Leasing

 

Eland Hospitality has on its portfolio an option to run client hotels under a lease contract. In this arrangement we will have an interest in the land and take over the property for a certain term. As such, under a lease structure, Eland Hospitality Group will hold the entire financial burden. The hotel company in this case will be a tenant and assumes all operating responsibilities together with all the financial obligations; therefore, it enjoys the benefits if the property is successful but suffers all of the losses if the property does not perform adequately. Eland will receive all of the profits, after rents have been paid. The lease agreement should address the rental structures bearing the fact that they can vary depending on the amount of risk that the investor is ready to take.
Eland Hospitality Group has some of the possible options to be explored by both parties from which the company and it’s client may agree on under the leasing option, and these are:
 
Fixed fee: this is a fixed rent with indexed growth. This form of lease structure has a guaranteed return, which bears the least risks for the property owner;
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Share of Revenue: in this variable lease scenario, the rent is calculated on the amount of sales generated. In this case, the property owner shares some of the risks linked to the level of performance of the hotel. They do, however, have the opportunity to assess the performance of the hotel against market data;
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Share of Net Operating Income (NOI): in this variable lease scenario, the rent is linked to the NOI after all the operating expenses have been deducted. This scenario carries the highest risk to the owner, as it also include the operating risk of running the hotel and offers little transparency as to likely income.
Both the revenue-based and NOI-based rents can include a base rent, which is a guaranteed return to the owner (hybrid lease). A hybrid lease might also include some clauses that can be found in management agreements, such as an obligation to maintain brand standards.
 

Call: +267 73 059 870, +267 72 553 526 Email: info@elandhospitality.com