€14.5m needed for purchase of existing hotel in French Alps - 100% funding, no upfront fees, looking for commercially sensible long-term (25 year) funding.

HOTEL LE DAHU

COURCHEVEL 1850, FRANCE

 

PROPOSED PURCHASE AND RENOVATION

EXECUTIVE SUMMARY

The Property

The hotel is located in the centre of Courchevel 1850, the highest and most exclusive of the Courchevel resorts.  With 39 en-suite bedrooms, a bar and lounge, the hotel currently sleeps 84 guests and operates a short 14/15-week season from mid-December to the end of March each year.  

The current owner, a British tour operator called Mark Warner, has owned and operated the hotel for over 10 years as a package-holiday “clubhotel” especially targeted towards families.  By offering inclusive childcare and packaging the rooms with flights and transfers they have been able to earn £3,000 per room per week in low season, going all the way to £4,800 per room per week in high season (Christmas, New Year and Half Term in February).

The owners are in the process of selling off all of their hotels and bars in the Alps (in a bid to reduce their risk and exposure to leases and unsold rooms) and are looking for a quick sale, ideally before the upcoming season in December.  They have already refused to participate in discussions about owner-financing – it is my impression that they are after a very quick cash-generation exercise, which means there is an opportunity to secure it at a good price.

The Resort

Courchevel 1850 is the most exclusive resort in the largest ski area in France (Les Trois Vallées or 3 Valleys).  At 1850m above sea-level, it boasts its own airport, heliport, 2 of the 8 “Palace” rated hotels in France and higher number of Michelin-stars per resident capita than any other place on earth.  The average price for a bottle of house wine in resort is €40, the cheapest bottle of Champagne on a menu is €90, and a meal for two with starters, steak and a coffee, sharing a modest bottle of wine will come to almost €200.

Home to the most expensive cheese-on-toast on earth (at €65) and a playground for Russian Oligarchs, international royalty and wealthy Arabs, the resort has, in recent years, lost a little of its sheen as it struggles to accommodate “normal” people.

The hotels have all upgraded and upgraded so that there are now 2 Palaces, seven 5* hotels, four 4* hotels and five 3* hotels in the resort, with at least two of the 4* hotels currently undergoing renovations to improve them to 5*. 

The Team

The project team all work in the ski industry (with a combined experience of more than 20 years in Courchevel and the neighbouring resort of Méribel) and have worked together transforming a very similar hotel in the same resort for TUI Travel plc in 2010-11.  That hotel was number 22 out of 24 on TripAdvisor at the inception of their project, and finished its first season under their management at number 2 (just 16 weeks later).  The hotel currently occupies the top position on TripAdvisor, ready to be surpassed by this one.

The Project

Once purchased, the project is to renovate the public areas, touch-up the façade and repurpose the existing ground-floor crèche facilities as a public bar and snack-restaurant.  Initially the bedrooms would not be renovated (though the furnishings would be upgraded before the upcoming season).  The plan thereafter would be to use working capital to fund the renovation of the hotel bedrooms and bathrooms (and the creation of two penthouse suites) on a season-by-season basis as income allows.

The hotel would be renamed and relaunched as La Bohème, a trendy boutique hotel of rustic contemporary chic furniture and outstanding service.  As a boutique hotel, the customerbase would no longer be exclusively British, with the new owners preferring to seek out an international mix.  The staff would be recruited accordingly for their language skills.

The new public bar would be called “Polo”, a testament both to the sophisticated nature of the clientele which frequents the resort, and to the annual snow polo competition which takes place during the month of January at the resort’s airport up on the slopes.  Offering live music during the après-ski hours, and a DJ late into the night, the bar will be set at one of the lowest price points in the resort, with a view to keeping it full and driving volume through.  It is anticipated that revenue from the bar alone will outstrip the room-revenue during the low-season, low-occupancy weeks.

Renovation works to the public areas are purely cosmetic, involving the purchase of furniture, curtains, lighting, audiovisual and paint/wallpaper.  There is no substantial renovation work to be done to the bar, restaurant or lounges initially.  The kitchens are in good condition and already accommodate evening service of a full hotel.  The hotel Bar is both large and well-laid out.

The Numbers

The hotel is currently on the market with Knight Frank for €14,500,000.  It is likely, given how long it has been on the market, and how soon the existing owners will need to begin recruiting their seasonal workforce and promoting their rooms for sale, and how keen they are as sellers, that it will be possible to secure it for a lot less than this.

Initial renovation works, to upgrade the public areas, convert the crèche into a bar, rebrand the hotel and purchase furnishings before opening in December have been costed out at approximately €380,000.

Because the purchase of the property is likely not to be completed before the end of August at the latest, it will be difficult to fill it for the upcoming season.  Revenue is likely to be severely impaired as a result.  Any funding would need to include a repayment-holiday to begin with, or sufficient surplus to fund the first 6-8 months of repayments.  Given the seasonal nature of the business it would also be interesting to discuss a weighted repayment plan which increases payments in the winter (or allows overpayment during the winter) to support reduced payments during the empty summer months.

Based on 50% average occupancy for the season (a conservative occupancy after year 1, depending on how soon we are able to purchase and start marketing in advance of this coming winter), the rooms will be able to generate 39 x 3,000 x 16 x 0.5 = €936,000 and the hotel f&b will be able to generate a further 15k/month, so the property is likely to gross approx €1m/season.  Costs during that time for electricity, staffing etc are relatively high, but there is likely to be approx €40,000/mth available for mortgage repayments.

The public-facing bar, once open, should generate a further €60-100k/month and, given the margins, approximately half of that will be profit.  This gives a total of €70,00/mth for repayments during the season, with approximately €40,000 available in the off-season periods.

Total available annually, therefore, would be five months at €70,000 and 7 months at €40,000 = €630,000 p.a.

As the brand builds and the occupancy fills, that number would obviously increase.  Our aim would be to overpay on the finance if at all possible, so that every month we are able to reduce our outstanding exposure.

The Timeline

If we are able to agree finance in principle before the end of July, it will take a further 4-6 weeks to purchase the hotel and conduct the necessary due diligence and get the appropriate vendor representations (it is being sold as a company).  This would see the ownership take effect by the end of September/beginning of October.  We would seek to enter into a guaranteed lease agreement with the current vendors (any payments under which being deducted from the purchase price) so that we can agree from exchange of contracts that we will operate the hotel this winter.  This will allow us to start selling the rooms and recruiting the remainder of the team.

This would leave 6-8 weeks for completion of the renovation works on site before opening at the beginning of December 2013.

Funding Sought

We are looking for genuine funding, able to offer a sensible return and are not going to be raising additional security (other than the freehold of the hotel) or paying any fees up-front.  Any finders fees or introduction fees are to be paid by the lender.

Please do not get in touch with us if you are not able to operate on those terms.

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To start we need a mutual NDA completed, executed and returned by all parties to the project.  Additionally, once we know the sector of the funding request i.e. Energy, Technology, Mining, Real Estate or Business we will provide a questionnaire that must be answered in detail and returned to access risk factors and determine our interest.   We are fully transparent and provide all the information for you to make an intelligent decision on doing business with us.  If the project has merit with strong principal, a very good plan, capital to support the project until funding we can get you through our in-house underwriting to funding.  We offer bank rate or better pricing not hard money.  Our rates are  based on the following indexes: Libor, Bond rate, 10-year Treasury or Prime depending on the project with terms of 3, 5, 7, 10 , 15 or 20 years.  Minimum loan amount is $1M US with no maximums on asset based lending. 

 

Required Documentation: (for submission)

The following documents will be necessary to successfully underwrite and fund your project:

  • Business Plan or Executive Summary with actual or proforma income statements 3 -5 years
  • Balance Sheet/Financial Statement/Cash Flow/P & L with YTD less than 90 days old (if applicable)
  • Copy of Appraisal or other valuation (if available)
  • Expanded Resumes of all principals
  • Line Item Detailed Use of Funds for short-term and long-term projections
  • Financial statement-Corporate/Personal

 

 You will need to show proof of funds invested to date in the project (if applicable), ability to pay for third party expenses including a site visit, a need and necessity study (mini feasibility) along with legal and due diligence.  This is not upfront but after you receive an expression of interest in writing from the lender along with lender contact and documentation for your due diligence. My job is to get you through our in-house underwriting and to funding!  We believe that relationship is critical if we are to be successful with our business venture and without a good relationship we will not be a good financial partner. 

 

(The following remark is not intended to offend but stated because of so many request from those who believe that all cost can be paid from closing proceeds):

 “If there are no funds available to cover project cost and principals expects the lender to pay the necessary cost to determine if the project is lendable, close and fund the project and get their expenses from the loan proceeds then no one I know of can help you.”   I have 27 years experience in this industry and have never seen that happen with lenders in the US, Western Europe or anywhere else.

 Ron Coleman

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nepcoinc@att.net  770-572-7765        nepcoinc1 -Skype

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