Estimated CASH FLOW

cash-flow

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ADR and occupancy are the input parameters which have the most significant impact on the level of cash-flow.

The calculation examines an average annual occupancy rate of 50% in year 1, with a gradual increase to 65% in year 10. These rates are based on the current market situation and an analysis of the competition in the location in question during 1Q 2009.

On the basis of the information available, ADR accounts for the competition operating in the location and considers the projects selected position in the market, in this case a 4-star congress business hotel. The RIVER TERRACE Hotel’s ADR is lower in comparison with hotels of the same quality operating close to the city centre, which, due to their location, cannot offer the combination of a 4-star hotel facility along with the site’s riverside amenity.

In addition to the influence of occupancy and ADR the cash flow and profitability are influenced by the structure of expenses and revenues and the total acquisition costs. These include financial expenses, the level of which depends on the structure of financing selected. For the sake of a cash-flow projection, the worst scenario was calculated, i.e. financing purely from external sources.

From the materials processed, it is clear that even in the current recession the project is realizable from an economic point of view. The entire calculation of cash-flow can also be positively influenced by the selection of the market position, optimization of operations, and the gradual pressure to reduce fixed-costs by finding economies of scale and developing a clear marketing strategy. The marketing strategy in particular can certainly take full advantage of the unique location and the immediate accessibility to the river.

The future value of the project, based on the input assumptions and the subsequent development of ADR, occupancy and the composition of expenses and revenues as determined by the revenue method, is more than EUR 67.7m given a capitalization level of 9%. After the deduction of acquisition, construction, investor and project expenses, including the cost of fittings and furnishing, this offers the developer room for profits of 20%, which under present circumstances is very attractive.

A detailed economic analysis is available from the project manager.