand Strong demand for high quality hotel accommodation in Benin City

Sponsor with track record in Management both locally & Internationally

Investor friendly structure allowing for significant participation

Premium Benin City positioning with excellent location in Maitama

Increasing inward investment in Nigeria as a major emerging market

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INFORMATION MEMORANDUM
6 RISK FACTORS AND MITIGANTS
In addition to the other information set out in this Information Memorandum, the following risk factors should be carefully considered when deciding what action to take in relation to this transaction. The following risks, individually or combined, could have a material adverse impact on the construction and operations of the hotel, and could therefore affect the proposed returns on investment. The promoters have made, and will continue to make, considerable efforts in mitigating these risk factors.

6.1.

Market Risk

There is a possibility that the hospitality market might suffer adverse changes (such as dips or weak demand growth, unfavourable pricing, etc.). This could erode the benefits of building a new hotel facility but various studies undertaken by the promoters and independent research centres agree that existing market demand for quality over night accommodation in Benin City will only continue to grow as the city develops and as long as it remains the States capital. This minimises the severity of market risk faced by this investment opportunity.

6.2. Management Risk


With the proposed engagement and partnership with reputable advisors and whole class facility managers throughout the project lifespan, and the extensive network and experience of the promoters, the management risk associated with this investment opportunity has been largely mitigated.

6.3. Regulatory risks


Nigerian Tourism Development Corporation (NTDC), the regulatory body for tourism and hospitality business in Nigeria has embarked on a drive to sanitize and develop the hospitality industry in the country. They are therefore encouraging the development of world class facilities like this project therefore the regulatory risk associated with this investment opportunity is largely minimal.

6.4. Political Risk


The investment opportunity faces the possibility of political interference, directly or indirectly, from the Edo State Government and/or volatile and unfavorable political situations, which could consequently jeopardize the investment. This risk is being mitigated by promoters good relationship with the State Government and the improving political stability of the country.

6.5 Risk Assessment


Strengths
Strong Management Company Brand Strength Knowledge of target market Service culture Strong Board Strategic Location World class design & facility

Weakness
New to the region Targeted pricing may be a challenge initially

Opportunities
Rapid Growth Market Huge Future Scale of Business Excellent Investor Returns

Threats
Increased Competition Political Instability

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INFORMATION MEMORANDUM
7 WHO WE ARE
S & F Panoramic Tourist Limited is a company registered in Nigeria with interest in the hospitality industry. Our principal executive offices are located at 5 Agbareh Close, Opebi, Lagos, and our telephone number is +234 1 6212163 and +234 8037228311. Our major aim is to offer world class tourism and hotel services within the Niger Delta Region, to guests all over the world. Our business is focused on the hospitality and tourism industry where we are committed to offering only experiences of exceptional quality. Our objective is to be recognized as the company that develops and runs the finest hotels in the Niger Delta region of Nigeria. We hope to create properties of enduring value using superior design and finishes, and support them with a deeply instilled ethic of personal service. By so doing, we would satisfy the needs and tastes of our discriminating customers, and build a reputation as the nations foremost hospitality company. Our key strengths and critical success factors include the strategic location of our properties, right funding for projects, strong branding, desired amenities, influential board and world class management.

7.1 THE BOARD


The S & F Panoramic Tourist Limiteds board comprises of experienced executives with global experience and local knowledge of the industry. Chief Sylvanus Agbareh - Chairman Chief is a very successful international Entrepreneur. A Chairman and Chief Executive of various companies including Ecoplan Limited, Surveys & Mapping Geodata Limited, SAE Construction, Austroconsult; he is an experienced Economist and Journalist. He was an executive with Unilever , a multinational conglomerate. Chief Agbareh is well respected, a philanthropist and he holds a traditional title in his community. Ide Eguabor - Managing Director Ide is an experienced Manager, Journalist, Editor and Publisher. He was the Director of Operations with ThisDay Newspapers on of the largest circulation newspapers in Africa. He was the co-founder and Managing Director of National Interest Newspapers a very successful news organization in Nigeria. Ide is a very successful consultant in the media and entertainment industry. He is also a member of various international professional organizations.

The Board
Chief Sylvanus Agbareh Chairman Ide Eguabor Managing Director High Chief Raymond Dokpesi Director Prince Tom Iseghohi Director Hajia Nene Lanval Director Kerry Oyakhire Company Secretary

High Chief Raymond Dokpesi - Director High Chief is the Executive Chairman of DAAR Communications the first privately owned communications conglomerate in Nigeria. He studied Marine Engineering at the Univ. of Gdansk Sopot in Poland. He has business interests in various industries including shipping, maritime security etc. High Chief Dokpesi is well respected, and has been conferred with numerous achievement awards globally. He holds a PhD and is an OFR in Nigeria. Prince Tom Iseghohi - Director.

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INFORMATION MEMORANDUM
Tom is an Executive Vice President at the Hudson Consulting Group a New York based business transformation and revitalization firm. He served as Executive Vice Chairman of the highly successful Transcorp Hilton Abuja Board. Tom has held executive positions in a number of Fortune 500 companies including PepsiCo, Ford Motor Company and American Express on Wall Street. He is a financial structuring expert and an investment banker. He was The Group Managing Director of The Transnational Corporation of Nigeria. Hajia Nene Lanval - Director Hajia Nene is the Chief Executive Officer of Design Variation Limited a very successful architectural firm in Nigeria. Her firm has worked on major projects with the FCT, UAC Properties, and Stablini etc. She holds an M.A. in Architecture from the Univ. of Minnesota and a B. Sc in Urban Planning. Hajia Nene has investments in various industries including oil & gas. She is involved in numerous civic activities. Kerry Oyakhire - Company Secretary Kerry is the Managing Consultant of Koenig Consult Limited a successful management and capacity building consulting firm. Kerry started his career in banking where he held various levels of increasing responsibilities with key banks in Nigeria including International Merchant Bank and United Bank for Africa. He is an experienced banker with over 25 years in the industry. He still provides consulting services to banks in Nigeria

7.2 Strategic Partners & Development Team Members


7.2.1 Operational Consultants - Hudson Consulting Group The Hudson Consulting group is a New York and Lagos based consulting, business revitalization and transformational services company with key offices in Washington DC, Baltimore, Maryland, and Lagos. The Hudson team consists of executives with experience in strategic planning, project management, business transformation, implementation management and financial planning. The company has developed several proprietary approaches that are recognized by industry experts and clients as leading edge, effective and innovative. The company has consulted extensively both in Nigeria and The United States. The client list includes key government agencies as well as major fortune 500 companies. . 7.2.2 Architects Design Variation Limited The practice Design Variations Ltd is a firm of Chartered architects, planning and development consultants. Key projects include Master plan of AUST, Abuja (5 star hotel - 500 rooms, 4 Star hotel 100 rooms, Guest Chalets, Residential Buildings, Student hostels, Drive-In Bank, Movie Theaters, Shopping mall, Urban Park with an Amphitheater and golf course; 11 storey office building including a penthouse at Campbell Street, Lagos Island, NECA House V.I, Green Park Estates; proposed Five Storey Hotel in Zamfara and proposed Luxury Ten storey block of apartments in Ikoyi amongst others. 7.2.3 Contractor - Vita Construction Limited Vita Construction Ltd is a building and Civil Engineering Construction Company with over 30 years experience in the Nigerian market. Since its inception, the company has executed over 500 building and civil engineering contracts throughout Nigeria.

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INFORMATION MEMORANDUM
7.2.4 Structural Engineers - CCP Consultants Collaborative Partnership is a consortium of three firms of Architect, Civil/Structural, Mechanical & Electrical Engineers who came together to provide responsive design solutions coupled with excellent professional services through the use of state-of the art technology, skilled manpower, and an organizational structure that enhances productivity 7.2.5 Mechanical and Electrical Engineers - Consem Associates This is an integrated electrical and mechanical engineering practice offering a multi disciplinary consultancy service to the building and construction industry. Key past projects include LCCI Conference Centre, Various luxury apartments in highbrow V.I and Ikoyi, etc 7.2.6 Quantity Surveyors - Zeg Concepts ZEG CONCEPTS ASSOCIATES was established in 1997 and has been providing quality services to customers in the areas of quantity survey; preliminary cost advice, preparation of accurate bills of quantities. Key past projects include rehabilitation of Tincan Island Terminal, FHA/Diamond Estate etc. 7.2.7 Project Managers - Construction Economists Partnership CEP has well established credentials and extensive experience in the Cost Management arena, within the built environment. Their capabilities are encapsulated in our attention to providing the client with a professional service that has endeared us to many key clients, both private and public. They have for over 25 years on a wide range of projects from Inception through to Turnkey and beyond. Examples of past projects include Tinapa Business Resort & Amber Tinapa, Eko Hotels Luxury Suites; Radisson Blu V.I, and a whole lot of residential and commercial projects in the government, financial, healthcare and education sectors. Studio; First Consultant Medical Hospital Complex

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INFORMATION MEMORANDUM
8 CONCLUSION
Benin Hotel industry is vibrant and will continue to grow over the next several years. Improvements in security, an increase in the number of entertainment shows held in Benin and an overall improvement in the travel and tourism industry in Nigeria will continue to drive the growth of the Benin hotel industry. There is a very strong desire for an international brand as evidenced in the high occupancy and highest average rates per room being charged by the only international brand. Investing in this five star hotel/mixed use facility will drive significant cash flows and capital gains for investors who include this exciting opportunity in their investment portfolio. It will generate remarkable profitability with an IRR of approximately 30% and ROE of 30%. It will also payback the investors original investment in approximately 7 years. The potential of this opportunity is driven by both macro and micro economic factors, many of which are noted below. Macro-Economic factors: Nigeria has a rapidly growing economy and is expected to have an approximately growth rate of 7% from 2013 2018. Nigeria has significant oil reserves which are sold to large, stable export partners like the United States and the European Union. Nigeria has many other natural resources and industrial opportunities that can create further rapid growth through investment of oil revenues. Benin Citys private sector infrastructure is in catch up mode. Most businesses are currently at capacity and trade margins are higher than that of other parts of Nigeria.

Micro-Economic factors: The majority of Benin Citys visitors are business travelers. Benin Citys overall hotel market receives mixed to poor reviews and is considered to be very expensive relative to similar hotels in other countries. . The only International brand competitor is the Best Western. This hotel is reputed to be the best in the city.
For Further Details Please Contact: Tom Iseghohi Hudson Consulting Group tomiseghohi@aol.com tomiseghohi@hudsongroup.us.com +234-803-302-2200

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COPYRIGHT HUDSON CONSULTING GROUP 2012