07 April 2015
Directors
NPOA Ltd.,
Dear Gentlemen,
Re: Proposed Ramada Borneo Beach Resort
The time has come to secure the future of Nexus Residence Karambunai Owners by creating a standalone Resort with its own name and management. This would place the Resort clearly in the hands of
Owners with improved value for all.
There are two phases to make this a stand-alone resort, capable of trading successfully in its own right:
Phase 1.
This is referred to as the Pre-opening period.
There are a number of steps we will have to take to prepare this resort to stand-alone. This means a
complete re-branding and an upgrade to 4 Star International standards.
During the pre-opening period, we will prepare the resort ready to accept guests. It will provide all the
facilities expected of an international standard resort with its own name and brand.
We envisage that the neighbouring Nexus Resort will continue in its own name, but it is a different
and complimentary product to that which we propose.
Phase 2
We will operate the new Resort on behalf of Owners and guests as a successful international resort
being a joint venture between ourselves and owners. Each initial owner will receive 75% of the profits
from commencement. Profits will include returns from unit rental, food and beverage, tours and
transport etc.
INDICATIVE COSTS
We propose to levy the group of Owners with only a single fee of USD120, 000 to complete Phase 1.
We will spell out in detail what this covers in later budgets, but in summary it covers our costs in
establishing Nexus Residences as a stand-alone Resort ready for trading. This means, all staff will be
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trained, uniformed and with systems ready to receive guests. A soft opening is planned for November
and a Full Opening planned to take place before Christmas.
Our initial fee will include our local costs, airfares etc. for a 6 month period. If we assume an initial 120
Owners participate, this will amount to USD1, 000 each.
Owners will also be required to contribute to the pre-opening budget. As J.V. Partners we will
contribute our share. Our share contribution percentage will be addressed below. A full program and
budget is being prepared. However, we expect this will not exceed USD240, 000 gross. Once we have
met our share, this would amount to USD1, 500 per Parcel for an initial 120 entrants.
At the end of this initial period, each participating Owner will enjoy an increased value in their Parcel
as they will benefit from being part of an upgraded, stand-alone international resort.
Joint Venture
On completion of the Pre-opening period the Resort will move into operational mode. There are many
models whereby a Manager is appointed to operate a Resort or Hotel. The bottom line varies very
little in most models. Here, however, we have a unique set of circumstances.
We therefore propose that the Resort operate as a Joint Venture between participating Owners and
ourselves. The J.V. would be a split of 75% to Owners and 25% to ourselves.
This means we will contribute 25% of the pre-opening budget and share to the extent of 25% in the
profits.
It would work this way:
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•
Funds collected from paying guests would be paid into a Trust Account operated by
us.
Costs associated with operating the Resort would be paid out of the Trust Account
leaving the balance to be declared as a surplus. Each quarter 75% of this surplus
would be paid to Owners with a full set of accounts. We suggest this be split up
amongst Owners according to their Share Unit entitlement established by the
Management Corporation according to law.
Management Corporation
We understand that the Management Corporation is currently operated by the Developer under an
interim arrangement. It is proposed that this be taken-over by Owners collectively. The Management
Corporation in Owners control will continue the good work commenced on the Resort’s Common
Property.
We have today sent a letter to the Developer on this subject. We would like to see an Ownercontrolled Management Corporation with its own set of By-laws, House Rules and with the
appropriate number of Share Units allocated to each Owner. It would be sensible for the Management
Corporation to officially appoint us as Agent to ensure day to day operations are maintained at 4 star
international standard.
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As Agent we would report to the Owners Council (committee) which need only meet, say, once per
year with monthly reports provided by the Agent.
The Management Corporation will control all Common Property in the interest of Owners. The Model
By-laws as set out in the Act, are likely to deal with most matters although we will require By-laws to
establish branding, standards, exclusivity of on-site guest bookings and servicing, signage etc. In other
words, the model By-laws will need to be reviewed.
We plan to work with the Developer in the establishment of an owner-controlled Management
Corporation and the issuance of Strata titles to all owners.
Accommodation Upgrade
We are delighted with your news that about 160 Parcels are already upgraded to a standard where
little, if anything, needs to be done. I understand however that items such as clock radios, TV’s, linen,
cutlery etc. may need purchasing. It will be the responsibility of each Owner to ensure his Parcel is
upgraded to 4 star, international standard.
JOINT VENTURE NOT COMPULSORY
Although there are many reasons for owners to join the Joint Venture from inception, there may be
some Owners who may prefer to join the Joint Venture later rather than sooner. This means that these
Owners would delay their entrance into the Joint Venture for one reason or another.
These late-joiners face this possibility:
(i)
(ii)
(iii)
(iv)
A higher cost to upgrade their Parcel to 4 star standards as bulk-buying will benefit
initial entrants only.
Late joiners will have to meet the same pre-opening costs as initial entrants sooner or
later. The late joiner fee will be paid into a common fund, which will go towards
maintaining and improvements to the common grounds.
Initial Owners will establish a longer track record to enhance their value.
Late Joiners will receive only 70% of the Joint Venture profits for their first 10 years.
At the end of 10 years from joining, their share will revert to the standard 75%.
The additional 5% referred to in (iv) above, will be added to the common area fund addressed in (ii)
which will help increase the value of the property for all owners. Our share of the Joint Venture will
remain at 25%.
Preparation of an Owners Information Booklet is being delayed only pending resolution of matters
mainly pertaining to the Management Corporation and operational budgets. When prepared, a copy
will be distributed to all Owners. Those who elect to join the Joint Venture will receive a Joint Venture
Agreement for completion and return. Those who return it within the specified time will benefit from
a 75% share of the Joint Venture.
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INTERNATIONAL BRANDING
As a stand-alone Resort, we think it is important that it is recognised by the public as an International
Resort with high standards. Our market is likely to include discerning guests from Peninsular Malaysia,
China and other Asian countries.
Wyndham Hotel Group is the leading American hotel group with a strong presence in Asia –
particularly China. It owns a number of well-recognised hotel and resort brands including Ramada.
We have an established relationship with Ramada Worldwide which has hotels on all continents. Its
loyalty club and brand marketing stands it apart from unbranded hotels. It has a loyal following from
all parts of the world.
We have the rights to use the Ramada name with resorts we are involved. Costs of this branding will
be kept to a minimum by our established relationship. We envisage a franchise arrangement will suit
this resort better than a full management proposal. A formal application will be made at the
appropriate time with the cost of the franchise negotiated at that time. These costs would be a part
of the operational budget.
We envisage the cost to Owners will be kept to a minimum consistent with the service provided. More
detail will be included in the proposed Information booklet.
The adoption of the Ramada international brand should benefit all Owners.
We trust this arrangement suits your group and all owners.
Yours faithfully
CHAIRMAN
Ramada Hotels and Suites
Ballina/Byron
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