ECOLODGE FORUM
March 25-27,
2000
ECOLODGE FINANCE SESSION
Ecolodge Finance
DR. Edward
Sanders
President Ecotourim
International
The Red Sea Sustainable Tourism Initiative is a
project of USAID/EEPP
PRESENRATION TO THE ECOLODGE
FORUM
Sponsored by :THE
TOURISM DEVELOPMENT AUTHORITY OF EGYPT
-PROJECT PREPARATION
-CONSTRUCATION FINANCING AND PRE-OPENING
EXPENSES
-PERMANENT FINANCING
-SUBSEQUENT EXPANSION AND RETRO-FIT
SOURCES OF FINANCING
-DEVELOPERS OWN FUNDS
-FRIENDS AND FAMILY
-INDIVIDUAL INVESTORS
-STRATEGIC INVESTORS
-VENTURE FUNDS AND INVESTMENT BANKS
-COMMERCIAL BANKS
-CAPITAL MARKETS
-GOVERNMENT PROGRAMS
LENDER CONCERNS
-SEEK ASSURED REPAYMENT OF PRINCIPAL &
INTEREST
-NEED COLLATERAL (“LTV”)
-LEGAL
TITLE, PERMITS, SUPPORTING CONTRACTS
-DEBT-SERVICE CAPACITY (“DSCR”)
-WEELL-DOCUMENTED, CONSERVATIVE FINANCIAL
PROJECTIONS
-CREDIT ENHANCEMENTS
TOURISM RISKS REFLECTED IN RATES
|
Type Of Project
|
Minimum
DSCR** |
Maximum
LTV** |
Spread
(Points) |
| Multi
– family apartment |
1.20 |
.80 |
140-200 |
| Anchored
Retail |
1.25 |
.80 |
160-205 |
| Unanchored
Retail |
1.25 |
.80 |
175-245 |
| Office
Building |
1.25 |
.80 |
175-215 |
| Industrial
Project |
1.30 |
.80 |
160-205 |
| Hotel |
1.40 |
.75 |
250-320 |
Source: U.S. – Based international
Financing Group
*DSCR (Debt Service Coverage Ratio
= Net Income divided by interest and principal Repayment)
** LTV (Loan to Value = Amount of
the Loan divided by the investment cost of the Project)
WHAT MAKES ECOTOURISM DIFFERENT?
-INDUSTRY TOO NEW TO HAVE A “ HISTORY”
-MOST LODGES TOO SMALL TO BE EASILY
FINANCED
-SEASONAL MARKETS AND REMOTE LOCATIONS
-FEW “CHAINS” OR MANAGEMENT COMPANIES
-COLLATERAL IS OFTEN OF LIMITED
VALUE
-EACH PROJECT IS DIFFERENT AND
HARD TO EVALUATED
THE INDUSTRY IS VERY YOUNG
|
Year Started
|
Developed
Country
|
Developing Country
|
Total
|
|
1920-1959
|
17 %
|
1 %
|
4 %
|
|
1960-1969
|
-
|
4 %
|
3 %
|
|
1970-1979
|
10 %
|
9 %
|
9 %
|
|
1980-1989
|
30 %
|
16 %
|
19 %
|
|
1990-19999
|
43 %
|
70 %
|
63 %
|
|
Total of Group
|
100 %
|
100 %
|
100 %
|
Source: TES Nature Lodge Financing
Study
SOURCES OF FINANCING FOR SMALL
ECOLODGES
| Financing
Source |
Developed
Countries |
Developing
Countries |
Combined |
| Owner’s
Own Funds |
57 %
|
58 %
|
58 %
|
| Friends
and Family |
1 %
|
8 %
|
6 %
|
| Other
Equity Investors |
10 %
|
19 %
|
9 %
|
| Commercial
Bank Loans |
21 %
|
11 %
|
14 %
|
| Government
loans |
3 %
|
2 %
|
2 %
|
| Private
Loans |
5 %
|
4 %
|
4 %
|
| Other
Sources |
4 %
|
9 %
|
7 %
|
| Total
for Group |
100 %
|
100 %
|
100 %
|
Source: TEN Nature Lodge Financing
Study
Egypt’s OPPORTUNITY
PROMOTE
ECO-LODGES BIG ENOUGH TO BE PROFITABLE BUT STILL MEET THE
ECOTOURIST’S EXPECTATIONS
PROMOTE ECOTOURISM
" CLUSTERS" WITH SHARED PUBLIC INFRASTRUCTRE AND APPROPRIATE
ZONING
PROVIDE
PUBLIC/PRIVATE FUNDING TO FACILITATE THE GROWTH OF THESE "
CLUSTERS”
PROVIDE
TECHNICAL ASSISTANCE ALONG WITH FUNDING
INITIAL FINANCING FOR BELIZE
LODGE AND EXCURSIONS
|
Source
|
Paid-in Equity
|
In – Kind Equity
|
Debt
|
Total
|
| Developer |
3.0 %
|
10.0 %
|
-
|
13.0 %
|
| Former
Land Owner |
-
|
16.9 %
|
-
|
16.9 %
|
| Foreign
Private Investors |
15.2 %
|
-
|
5.9 %
|
21.1 %
|
| Strategic
Investor |
7.2 %
|
2.3 %
|
-
|
9.5 %
|
| Institutional
Investors |
15.8 %
|
-
|
18.1 %
|
33.9 %
|
| Other* |
0.3 %
|
5.3 %
|
-
|
5.6 %
|
| Total |
41.5 %
|
34.5 %
|
24.0 %
|
100 %
|
* Includes Collateral
for a bridge loan to acquire land for the non- profile conservation organization
|
