The following is the text of a valuation report prepared for the purpose of incorporation in this offering document received from Savills Valuation and Professional Services Limited, an independent professional valuer, in connection with the valuation of the Hotels as at [ ] 2013. Savills Valuation and Professional Services Limited 23/F Two Exchange Square Central, T: (852) 2801 6100 F: (852) 2530 0756 EA Licence: C-023750 savills.com The Board of Directors NWHI Manager Limited, as the Trustee-Manager of NW Hotel Investments The Board of Directors NW Hotel Investments Company Limited [ ] [ ] 2013 Dear Sirs, RE: (1) GRAND HYATT HONG KONG, HOTEL TWO ON THE WESTERN SIDE, CONVENTION PLAZA, 1 HARBOUR ROAD, WAN CHAI, HONG KONG (2) RENAISSANCE HARBOUR VIEW HOTEL, HONG KONG, HOTEL ONE ON THE EASTERN SIDE, CONVENTION PLAZA, 1 HARBOUR ROAD, WAN CHAI, HONG KONG (3) HYATT REGENCY HONG KONG, TSIM SHA TSUI, K11, 18 HANOI ROAD, TSIM SHA TSUI, KOWLOON, HONG KONG In accordance with your instructions for us to value the above properties to be acquired by [NW Hotel Investments Company Limited] ( the Company ) and its subsidiaries (collectively the Group ) for investment purposes, we confirm that we have carried out inspections, made relevant enquiries and III-1
searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of these properties as at [ ] 2013 for public listing purposes. BASIS OF VALUATION Our valuation is our opinion of the market value of each property which we would define as intended to mean the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion. Our valuation is prepared in accordance with The HKIS Valuation Standards (2012 Edition) published by The Institute of Surveyors and complies with Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Limited. We have applied the definition of market value to each property independently. In view of the nature of the properties, we have valued each of the properties on a going-concern basis as an operating hotel and hence our valuations have included the values of land, buildings, furniture, trade fixtures and fittings, and operating equipment. VALUATION METHODOLOGY The properties are operating hotels and have been granted with the respective licence as hotel/guesthouse under the Hotel and Guesthouse Accommodation Ordinance, Cap. 349 by Hotel and Guesthouse Accommodation Authority. Our valuations are carried out with reference to their uses in existing state and on the basis that the properties have been constructed, occupied and used in full compliance with, and without contravention of all ordinances, except only where otherwise stated. We have further assumed that, for the continual use of the properties upon which our valuations are based, all required licences, permits, certificates and authorisations have been obtained, except only where otherwise stated. In arriving at our opinion of values, we have considered the relevant general and economic factors and in particular have investigated recent sales of comparable properties. In the course of our valuation, we have principally adopted the Discounted Cash Flow Analysis approach which is a commonly accepted method in valuation of hotel premises and counter-checked this by the Direct Comparison Approach. Discounted Cash Flow Analysis (DCF Analysis) As the properties are to be acquired for long term investment, we have adopted a 10-year projection time frame in our DCF Analysis. Such 10-year investment horizon enables an investor to make an assessment of the long-term return that is likely to be derived from the target properties. In preparing the DCF Analysis, the income and expenses for the next ten years from the date of valuation are itemised and projected annually taking into account, among other things, the actual operating accounts from 2009 to 2012 and the budgeting account for 2013 of the properties, and the expected growth (or decline) of incomes and expenses. III-2
The net cash flow over the ten-year period is discounted at a discount rate. In undertaking this analysis, we have relied on the actual results of operations of the properties supplied by the Company in respect of room sales, income from food/beverage and commercial areas, outgoings, operating costs, gross operating profits, rent and rates. Reference has also been made to the market research report prepared by [Savills Limited] (the Market Consultant Report ) on the forecast of growth of room rates and rates as well as the analysis of the relevant general and economic conditions and the business prospects of the properties. The properties are hypothetically assumed to be sold at the end of the ten-year period. The net cash flow of each property from the 11th year onward to perpetuity is capitalised at a terminal capitalisation rate expected for this type of property investment in the market. Due consideration has been given to the expectation of the renewal of the Government lease upon expiry (in 2060 in the case of Grand Hyatt Hong Kong and Renaissance Harbour View Hotel, and 2057 in the case of Hyatt Regency TST) at nil premium according to the prevailing Government policy which is in line with the market expectation. This terminal rate of return is made by reference to the yields achieved in analyzed market sales of hotel premises and our knowledge of the market s expectations from our day-to-day contact with property investors. This expected return reflects implicitly the quality of the investment, the expectation of the potential of future income and capital appreciation, risk factors and the like. This capitalised terminal value is discounted at the discount rate. Direct comparison As a supporting approach to the valuation, we have also considered the Direct Comparison Approach as a reference check for the valuations arrived at from DCF Analysis. In this regard, comparable hotel sales transactions around the valuation date are collected and analyzed in terms of a price per room. The collected comparables are then adjusted to take account of the discrepancies between the properties and the comparables. TITLE INVESTIGATIONS In preparing our valuation, we have carried out land searches at the Land Registry of. However, we have not searched the original documents to verify ownership or to ascertain the existence of any amendment which does not appear on the copies handed to us. We are not aware of any title defects, easements or right of way affecting the properties and our valuations assume that none exists, except only where otherwise stated. VALUATION CONSIDERATION AND ASSUMPTIONS We have relied to a very considerable extent on information given by the Company and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, lettings, building plans, floor areas, income and expenditure statements and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. We have not carried out on-site measurement to verify the correctness of the floor areas of the properties. We have no reason to doubt the truth and accuracy of the information provided to us by the Company or to suspect that any material information has been withheld. III-3
We have inspected the exterior of all the properties valued and, where possible, we have also inspected the interior of the premises. However, no structural survey has been carried but, in the course of our inspection, we did not note any serious defect. We are not, however, able to report that the properties are free from rot, infestation or any other structural defect. No tests were carried out to any of the services. No allowance has been made in our report for any charge, mortgage or amount owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that all properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values. We enclose herewith our summary of values and valuation certificate for your attention. Yours faithfully For and on behalf of Savills Valuation and Professional Services Limited Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Managing Director * Mr Charles C K Chan, chartered estate surveyor, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been a qualified valuer since June 1987 and has about 28 years experience in the valuation of properties in. III-4
SUMMARY OF VALUES Market value in existing state as at [ ] 2013 1. Grand Hyatt, Hotel Two on the Western Side, Convention Plaza, 1 Harbour Road, Wan Chai, 2. Renaissance Harbour View Hotel,, Hotel One on the Eastern Side, Convention Plaza, 1 Harbour Road, Wan Chai, Hong Kong 3. Hyatt Regency, Tsim Sha Tsui, K11, 18 Hanoi Road, Tsim Sha Tsui, Kowloon, Total: HK$9,700,000,000 HK$7,800,000,000 HK$3,900,000,000 HK$21,400,000,000 III-5
VALUATION CERTIFICATE Description and tenure Particulars of Market value in existing state as at [ ] 2013 1. Grand Hyatt Hong Kong, Hotel Two on the Western Side, Convention Plaza, 1 Harbour Road, Wan Chai, 787,418/4,000,000th shares of and in Inland Lot No. 8593. Convention Plaza is a composite development comprising two hotels, an office tower and a residential tower erected over a podium of convention centre, shops, car park and hotel facilities. According to the Occupation Permit, the development was completed in 1990. The property comprises a 25-storey hotel accommodating 549 guest rooms with other ancillary facilities such as function and meeting rooms, banquet venue, restaurants, bar lounges and business centre. The property is also equipped with back-of-house and loading/unloading facilities. The property is an operating hotel. HK$9,700,000,000 The guest room configuration is detailed as follows:- Room Type Number of Rooms Suites Presidential Suite 2 Chairman Suite 1 Plateau Deluxe Suite 1 Ambassador Harbour View 4 Suite Ambassador Garden View Suite 3 Diplomat Harbour View Suite 2 Diplomat Garden View Suite 1 Plateau Suite 1 Grand Executive Harbour View 21 Suite Grand Garden View Suite 1 Rooms Plateau Deluxe Room 1 Grand Deluxe Harbour View 16 Room Plateau Room with Terrace 6 Plateau Room 1 Grand Club Harbour View 28 Room Grand Club Room 32 Grand Harbour View Room 252 Grand Room 176 Total: 549 III-6
Description and tenure Particulars of Market value in existing state as at [ ] 2013 The food and beverage outlets are detailed as follows:- Name (Style) Floor Grand Hyatt Steakhouse (Western) Grand Cafe (All-day Dining) Champagne Bar (Lounge Bar) Kaetsu (Japanese) Tiffin Lounge (Western & European) Grissini (Italian) One Harbour Road (Chinese) The Grill (Barbecue & Seafood) The Waterfall Bar (Poolside & Lounge) Ground-3rd 1st 1st Mezzanine Mezzanine 2nd 7th-8th 11th 11th The function, meeting and banquet facilities are detailed as follows:- Venue Name Floor/ (Number of Rooms) Grand Ballroom Grand I, II, III, IV and Annex Salon I, II, III, IV Drawing Room Lounge Library Chief Executive Suite I, II, III The Poolhouse Meeting Rooms 1225 and 1228 Grand Club Lounge and Conference Room 1st (1 room) 1st (5 rooms) Mezzanine (4 rooms) Mezzanine (1 room) Mezzanine (1 room) Mezzanine (1 room) 5th (3 rooms) 11th (event venue) 12th (2 rooms) 29th-31st (4 rooms) III-7
Description and tenure Particulars of Market value in existing state as at [ ] 2013 The property also provides recreational facilities including the Plateau Spa, outdoor swimming pool and jogging track (both shared with Renaissance Harbour View Hotel), sauna, landscape garden, 24-hour fitness studios, tennis court, squash courts, golf-driving range and children s playground. The total gross floor area of the property is approximately 50,256.18 sq.m. (540,958 sq.ft.). Inland Lot No. 8593 is held from the Government under Conditions of Grant No. 11784 for a term of 75 years commencing on 19 February 1985 at an annual Government rent of HK$1,000. Notes: (1) The registered owner of the property is Grand Hyatt Company Limited. (2) The property lies within an area zoned Other Specified Uses (Exhibition Centre with Commercial Development) under Wan Chai North Outline Zoning Plan. (3) The property was granted a licence as a hotel/guesthouse from 22 October 2010 to 21 October 2013 under the Hotel and Guesthouse Accommodation Ordinance, Cap. 349 by the Hotel and Guesthouse Accommodation Authority. (4) The hotel is managed by Hyatt International Asia Pacific, Limited (thereinafter Hyatt ) under a Management Agreement dated 18 October 1985 and various Amendment Agreements for a term of 20 years commencing from the formal opening date and was renewed from 1 January 2010 for a further term of 10 years. Under the Management Agreement, Hyatt has the right to extend the operating term for two more consecutive periods of 10 years by giving notice to Grand Hyatt Company Limited, subject to Hyatt not being in default under the Management Agreement and the operating term having been extended for all prior periods. (5) Under the Management Agreement as stated in Note (4), the basic management fee payable to Hyatt is 3% of the revenue and the incentive fee is 8% of the gross operating profit. (6) The property is subject to a Second Mortgage to secure banking facilities of a subsidiary of New World Development Limited in favour of The Hongkong and Shanghai Banking Corporation Limited. (7) Our inspection was carried out by Juliana Tham, on 19 March 2013. The property was maintained in a reasonable condition commensurate with its age and uses and equipped with normal building services. (8) According to the information provided, the property is currently undergoing renovation of the rooms and facilities in phases which is expected to be completed in 2016. (9) The key parameters of our 10-year DCF Analysis are set out below. Cash Inflow: Cash Outflow: Average Daily Rate: The cash inflow mainly includes revenues generated from hotel rooms, food and beverage, other minor operations such as telephone, laundry, business centre and rentals etc. The cash outflow mainly includes costs of sales of hotel rooms, food and beverage and minor operations as well as expenditures for administration and general, sales and marketing, utilities, repair and maintenance, building insurance, furniture, fixtures and equipment reserve ( FF&E Reserve ), base and incentive management fees and Government rates and rent. The average daily room rate is HK$3,661 per room in year 1 of the DCF Analysis with reference to the expected growth of room rate in the Market Consultant Report, the expectation of the Hyatt, and the effect of the proposed renovation. Changes in Average Daily Rate for the remainder of the 10-year projection period are incorporated in the average annual change of revenue. III-8
Occupancy Rate (1) : The rates adopted in our 10-year DCF Analysis are tabulated below which have made reference to the historical rates from 2009 to 2012, the Market Consultant Report and the effect of the proposed renovation programme from 2013 to 2016. Year 1 2 3 4 5 6 7 8 9 10 Projected rate... 72% 75% 76% 77% 78% 75% 77% 78% 78% 78% The property is located in a core business area and near the Convention Centre. The continual strong performance of visitor arrivals and the growing market of business, convention and exhibition visitors support a growth of. The comprehensive provision of hotel amenities and the upcoming renovation also strengthens its competitiveness and capture an growth. According to the Market Consultant Report, there are no expected substantial changes in competition which may have a significant impact on the of the property. Hence, the rates of the property are expected to be stabilised in the medium to long term. In addition, our projected rates have been based on the prevailing Government policy of promoting the tourism industry in. Average Revenue Change: The average annual change of revenue over the 10-year forecast period is 4.8% per annum with reference to the expected growth of room rate in the Market Consultant Report, the expectation of Hyatt, and the effect of the proposed renovation. The projected growth in revenue is prepared on the basis that the Hyatt is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determining the revenue changes. Long-term Change of Revenue per Available Room ( RevPAR ): Discount Rate: Terminal Capitalisation Rate: 3% per annum is adopted taking into account the characteristics of the property, the growth expectation of the Market Consultant Report and the outlook of the industry in the long-term. The long term change of RevPAR is prepared on the basis that the Hyatt is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determination of long-term RevPAR changes. The discount rate adopted is 7.25% which reflects the time value of money in the DCF Analysis and a risk premium for the forecast cash flow to be materialised having regard to the risk free rate based on the prevailing yield of 10-year Exchange Fund Notes, expected inflation and the projected income over the forecast period. The property is hypothetically assumed to be sold at the end of the 10-year projection period. The terminal capitalisation rate is used to capitalise the net cash flow of the property from the 11th year onward to perpetuity to arrive at the terminal value. The terminal capitalisation rate in perpetuity adopted is 4.25% taking into account, inter alia, the discount rate adopted and the forecast long-term change of RevPAR, which is in line with our knowledge of the prevailing yield expectation of hotel investors in the market having regard to the location, class and physical attributes of the property. Note: 1 calculated based on total room number of 549. III-9
(10) We have also adopted the comparison approach to cross-check and support the result of the DCF Analysis. However, relevant hotel transactions are scarce and therefore we have also made reference to similar recent transactions of serviced apartments. The reference transactions are set out below. Comparable No. Date of Transaction Price Price/Room Remarks 1... Shama Central 26 Peel Street, Central, 2... Shama Causeway Bay 8 Russell Street, Causeway Bay, 3... Novotel Hotel complex Kowloon, 348 Nathan Road, Jordan, Kowloon, 7-May-12 HK$590,000,000 HK$10,500,000 per room (approx.) 18-Feb-12 HK$1,200,000,000 HK$10,900,000 per room (approx.) Mar-12 HK$2,368,000,000 HK$6,100,000 per room (approx.) including the shops 56 serviced apartments completed in 1997 in Central. 110 serviced apartments completed in 2001 in Causeway Bay. A 389-room High Tariff B hotel with shops completed in 1992 in Jordan. F&B facilities include a restaurant and a bar. Being located at one of the core business areas of Island and near the Convention and Exhibition Centre, the property is better located than Comparable 1 and 3 but is not situated at a prime tourist shopping area as Comparable 2 is. The accessibility of the property and Comparable 2 and 3 is good and conveniently accessible by private and public transport; Comparable 1 is considered inferior in this respect. The property is a high quality hotel providing guest rooms and ancillary services such as restaurants, café, lounge, swimming pool and fitness centre which the three comparables do not comparably offer. III-10
Description and tenure Particulars of Market value in existing state as at [ ] 2013 2. Renaissance Harbour View Hotel,, Hotel One on the Eastern Side, Convention Plaza, 1 Harbour Road, Wan Chai, 812,218/4,000,000th shares of and in Inland Lot No. 8593. Convention Plaza is a composite development comprising two hotels, an office tower and a residential tower erected over a podium of convention centre, shops, car park and hotel facilities. According to the Occupation Permit, the development was completed in 1990. The property comprises a 31-storey hotel accommodating 857 guest rooms with other ancillary facilities such as function and meeting rooms, banquet venue, restaurants, lounge and business centre. The property is also equipped with back-of-house and loading/unloading facilities. The property is an operating hotel. HK$7,800,000,000 The guest room configuration is detailed as follows:- Room Type Number of Rooms Suites Dynasty Suite 5 Deluxe Harbour View Suite 10 Superior Corner Suite 1 Superior Suite 15 Studio Harbour View Suite 21 Rooms Club Level Harbour View Room 36 Club Level Garden View Room 27 Harbour View Room 383 Garden View Room 359 Total: 857 The food and beverage outlets are detailed as follows:- Name (Style) Floor The Lounge (Cafe Lounge) Cafe Renaissance (All-day Dining) Dynasty Restaurant (Chinese) Scala Restaurant (Italian) 1st Mezzanine 3rd 11th III-11
Description and tenure Particulars of Market value in existing state as at [ ] 2013 The function, meeting and banquet facilities are detailed as follows:- Venue Name Floor/ (Number of Rooms) Boardroom 8 Boardroom 7 Boardrooms 1, 2, 3, 4, 5 and 6 Concord Rooms I, II and III Oasis Room Pre-function Area Boardroom 42 Club Lounge Lower Lobby (1 room) 1st (1 room) Mezzanine (6 rooms) 8th (3 rooms) 8th (1 room) 8th 42th (1 room) 40th-42nd The property also provides recreational facilities including outdoor swimming pool and jogging track (both shared with Grand Hyatt Hotel) and landscape garden. The total gross floor area of the property is approximately 52,078.97 sq.m. (560,578 sq.ft.)]. Inland Lot No. 8593 is held from the Government under Conditions of Grant No. 11784 for a term of 75 years commencing on 19 February 1985 at an annual Government rent of HK$1,000. Notes: (1) The registered owner of the property is New World Harbourview Hotel Company Limited. (2) The property lies within an area zoned Other Specified Uses (Exhibition Centre with Commercial Development) under Wan Chai North Outline Zoning Plan. (3) The property was granted a licence as a hotel/guesthouse from 1 September 2011 to 31 August 2014 under the Hotel and Guesthouse Accommodation Ordinance, Cap. 349 by the Hotel and Guesthouse Accommodation Authority. (4) The hotel is managed by Luxury Hotels International of Limited (thereinafter Luxury Hotels ) under a Management Agreement dated 18 October 1985 and various supplementary agreements for a term of 20 years commencing from the formal opening date of the hotel, and was renewed from 1 January 2010 for a further term of 10 years. Under the Management Agreement, Luxury Hotels has the right to extend the operating term for two more consecutive term of 10 years by giving notice to New World Harbourview Hotel Company Limited, subject to Luxury Hotels not being in default under the Management Agreement and the operating term having been extended for all prior periods. (5) Under the Management Agreement as stated in Note (4), the basic management fee payable to Luxury Hotels is 3% of the revenue and the incentive fee is 8% of the gross operating profit. III-12
(6) The property is subject to a Second Mortgage to secure banking facilities of a subsidiary of New World Development Company Limited in favour of The Hongkong and Shanghai Banking Corporation Limited. (7) Our inspection was carried out by Juliana Tham, on 19 March 2013. The property was maintained in a reasonable condition commensurate with its age and uses and equipped with normal building services. (8) According to the information provided, the renovation of the property has been substantially completed in 2012 and the renovation of the remaining rooms and facilities is expected to be completed in 2014. (9) The key parameters of our 10-year DCF Analysis are set out below. Cash Inflow: Cash Outflow: Average Daily Rate: Occupancy Rate (1) : The cash inflow mainly includes revenues generated from hotel rooms, food and beverage, other minor operations such as telephone, laundry, business centre and rentals etc. The cash outflow mainly includes costs of sales of hotel rooms, food and beverage and minor operations as well as expenditures for administration and general, sales and marketing, utilities, repair and maintenance, building insurance, furniture, fixtures and equipment ( FF&E Reserve ), base and incentive management fees and Government rates and rent. The average daily room rate is HK$2,322 per room in year 1 of the DCF Analysis with reference to the expected growth of room rate in the Market Consultant Report, the expectation of the Luxury Hotels, and the effect of the proposed renovation. Changes in Average Daily Rate for the remainder of the 10-year projection period are incorporated in the average annual change of revenue. The rates adopted in our 10-year DCF Analysis are tabulated below which have made reference to the historical rates from 2009 to 2012, the Market Consultant Report and the effect of the proposed renovation programme from 2013 to 2014. Year 1 2 3 4 5 6 7 8 9 10 Projected rate... 71% 73% 76% 78% 80% 74% 77% 80% 80% 80% The property is located in a core business area and near the Convention Centre. The continual strong performance of visitor arrivals and the growing market of business, convention and exhibition visitors support a growth of. The comprehensive provision of hotel amenities and the upcoming renovation also strengthens its competitiveness and capture an growth. According to the Market Consultant Report, there are no expected substantial changes in competition which may have a significant impact on the of the property. Hence, the rates of the property are expected to be stabilised in the medium to long term. In addition, our projected rates have been based on the prevailing Government policy of promoting the tourism industry in. Average Revenue Change: The average annual change of revenue over the 10-year forecast period is 4.7% per annum with reference to the expected growth of room rate in the Market Consultant Report, the expectation of the Luxury Hotels, and the effect of the proposed renovation. The projected growth in revenue is prepared on the basis that the Luxury Hotels is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determining the revenue changes. Note: 1 calculated based on total room number of 857. III-13
Long-term Change of Revenue per Available Room ( RevPAR ): 3% per annum is adopted taking into account the characteristics of the property, the growth expectation of the Market Consultant Report and the outlook of the industry in the long-term. The long term change of RevPAR is prepared on the basis that the Luxury Hotels is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determination of long-term RevPAR changes. Discount Rate: The discount rate adopted is 7.25% which reflects the time value of money in the DCF Analysis and a risk premium for the forecast cash flow to be materialised having regard to the risk free rate based on the prevailing yield of 10-year Exchange Fund Notes, expected inflation and the projected income over the forecast period. Terminal Capitalisation Rate: The property is hypothetically assumed to be sold at the end of the 10-year projection period. The terminal capitalisation rate is used to capitalise the net cash flow of the property from the 11th year onward to perpetuity to arrive at the terminal value. The terminal capitalisation rate in perpetuity adopted is 4.25% taking into account, inter alia, the discount rate adopted and the forecast long-term change of RevPAR, which is in line with our knowledge of the prevailing yield expectation of hotel investors in the market having regard to the location, class and physical attributes of the property. (10) We have also adopted the comparison approach to cross-check and support the result of the DCF Analysis. However, relevant hotel transactions are scarce and therefore we have also made reference to similar recent transactions of serviced apartments. The reference transactions are set out below. Comparable No. Date of Transaction Price Price/Room Remarks 1... Shama Central 26 Peel Street, Central, 2... Shama Causeway Bay 8 Russell Street, Causeway Bay, 3... Novotel Hotel complex Kowloon, 348 Nathan Road, Jordan, Kowloon, 7-May-12 HK$590,000,000 HK$10,500,000 per room (approx.) 18-Feb-12 HK$1,200,000,000 HK$10,900,000 per room (approx.) Mar-12 HK$2,368,000,000 HK$6,100,000 per room (approx.) including the shops 56 serviced apartments completed in 1997 in Central. 110 serviced apartments completed in 2001 in Causeway Bay. A 389-room High Tariff B hotel with shops completed in 1992 in Jordan. F&B facilities include a restaurant and a bar. Being located at one of the core business areas of Island and near the Convention and Exhibition Centre, the property is better located than Comparable 1 and 3 but is not situated at a prime tourist shopping area as Comparable 2 is. The accessibility of the property and Comparable 2 and 3 is good and conveniently accessible by private and public transport; Comparable 1 is considered inferior in this respect. The property is a high quality hotel providing guest rooms and ancillary services such as restaurants, café, lounge, swimming pool and fitness centre which the three comparables do not comparably offer. III-14
Description and tenure Particulars of Market value in existing state as at [ ] 2013 3. Hyatt Regency Hong Kong, Tsim Sha Tsui, K11, 18 Hanoi Road, Tsim Sha Tsui, Kowloon, 30,349/106,220th shares of and in Kowloon Inland Lot No. 11188. K11 is a composite development comprising a tower of hotel (at the low zone) and apartments (at the high zone) erected over a podium of shopping mall known as K11 Art Mall, car park and hotel facilities. According to the Occupation Permit, the development was completed in 2009. The property comprises a 15-storey hotel accommodating 381 guest rooms with other ancillary facilities such as function and meeting rooms, restaurants, bar, business centre and banquet venue on the 4th Floor Lobby Level. The property is equipped with back-of-house, car parking and loading/unloading facilities. The property is an operating hotel. HK$3,900,000,000 The guest room configuration is detailed as follows:- Room Type Number of Rooms Suites Presidential Suite 1 Regency Executive Suite 4 Regency Suite Harbour View 13 Regency Suite 15 Rooms Club Harbour 27 Club 23 Harbour View 60 Deluxe 144 King/Twin 94 Total: 381 The food and beverage outlets are detailed as follows:- Name/(Style) Floor The Chinese Restaurant (Cantonese) Chin Chin Bar (Lounge Bar) Hugo s (European) Cafe (All-day Dining) 3rd 3rd 4th 4th III-15
Description and tenure Particulars of Market value in existing state as at [ ] 2013 The function, meeting and banquet facilities are detailed as follows:- Venue Name Floor/ (Number of Rooms) Regency Ballroom I&II Pre-function Area Salon I, II, III, IV and V Event Suite I&II Meeting Room Regency Club Lounge 4th(1room) 4th 4th (5 rooms) 4th(2rooms) 24th (1 room) 23rd-24th The property also provides recreational facilities including a fitness centre and sky garden and facilities shared with the Masterpiece Apartments such as an outdoor swimming pool, outdoor Jacuzzi, kid pool and steam room. The total gross floor area of the property is approximately 25,815.67 sq.m. (277,879 sq.ft.). Kowloon Inland Lot No. 11188 is held from the Government under Conditions of Exchange No. UB20040 for a term of 50 years commencing on 23 April 2007 at an annual Government rent of 3% of the rateable value for the time being of the lot. Notes: (1) The registered owners of the property are Sunfield Investments Limited (a share of 92/100) and Park New Astor Hotel Limited (a share of 8/100 holding as tenants in common). (2) The property lies within an area zoned Commercial (10) under Tsim Sha Tsui Outline Zoning Plan. (3) The property was granted a licence as a hotel/guesthouse from 27 August 2010 to 26 August 2013 under the Hotel and Guesthouse Accommodation Ordinance, Cap. 349 by the Hotel and Guesthouse Accommodation Authority. (4) The hotel is managed by Hyatt International Asia Pacific, Limited under a Management Agreement dated 29 November 2007 for a term of 20 years commencing from the formal opening date, i.e. 1 January 2010. (5) Under the Management Agreement as stated in Note (4), the basic management fee payable to Hyatt is 2% of the revenue; while the incentive fee is 5% of the gross operating profit during 1st to 7th calendar years of the term and 8% of gross operating profit commencing from the 8th calendar year. (6) Our inspection was carried out by Juliana Tham, on 20 March 2013. The property was maintained in a reasonable condition commensurate with its age and uses and equipped with normal building services. III-16
(7) The key parameters of our 10-year DCF Analysis are set out below. Cash Inflow: Cash Outflow: Average Daily Rate: Occupancy Rate (1) : The cash inflow mainly includes revenues generated from hotel rooms, food and beverage, other minor operations such as telephone, laundry, business centre and rentals etc. The cash outflow mainly includes costs of sales of hotel rooms, food and beverage and minor operations as well as expenditures for administration and general, sales and marketing, utilities, repair and maintenance, building insurance, furniture, fixtures and equipment ( FF&E Reserve ), base and incentive management fees and Government rates and rent. The average daily room rate is HK$2,241 per room in year 1 of the DCF Analysis with reference to the expected growth of room rate in the Market Consultant Report and the expectation of Hyatt. Changes in Average Daily Rate for the remainder of the 10-year projection period are incorporated in the average annual change of revenue. The rates adopted in our 10-year DCF Analysis are tabulated below which have made reference to the historical rates from 2009 to 2012 and the Market Consultant Report. Year 1 2 3 4 5 6 7 8 9 10 Projected rate... 87% 88% 89% 90% 91% 91% 91% 91% 91% 91% The property is situated at a prime tourist shopping area and core business area and benefits from the continual growth of visitor arrivals including Chinese visitors for whom shopping is invariably one of the main activities. The improvement in infrastructures such as Express Railway Station and West Kowloon Cultural District and the recovering of the US and Chinese economies also helps bring about more business travellers and growth of. According to the Market Consultant Report, there are no expected substantial changes in competition which may have a significant impact on the of the property. Hence, the rates of the property are expected to be stabilised in the medium to long term. In addition, our projected rates have been based on the prevailing Government policy of promoting the tourism industry in. Average Revenue Change: The average annual change of revenue over the 10-year forecast period is 4.2% per annum with reference to the expected growth of room rate in the Market Consultant Report and the expectation of Hyatt. The projected growth in revenue is prepared on the basis that the Hyatt is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determining the revenue changes. Long-term Change of Revenue per Available Room ( RevPAR ): Discount Rate: 3% per annum is adopted taking into account the characteristics of the property, the growth expectation of the Market Consultant Report and the outlook of the industry in the long-term. The long term change of RevPAR is prepared on the basis that the Hyatt is a competent operator conducting the operation of the property in an efficient manner. In addition, we have also considered the prevailing Government policy of promoting the tourism industry in in determination of long-term RevPAR changes. The discount rate adopted is 7.25% which reflects the time value of money in the DCF Analysis and a risk premium for the forecast cash flow to be materialised having regard to the risk free rate based on the prevailing yield of 10-year Exchange Fund Notes, expected inflation and the projected income over the forecast period. Note: 1 calculated based on total room number of 381. III-17
Terminal Capitalisation Rate: The property is hypothetically assumed to be sold at the end of the 10-year projection period. The terminal capitalisation rate is used to capitalise the net cash flow of the property from the 11th year onward to perpetuity to arrive at the terminal value. The terminal capitalisation rate in perpetuity adopted is 4.25% taking into account, inter alia, the discount rate adopted and the forecast long-term change of RevPAR, which is in line with our knowledge of the prevailing yield expectation of hotel investors in the market having regard to the location, class and physical attributes of the property. (8) We have also adopted the comparison approach to cross-check and support the result of the 10-year DCF Analysis. However, relevant hotel transactions are scarce and therefore we have also made reference to similar recent transactions of serviced apartments. The reference transactions are set out below. Comparable No. Date of Transaction Price Price/Room Remarks 1... Shama Central 26 Peel Street, Central, 2... Shama Causeway Bay 8 Russell Street, Causeway Bay, 3... Novotel Hotel complex Kowloon, 348 Nathan Road, Jordan, Kowloon, 7-May-12 HK$590,000,000 HK$10,500,000 per room (approx.) 18-Feb-12 HK$1,200,000,000 HK$10,900,000 per room (approx.) Mar-12 HK$2,368,000,000 HK$6,100,000 per room (approx.) including the shops 56 serviced apartments completed in 1997 in Central. 110 serviced apartments completed in 2001 in Causeway Bay. A 389-room High Tariff B hotel with shops completed in 1992 in Jordan. F&B facilities include a restaurant and a bar. The property and Comparable 2 are located at prime tourist shopping areas in Tsim Sha Tsui of Kowloon and Causeway Bay of Island respectively while Comparable 1 and 3 are not. The accessibility of the property and Comparable 2 and 3 is good and conveniently accessible by private and public transport; Comparable 1 is considered inferior in this respect. The property is a high quality hotel providing guest rooms and ancillary services such as restaurants, café, lounge, swimming pool and fitness centre which the three comparables do not comparably offer. III-18