7.18 So was born the Carlton Savannah. A business Luxury Hotel ranked by Preferred Hotels, aimed at providing the services that a business person should expect in the capital city – Port of Spain – of a wealthy economy.
7.19 However, rather than a traditional hotel, the Carlton Savannah Hotel is a hotel with individuals and institutions such as the Carlton Savannah REIT owning the Apartments. These Apartments will be managed by the Hotel Operating Company. On a monthly basis, the Owners of the Apartments in the Hotel will receive their proportionate share of the Owners’ Share of Rent earned by the operations of the Hotel, thus creating an investment asset with an income stream.
7.20 Below is a step-by-step explanation of the investment opportunity:
Carlton Savannah Hotel has 55 two-bedroom Apartments that are individually titled and are available for sale to individuals, institutions or REITS.
On buying an Apartment, an Owner must sign a Carlton Savannah Hotel Operating Agreement which places the Apartment in the pool of Apartments managed by the Hotel Operating Company for an agreed percentage of the Owners’ Share of Rent.
1. The Apartments are managed for the Owners as a Preferred Hotel’s Luxury Hotel.
2. Having the Apartments managed by a professional Hotel Operating Company, means that the owner are likely to achieve higher per-square-foot rent than in the normal residential rental market, because the space is being rented at a Preferred Hotel’s Luxury Hotel rate, rather than a monthly residential rental.
3. The Apartments have been designed to maximise the rental income by the ease with which they can be reconfigured. Each Apartment:
(a) has fully furnished three rooms – 2 bedrooms and one living room
(b) is designed with three bathrooms to allow reconfiguration into 3 one-bedroom Apartments
(c) has three entrances from the hotel hallway so that each of the one-bedroom Apartments referenced in (b) above can be rented independently
(d) has a living room with very high tech wall-beds, so that the rooms can be used as the living space of a suite, or as a separate bedroom, and be interchangeable on demand
This way, the Hotel Operating Company has total flexibility to rent the space as three separate one-bedroom units or as a one or two-bedroom suite.
4. Based on the flexible design of the Apartments, the monthly Rent is maximized as a result of the following:
(a) the entire building is managed as a Preferred Hotel’s Luxury Hotel
(b) The Owners receive a proportionate share of the Owners’ Share of Rent which represents 65% of the Net Operating Profits. The Hotel Operating Company retains 35% of the Net Operating Profits.
This is an optimal situation as the Hotel Operating Company, and the Owners have similar commercial objectives and so the Hotel Operating Company is motivated to maximize profit.
5. Mr. Lyle Pauls, the General Manager of the Hotel, has the experience of managing hotels in North America and Canada utilizing the shared profit model.
6. Of significance, the Carlton Savannah Hotel, upon opening, will not be encumbered with high levels of debt used in the construction of the hotel. The traditionally financed hotel often has long-term debt over 30-40 years in relation to the construction of the facility, which encumbers the profit & loss account with high financing charges, which along with reducing the overall profitability of the company, also makes the company less agile if at any time markets soften. In stark contrast, the Carlton Savannah Hotel has been structured as a real estate transaction, such that the entire facility, comprising 55 apartments, a Health Club & Spa and the food & beverage operation, is sold to owner-investors, and as such the hotel is able to repay construction finance.
7 The Carlton Savannah hotel in Port of Spain, Trinidad & Tobago was awarded Preferred Standards of Excellence® 2007 by Preferred Hotels & Resorts This is significant as the Preferred Standards of Excellence was awarded before the hotel is opened.
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