Erakor Info Memorandum Oct 09.FH11

Erakor Island Resort
Information Memorandum ~ October 2009
General Description
Westpac Banking Corporation (as mortgagee exercising power of sale in respect of the Resort Leases)
and Hawkes Law, Vanuatu Chartered Accountants, acting as Receivers and Managers in respect of the
Business and Business Assets are offering for sale of the Erakor Island Resort by way of Expressions of
Interest closing on Thursday 12 November 2009.
Erakor Island Resort is located in subtropical Vanuatu approximately 5 km south of the country’s capital
city, Port Vila. The existing resort and its facilities are situated on approximately half of the 7.2 hectares
available for development. Existing improvements include a wharf, large reception area, an over-thewater restaurant and bar, several relaxation gazebos, spa facility, 21 guest cottages and a dormitory
style lodging structure.
The resort is trading profitably under management and is offered for sale as a going concern.
1.
Executive Summary
Registered Owner:
The Registered Proprietor of the Resort Leases is Erakor Island Resort Limited as Lessee.
Land Area:
The island has a land area of approximately 7.2 hectares and is held within 2 leasehold titles zoned
commercial tourism. There is an existing strata plan on the development area of the island, which will
be cancelled and replaced with a more appropriate commercial development lease.
Services:
The Island is one of the few in Vanuatu connected to the main power grid and water system. Sewage
is done via septic tanks.
Location:
Erakor Island is situated at the entrance to Erakor Lagoon on the southern coast of Efate Island. The
island is situated approximately 300 metres offshore from the mainland and accessed by private ferry
service. Central Port Vila is approximately 3-4 km to the north. The Bauerfield International Airport is a
further 5-6 km distance or approximately 15-20 minutes travel time from the resort.
Brief Description:
The Erakor Island Resort comprises 29 accommodation units being 21 stand alone fares and an 8 room
dormitory. Other facilities include a restaurant and bar, reception lounge, spa, manager and staff
accommodation and water sports centre. A large portion of the southern end of the island is currently
undeveloped and suitable for further development of the existing resort
Room Configuration:
21 bures plus an 8 room dormitory.
Sales process:
By way of Expressions of interest submitted to Wetspac Banking Corporation by 12th November 2009
4pm in sealed envelopes, or by way of email to:
ATTENTION:
Mariana May James, Westpac Banking Corporation
1st Floor, Westpac Building, Lini Highway, P O Box 32, Port Vila, Vanuatu.
Telephone: +678 22084
Mobile Phone: +6785580004
Email: [email protected]
Website: www.erakor.vu
2.
Location
The island is situated at the mouth of a double lagoon
system and 500 metres off the mainland. The Island faces
the open waters of the South Pacific Ocean toward the
south/southwest.
It is located approximately 5 km from the Port Vila
township.
Erakor Island is part of a crystallised ancient reef formation
setting atop the volcanic structure of the island of Efate.
The land mass of the island is comprised mainly of white
coral sand and core samples have shown that it is mostly
loamy sand down to the top of the underlying structure.
Some volcanic rock is visible on parts of the island. The
island of Erakor has been in its present state for the most
part of the Holocene period; that being over the last
10,000 years or so.
Erakor Island is surrounded by an extensive reef system that is home a stunning variety of hard and
soft corals, tropical fish and starfish.
The free ferry transports guests and staff from the Efate mainland across the shallow and crystal clear
waters of the lagoon.
3.
Accommodation
RESORT DESCRIPTION
Erakor Island Resort is located on its own private island of 7.2 hectares in size. It is completely surrounded
by the crystal clear waters of Erakor Lagoon. The resort comprises 21 waterfront bungalows, an 8 room
(32 bed) dormitory, staff accommodation, spa facilities, restaurant, bar and ancillary buildings.
The resort consists of 21 fares and dormitory accommodation as follows:
Room Type
Superior
Deluxe
Family
Starfish Lodge
Total:
No. of Rooms
13
4
4
8
29
Approximate Floor Areas (m²)
34
39
69
251
The Superior and Deluxe fares are all single level, stand-alone buildings (apart from two adjoined
“superior” fares) accommodating up to three people and the family fares are in two blocks comprising
of two levels each sleeping up to five people. Ablutions typically comprise a shower, vanity unit and
toilet. All fares have French doors opening out to a private deck overlooking the water.
STARFISH LODGE
The Starfish Lodge was constructed only five years ago and provides eight rooms each with two bunk
beds accommodating up to four people. This lodge contains toilets & showers and also a kitchen.
STAFF ACCOMMODATIONS
There is also a Managers villa, Second Manager’s unit and a self contained staff flat.
4.
Facilities of the Resort
ROXY’S RESTAURANT
The waterfront restaurant & bar is located
next to the jetty and reception and has a
large deck over the water. It incorporates
a ‘u’ shaped bar to one end and restaurant
seating at the other. There is a commercial
kitchen in an adjacent building which also
houses the reception area and office space.
The restaurant attracts solid patronage
from resort guests as well as strong local
support and tourists based on the
mainland.
OTHER FACILITIES AND SERVICES
The main beach on the island known as “Paradise
Beach” is a white sandy beach fronting the crystal
clear waters of the lagoon, with safe swimming
for children and great snorkeling.
The water sports building located on Paradise
Beach is where guests can access a range of
equipment, including catamarans, kayaks and
outrigger canoes, paddle boards and snorkeling
equipment.
Erakor’s walking paths will take you through lush
tropical gardens where there are some historical
sites of interest including the original missionary
house and also one of the oldest open air chapels
in the South Pacific situated in the middle of the
island which is a popular wedding venue.
RECEPTION
The main reception building is located near the
restaurant on the northern part of the island and
serves as the hub of the resorts operations. Also
housed in this building is the commercial kitchen
that services Roxy’s Restaurant, management
offices and public toilets. There is a laundry room
located at the rear of the building.
DAY SPA
The Day Spa is housed in a large bungalow in the
centre of the resort. It provides a range of massages
and treatments. It is a successful operation and
also includes various open air fares for outdoor
massages and treatments. The Spa has been
popular with both guests and local residents of
Port Vila.
5.
Vanuatu Overview
Vanuatu comprises a group of some 83 volcanic and corallined islands covering approximately 12,200 square kilometres
in the South Pacific Ocean. The country is situated some 2,250
kilometres northeast of Sydney and 800 kilometres west of Fiji.
Vanuatu became an independent republic in 1980 and has
three official languages: Bislama, English and French. The
current port of entry to the country by air is Bauerfield
International Airport on Efate Island, located 10 minutes from
the capital city Port Vila. There are two other airports which
are capable of receiving international flights being White Grass
Airport on Tanna Island and Pekoa Airport on Espiritu Santo.
CLIMATE
Vanuatu’s climate can vary from subtropical in the south to tropical in the north. In general terms,
seasons are characterised by:Dry season from May to October climate typically offers fine warm days and cooler evenings.
Wet season from November to April, when higher temperatures and heavier rain can be expected.
Summer is from November to March, the average temperature is 28oC and can be hot wet and
humid.
Winter is from April to October with temperatures averaging 23oC.
POPULATION
Vanuatu has an estimated population of 215,500 (July 2008 est.). Demographically, indigenous Melanesian
(Ni-Vanuatu) is the dominant ethnic group with 98.5% of the population (1999 Census). Other minority
groups include French, Vietnamese, Chinese and other Pacific Islands, as well as a growing ex-pat
community mostly from Australia and New Zealand. Port Vila has a population of approximately 40,000.
EMPLOYMENT
Officially the unemployment rate was 1.7% 1999. There has been no official update since then however
the US Millennium Challenge Corporation estimated urban unemployment to be 6.6% in 2006.
Anecdotally, we understand unemployment is significantly higher with a large portion of the population
involved in small scale agricultural and subsistence farming. In general this provides ample availability
of unskilled labour at low employment cost balanced by low efficiency.
6.
Vanuatu Overview
POLITICAL STABILITY
Prior to 1980 Vanuatu was known as the New Hebrides and was governed by a joint English-French
Condominium established in 1906. In 1980 the country became an independent republic and is
governed by a parliamentary democracy political system with a President as ceremonial head of state.
The President has primarily ceremonial powers and is elected for 5-year terms by parliament and the
heads of provincial governments. Parliament’s 52 members are elected for four-year terms and the
Prime Minister, who is the head of government and leader of the majority party in parliament, appoints
cabinet from among the members. The Prime Minister and the Council of Ministers constitute the
executive government. General elections were held in September 2008 with the new government
formed as a coalition based on the two main parties who formed the outgoing government and a
further 5 parties. The senior partner of the coalition, the Vanua’aku Party won 11 of the 52 seats.
Vanuatu is seen as having a relatively stable political environment compared to other Pacific nations.
RELIGION
By far the majority (understood to be in excess of 95%) of the Vanuatu population are Christians.
Compared to some other Pacific nations, which have a greater diversity of religious belief, Vanuatu is
less exposed to religious tension.
ECONOMY
The economy is very narrowly based primarily relying heavily on tourism, agriculture, fishing and to
some extent offshore financial services. Mineral deposits are negligible and there are no known petroleum
resources.
The vast majority of the population is engaged in subsistence or small scale agriculture, which provides
a living for 65-70% of the population. Vanuatu’s main exports are kava, copra, timber, beef and coca.
Apart from Kava, none of these exports have seen significant growth in recent years. World prices
particularly for copra have declined steadily in recent years making agricultural production less profitable.
The tourism sector is recognised as a key sector for economic development and is expected to provide
21,000 jobs in 2009 according to the World Travel and Tourism Council.
TAXATION
Vanuatu has no income or capital gains taxes.
Tax revenue extends from:1. Import duties - which can be considerable and result
in imported goods being very expensive.
2. 12.5% Value Added Tax (VAT) on goods and services.
This is the equivalent of the GST collection system
in Australia and New Zealand.
Economic development is hindered by dependence on
relatively few commodity exports, vulnerability to natural
disasters and long distances from main markets and islands.
7.
Vanuatu Overview
ECONOMIC GROWTH
A stable government has provided the platform for strong economic growth in recent years with
economy growing by an average of 6.4% per annum over the four years to 2007. Economic growth
was estimated to have slowed in 2008 and is expected to slow further in the current year.
The industry sector achieved the highest growth in 2007 of 8.4% and was led mostly by construction
growth. The service sector contributed 80% of the overall growth and was underpinned by wholesale
and retail trades, transport and communications, real estate and business services, hotels and restaurants
and government services.
The economy is forecast to grow 5.5% in 2009 with inflation falling to 2.5% from an estimated 3.8% in
2008.
Summary of National Accounts (Value Million Vatu)
2000
2001
2002
2003
2004
2005
2006
2007
GDP (constant prices)
17,113
16,685 15,454 15,946 16,824 17,918 19,208 20,456
Annual Growth
2.7%
-2.5%
-7.4%
3.2%
5.5%
6.5%
7.2%
6.5%
CPI - Annual Change
4.4%
2.3%
2.3%
2.9%
0.8%
1.9%
1.9%
4.1%
Source: IMF
FOREIGN INVESTMENT
The overall aim of Government policy is to create and foster economic growth. To date, the government
of Vanuatu have achieved a track record of reasonably sound economic management with an emphasis
on financial stability.
Vanuatu encourages foreign investment, and to do so the Government enacted a Foreign Investment
Act 1998 to create a favourable environment for private sector investment.
The Act provided for the establishment of the Vanuatu Investment Promotion Authority (VIPA) which
encourages the formulation of a transparent and open investment environment as well as faster
processing of investment applications. For example, we understand that investments in developments
that are likely to create local employment are sometimes provided with an import duty discount or
exemption.
8.
Vanuatu Overview
DEVELOPMENT ASSISTANCE
A large contributor to the Vanuatu economy is development assistance reached approximately A$47
million in 2008. The Australian assistance focuses on needs identified in the Vanuatu Prioritised Action
Agenda including improving governance of key institutions, reducing poverty, converting growth into
jobs and better services, stronger and more accountable law and justice sectors and delivery of
government services such as health and education.
A recent reform supported by the Australian Government has been the opening up of Vanuatu’s
telecommunication sector to competition. Digicel launched operations in June 2008 which immediately
led to a decrease in costs and increased coverage from approximately 20% of the population to more
than 80%.
Grants from abroad are an important source of government revenue as outlined below:
Government Revenue (Vt million)
Vatu
1 USD
97.50
1 AUD
77.59
1 NZD
64.39
Source: Vanuatu Statistics Office
In March 2006 the US funded Millennium Challenge corporation signed a five-year agreement with the
government of Vanuatu that will fund a series of projects to improve transportation infrastructure. The
US$65.69 million agreement covers 11 civil works projects including roads, wharves, warehouses and
an airstrip and aims to benefit agricultural producers and providers of goods and services for tourists.
A US$54 million design and build contract for sealing the Efate Ring Road was signed in May 2008 and
construction started in August 2008.
INVESTMENT REVIEW AND APPROVAL
New investors require approval from the VIPA before establishing a business in the Country. This
requirement involves the completion of an Investor Application Form, which is then submitted to the
VIPA Secretariat. The average period of time involved in processing an investment application from the
point of submission to final approval is three weeks. Foreign investors are expected to comply with
relevant local legislation, The Investment Division of the Department of Trade, Industry and Investment
monitors approved projects for compliance.
9.
Vanuatu Overview
CURRENCY AND EXCHANGE RATE
The local currency of Vanuatu is the Vatu. The Vatu has historically been a very stable currency with no
major fluctuations against any of the major international currencies.
The following chart tracks the movement of the major currencies against the Vatu since 2003:-
Generally, the Vatu experiences only modest currency fluctuations against major currencies, however
there have been some quite substantial movements since the middle of 2008 as world economies
have been challenged.
AIR TRANSPORTATION
The current port of entry to the country is Bauerfield International Airport located 10 minutes from the
capital city Port Villa. The airport is relatively small in size, but its runways have the capability and length
to accept most large passenger jets, apart from Boeing 747s. It serves as the hub for Vanuatu's
international airline, Air Vanuatu.
There are two other airports which are capable of receiving international flights being White Grass
Airport on Tanna Island and Pekoa Airport on Espiritu Santo. Pekoa recently started receiving international
flights from Brisbane and it is expected that White Grass will also receive international flights in the
medium term.
Vanuatu has its own international airline, Air Vanuatu, which is currently on a code share basis with
Qantas and Air New Zealand. Vanuatu is serviced directly from Australia and New Zealand by Air
Vanuatu’s 737 with flights to/from Brisbane, Sydney, Melbourne and Auckland. Pacific Blue also operates
flights direct from Sydney and Brisbane with Melbourne a distinct possibility in the near term.
10.
Vanuatu Overview
There are also flights from other Pacific Islands serviced by Air Calin (Noumea), Air Pacific (Nadi) and
Solomon Airlines (Honiara).
Selected Flight Travel Times to Vanuatu
From
Travel Time
Australia (Sydney)
4 hrs
Australia (Melbourne)
5 hrs
Australia (Brisbane)
3 hrs
Australia (Perth)
8 hrs
New Zealand (Auckland)
3 hrs
Fiji (Nadi)
1 hr 30 min
New Caledonia (Noumea)
1 hr
Around Central Port Villa, buses (communal taxi vans) run regularly and virtually everywhere. Private
taxis are inexpensive and typically metered. Rental cars are available from Budget and Avis other major
local firms.
POWER AND UTILITIES
The production and supply of electricity and water is provided in Port Villa by UNELCO (a private
company) who also supply electricity in Luganville. Electricity is only available to approximately 20%
of the population and essentially only in the urban areas. Electricity is primarily diesel generated
(resulting in susceptibility to price volatility) although there is an increasing move towards biofuel using
cobra oil.
11.
Lease Summary
All land throughout Vanuatu is of leasehold nature, with a maximum of 75 years terms. Urban land
within Port Vila is public land owned by the government while rural land belongs to the traditional
(Custom) land owners. This is consistent with most other countries in the Pacific.
There are currently two leases in place between the current resort owners and the Custom land owners,
one of which has in turn been strata-titled. One lease is in relation to the resort operation and the other
is in relation to the strata – titled vacant area.
The current arrangements are summarized as follows:Lease summary - 12/0913/433 – Title relating to main resort
LESSOR: CHIEF MARIK KALMETABIL NMAK IV, CHIEF CHARLEY KALMET MPAKUS NMAK, MARK KALMET,
KALOTIP ROBERT, TOM REUBEN AND TIMTEO KALMET
LESSEE: ERAKOR ISLAND RESORT LIMITED
COMMENCEMENT DATE: 20 JANUARY 2006
TERM: 75 YEARS
RENT-COMMENCEMENT: 1,500,000VT (SOME AUD$18,300)
PERMITTED USE: COMMERCIAL TOURISM PURPOSES
Lease summary – 12/0913/434- Strata Title Area – Vacant Land
LESSOR: CHIEF MARIK KALMETABIL NMAK IV, CHIEF CHARLEY KALMET MPAKUS NMAK, MARK KALMET,
KALOTIP ROBERT, TOM REUBEN AND TIMTEO KALMET
LESSEE: THE BODY CORPORATE STRATA PLAN 0003
COMMENCEMENT DATE: 20 JANUARY 2006
TERM: 75 YEARS
RENT-COMMENCEMENT: 1,500,000VT (SOME AUD$18,300)
PERMITTED USE: RESIDENTIAL/COMMERCIAL TOURISM PURPOSES
Lease title 12/0913/434 has been strata titled into 30 lots, reflected in Certificates of Title 1-30 inclusive
of Strata Plan 0003, which strata titles are held subject to a Restrictive Agreement (building covenants)
and registered easements.
After excision of the strata lots, the land remaining in title 12/0913/434 consists of the Common Property.
12.
Cooperation Agreement
Westpac has entered into a Cooperation Agreement between Chief Charley Kalmet Mpakus and Nmak
Council of Erakor Village, the established custom owners of Erakor Island (CNC).
The Cooperation Agreed provides:On completion Lots 1-30 and the Common Property in Strata Plan 0003 shall be transferred by
Westpac to the incoming Purchaser.
CNC as Lessor has consented to such transfer for the purposes of the termination of Strata Plan
0003 and its removal from the Strata Plan Register kept by the Land Records Office.
CNC as Lessor has consented to the reversion of ownership as Registered Lessee of Lease Title No.
12/0913/434 to the Purchaser as the owner of all the lots in SP0003 and the Common Property
immediately prior to such termination of Strata Plan to the intent that thenceforth the Purchaser
shall be and become the Registered Lessee of Lease Title No. 12/0913/434 (as varied) and in lieu
of and in substitution for Erakor Island Resort Limited.
The Variation of Lease Title 12/0913/434 shall provide for the deletion of the Strata Title provisions
set out in clause 14 of the existing Lease together with all other necessary and consequential
amendments to reflect, mutatis mutandis, the provisions of the Commercial Tourism Lease of Title
12/0913/433, and in particular the user provision shall reflect this.
The Variation of Lease Title 12/0913/434 and the Variation of Lease Title 12/0913/433 shall both
provide for:no further strata title subdivision or any other form of subdivision of all or any part of Erakor Island;
and
the protection and preservation of the heritage sites located at Erakor Island described in the Site
Plan.
Occupation of any part of the island as a private residence shall be forbidden provided however
that periodic occupation of resort bungalows or other tourist accommodation for up to a maximum
period of one month by any occupant/s shall be permitted.
13.
Cooperation Agreement
The Variations of Lease Title 12/0913/433 and Lease Title 12/0913/434 shall contain:a Development Covenant in the Leases as varied to provide for construction of additional Resort
facilities (including as least 10 new bungalows) in accordance with such plans as shall be reasonably
agreed by the Purchaser and the Lessors (and any Mortgagee) such construction to be commenced
within 12 months of the date of settlement and transfer and completed within 24 months of such
date.
a revised rental clause whereby as from the date of commencement of operations of the new
Resort the Purchaser (as Lessee) shall pay to the Lessors by way of any additional rental such
amount as shall be mutually agreed.
a clause whereby recruitment of new employees shall be made on a first preference to the
indigenous people of Erakor Village basis.
Both the said Leases as varied shall provide that further resort facilities development shall be
subject to:
Submission of outline physical planning approval from SHEFA Provincial Council.
Submission of environmental impact study and environment and foreshore development approvals.
Submission of sewage reticulation/treatment plant proposal.
14.
Future Development
The island has approximately 50% of the land area still available for future development. This could be
by way of increased facilities such as additional bungalows and villas, tennis courts and swimming
pools. It has an extensive amount of coastline still available for more bungalows of various types.
This development land is a key component of the future development and value of Erakor Island Resort.
It allows significant upside opportunity for the purchaser to add further capacity to the existing operation
and capitalise on the growing tourism sector.
15.
Expressions of Interest Process
Erakor Island Resort is offered for sale by way of Expression of Interest closing 4pm, 12th November.
For onsite inspection please contact Westpac to make arrangements. Expressions of interest to be
delivered in sealed envelopes or by email to Westpac.
EXPRESSION OF INTEREST INFORMATION REQUIRED
Name of Purchaser (if company then details of beneficial ownership of company)
Physical and Postal Address of Purchaser
Email Address
Contact Phone Number
Expression of interest Price Offered
Any special conditions of expression of interest bid
Proposed Completion date
CONDITION OF SALE (SUBJECT TO CONTRACTS)
The highest or any expression of interest need not necessarily be accepted.
Each bid is be accompanied by a bank cheque for the amount of 1% of the bid lodged.
Deposits will be returned to the unsuccessful bidders on the third working day following the successful
bidder being determined
All costs required for the completion of the sale such as stamp duty and registration fees shall be borne
by the successful bidder.
Draft Contracts are available on www.erakor.vu
PRICE INDICATION
Not less than AUD$3 Million
FINANCE:
Bidders should be either cash bidders or have pre-arranged finance.
16.
Disclaimer
This information memorandum has been prepared by Westpac Banking Corporation Port Vila Vanuatu
Branch. This document does not constitute an offer or contract of sale or any part of an offer or contract of
sale. It is intended only as a guide and an aid to further investigation by potential investors. Potential investors
accept this document on the condition that they will make their own enquiries and obtain their own
independent advice in order to verify the accuracy of the information presented in this document. The content
of this document has been derived, in pat, from sources other than Westpac Banking Corporation and may
be based on assumptions. In passing this information on, Westpac Banking Corporation does not warrant
that such information or assumptions are accurate or correct.
To the extent that this document includes any statement as to a future matter, that statement is provided
as an estimate and/or opinion based upon the information known to Westpac Banking Corporation at the
date of preparing this document and assumptions which may be incorrect. Westpac Banking Corporation
does not warrant that such statements are or will be accurate or correct.
Westpac Banking Corporation provides this document on the condition that, subject to any statutory limitation
on its ability to do so Westpac Banking Corporation disclaims liability under any cause of action including
negligence for any loss arising from reliance upon this document.
This confidential document is for the sole use of persons directly provided with it by Westpac Banking
Corporation is not to be resupplied to any other person without the prior written consent of Westpac Banking
Corporation and without limitation to the above disclaimers, Westpac Banking Corporation is not liable for
any loss arising from such unauthorized use or reliance.
17.