Beachfront Resort & Spa land for sale with guaranteed lease-back 8%-15% p.a
Established resort & spa over 17 years in a southern island in Thailand sells beachfront land with a hotel wing of 24 rooms and leases it back from the purchaser/investor offering a guaranteed 8%-15% scaled return on investment during the next 5-30 y period. 8% during the first 5y, 9% during the next 5 y, 10% during the next, 11%, 13% and 15% correspondingly. This is a passive investment purchase only. Purchaser will have no involvement or responsibility over resort running. Vendor requires financing for business expansion but does not want to lose the right to operate the hotel business based on that property. This property represents the most lucrative revenue and profit source of the hotel and for that reason the vendor will never default on these lease payments, as it cannot risk losing that property which is essential to its business. Comprehensive financial records can demonstrate the strong profitability and solid guarantees are offered to ensure the due lease payments.
Selling price US$ 1,450,000
- This opportunity has no resemblance to any of the usual sale-leaseback deals that can be encountered in the sale of properties. In those deals there is a short guaranteed period by the vendor and then the investor is left with a property which he has to manage and the fate of which will depend on the forces of the local or global markets and his ability and willingness to tangle himself into those changing forces.
- This deal is ironclad in terms of ROI, guarantees and capital appreciation and the transaction involves a vendor/lessee who sticks around after the sale plus he is strongly motivated to maintain the lease control of the sold property, as it is essential to his business. Therefore the interests of vendor/lessee and purchaser/lessor/investor are parallel and complementary rather than conflicting as it most other leaseback deals.
The investor needs to consider the following:
a) Can my investment capital be preserved and appreciated over time?
b) Is the business that offers the leaseback established, reputable & profitable ?
c) Why would the business want to sell this property?
d) Why would the business want to lease it back?
e) Is the business able to comfortably pay the guaranteed lease payments to me?
f) Would the business have any possible reason at all to default on its payments?
g) What would be the guarantees that the business would not default on its commitments?
The answers to these questions are the following:
a) Beachfront properties in Thai islands are in an ever-increasing demand and there is never oversupply to depress their values. Additionally, the availability of small properties like this one, are extremely rare & and that makes them more attractive and much more valuable. Therefore capital appreciation on a steady basis -both short and long term- is guaranteed.
b) The business has been established for 17 years and is one of the pioneers in the holistic industry worldwide and from the very first in Thailand. It has developed a strong reputation and loyal clientele over those years.
c) The business requires significant funds to expand, renovate facilities, reorganize management and intensify marketing and upscale its target clientele.
d) This resort has been very successful and profitable. Revenue in 2014 was US$ 1.3m Out of this revenue, US$ 800,000 was generated from the specific 24 rooms now available for sale. Therefore the control of this property section is crucial for the resort’s overall business success and this is the reason why wants to lease it back.
e) Out of the total US$ 700,000 profit of the overall business, the corresponding profit out of these rooms was US$450,000. Solid financial records can prove that profitability. It becomes obvious that the lessee’s business has the ability to pay the (8%) US$116,000 annually out of its specific as well as its total profit.
f) It would be absurd and suicidal for the lessee’s business to default on its committed lease payments when it depends on the control of the specific property and its success and profitability would be crippled if for any reason decided to default on its lease payments commitment.
g) The most important guarantee for the investor is that the lessee’s business’s revenue and profitability depends on the control of the leased property. In any case there is no downside for the investor as he holds the land title deed, the registered lease agreement and he can enforce its terms plus sell or lease an appreciating value property to someone else if the lessee defaults on its commitment. Additional safeguards and clauses may be negotiated.